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October Auto SAAR Expected Just Over 10 Million, Will CfC Overhang Persist?

Tyler Durden's picture





 

With October car sales forthcoming from the Big 2 (and Fiat), the Street is being explicably cautious, with October SAAR estimates slightly higher than 10 million. As a reminder prior year's October SAAR came in at 10.8 million, and that was in a month following the standstill of the entire economy. What was that about increased lending going to consumers courtesy of the Fed's monetary largesse? Or does that only account for "big ticket" purchases like iPhones? Yet where the street may be in for a surprise is its optimism that the Cash For Clunker overhang has subsidized: a rather bold assumption for an economy running entirely on government stimuli.

Goldman Sachs expects the following YoY declines from GM, Ford and Chrysler: -2%, -5% and -30% (when will someone put that last on that list out of its mysery?) Away from Broad Street, Ward’s expects GM to be down 1.1%, Ford down 4.5%, and Chrysler down 30.7%. GM is expected to outperform courtesy of its own "CfC" variant in the form of sizable purchasing incentives. The question of whether the firm generates any profits on car sales at this point seems no longer relevant: it is all about the V in the PV revenue variance equation. If the next step for GM is wholesale dumping, so be it. Another data point: October 2009 had 28 selling days, versus 27 last year; therefore sales for the Detroit 3 will require a selling day adjustment.

Below is Goldman's commentary in SAAR expectations:

October’s US light vehicle sales will be reported on Tuesday, November 3. We expect a seasonally adjusted annual selling rate (SAAR) of 10.1 million units in October 2009 – a significant improvement versus the 9.2 million SAAR in September 2009, but below the 10.8 million reported in October 2008. The hangover effect associated with the Cash-for-Clunkers program has subsided, but underlying consumer demand remains mixed at best. On a positive note, industry inventories remain at appropriate levels, with approximately 56 days of supply at the start of October according to Ward’s Automotive. Goldman Sachs Equity Research is expecting a SAAR of 10.0 million units in October, while Ward’s is forecasting 10.4 million. For FY2009 and FY2010, we continue to forecast a 10.5 million and 11.7 million unit US light vehicle SAAR, respectively.

And never one to come packaged without at least a little RDA of optimism, Goldman is optimistic on industry pickup in Q4 and Q1 2010.

CSM is forecasting 4Q2009 and 1Q2010 North American (NA) production of 2,735,000 units (up 1.7% y-o-y) and 2,522,000 units (up 49% y-o-y), respectively. The increases reflect much easier y-o-y comps and the rebuilding of dealer stocks (see exhibits 1 and 2). Regarding Ford, we expect the company to produce 570,000 units (up 33% y-o-y) in 4Q2009 and 540,000 units (up 49% y-o-y) in 1Q2010.

With news due to hit shortly after noon, keep your eye on that news ticker.

 

 


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Tue, 11/03/2009 - 13:16 | Link to Comment tom a taxpayer
tom a taxpayer's picture

Cars sales will be down because we will be riding the rails, and I don't mean comfy coach seats...I mean hopping into box cars. Warren Buffet buying BNI is the sign of  the future. 

 

When the Waxman-Malarkey carbon tax & climate change bill becomes law, taxing every point in the auto production and fueling process, car sales will plummet further. Maybe transporting cars by railroad will be revived. See the USA in your Chevrolet riding the rails.

 

And for those thinking electric cars will flourish or become affordable, remember the primary fuel to generate electricity in the U.S. is coal (48.5% of fuel mix); natural gas is 21.3% of fuel mix, and fuel oil 1.1%. So, over 70% of electricity is generated with fossil fuel that will be hit with carbon tax.  And delivering coal and other fossil fuels over hundreds of miles of electrical power lines where energy is lost during transmission is not efficient. The electricity to run electric cars as well as the fossil-fuel-rich manufacturing steps in producing electric cars will also be hit with the carbon tax.

Tue, 11/03/2009 - 14:11 | Link to Comment Prof Gulliver
Prof Gulliver's picture

Another swing and a miss by Goldman, at least regarding Ford sales. And it looks like the higher-ticket car makers (Merecedes, Audi) had good months.

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