Cash For Clunkers
Just as we thought GM's channel stuffing days may be coming to an end, and the company may finally be normalizing its inventory management, here come January numbers, where we learn that in addition to car sales declining by 6% compared to a year ago, at 167,962 vehicles sold (of note: "Retail deliveries declined 15 percent compared with the same month a year ago and accounted for 70 percent of GM sales"), it was the all critical month end dealer inventory that caught our attention. And unfortunately as the skeptics expected, GM is back to its old tricks, as dealer inventories rose once again, this time by over 36k units, or the second highest in its post-reorg history, to a near record 619,455 vehicles stored with dealers. This is just the second highest ever in fresh start GM history, second only to November's 623,666. The January-end number represents 89 days supply, but more importantly the recent spike in restocking, which was seen with all other major car dealers, explains the ongoing "expansion" in the US economy as measured by indices such as the ISM. Eventually, when the end demand for these dealer parked vehicles does not materialize, the New Orders so diligently tracked by economists everywhere will slip back under 50, but before that we are confident that the administration will come up with some new Cash for Clunkers plan to take demand from the future and to push it into the days leading into the election, probably funded once again by other taxpayers who don't quite see the fascination with owning a GM car.
Bad News For GM: As China's Own "Cash For Clunkers" Program Ends, Car Sales Come Far Below Expectations; BYD Sales PlungeSubmitted by Tyler Durden on 04/12/2011 16:38 -0500
Two months ago we reported that the recently bailed out Unionized Carmaker, for whom China (where they apparently do not care about falling steering wheels) has become a market more important than even the US, had seen some jarring demand weakness, following a 10% drop in January sales. We now learn that GM was not only the beneficiary of last year's Cash For Clunkers program in the US, but has been the recipient of recent incentives offered in the domestic Chinese market. Alas those are now over, and as Bloomberg reports "China’s passenger-car sales grew in March at a pace that was below forecasts after incentives ended and fuel prices rose, the China Association of Automobile Manufacturers said." That's putting it mildly: for an economy in which a growth rate of 10% is considered stagnating, what happened in March was equivalent to a drubbing: "Dispatches of cars including multipurpose vehicles and sport-utility vehicles to dealerships rose 6.52 percent from a year earlier to 1.3 million units, the association said in a statement today. That pace was about one-tenth of the 63 percent sales increase reported in March of last year." Which brings us to the question of the day: how does one spell "short GM" in Mandarin? Yet the irony of the day award goes to Charlie Munger, who may or may not have been completely "open" with his purchase of BYD shares: BYD sales plunge in March by 41% (Y/Y). Suck it in, Charlie.
As Cash For Clunkers Trades Pile-Up at the Junk Yards, Meet "Cash For Appliances." You Asked For It? You Got It. Toyota!Submitted by Travis on 10/25/2009 07:51 -0500
When I wrote about the obvious "win-win situation" that was Cash for Clunkers this past summer, amid the fact that right now cars are back-logged, piled-up, unable to get recycled in an efficient, timely manner- South Carolina is offering $3.9 million, their share of some $300 million in federal stimulus funds from the American Recovery and Reinvestment Act being distributed as appliance rebates. Meet... "Cash for Appliances."
Goldman Sachs, which disagrees with Edmunds' expectation for an 8.8 million September SAAR, has shared its own projection of 9.3 million. Even so, the drop from the 12.5 million in September 2008 and the 14.1 million in August, is dramatic. What is scary is that there is no indication October will be any better. The only new initiative launched by Detroit: 60 day money back guarantees. Will that stimulate car sales, or simply end up as a bureaucratic nightmare for dealers, is still unknown. Although rental companies, those Chinese rockets like Hertz and Avis whose stocks have gone up by about 10,000%, will very likely not be too happy that GM has now also entered the "rental" car business.
In 10 days auto companies will announce their September auto sales. If auto specialist Edmunds.com is right, expect to see an unprecedented decline in the September SAAR number: from 13.7 million in August to a 28 year low of 8.8 million!
The first fully blown subsidy program in the form of Cash for Clunkers is now over. Many more undoubtedly will follow, with Cash for Woodshed Plasma TV likely to appear in 3 to 6 months. As it will facilitate Made in Taiwan and Japan exports to the US, one does not anticipate any WTO trade wars. Some observations on the consequences of CfC.
In a stark example of how it "should" be done, the recently terminated cash for clunkers subsidy for overleveraged US consumer to purchase Japanese cars, has allowed companies such as Toyota, Honda and Hyundai to push forward a significant amount of their sales, while relying less on the back end of their production curve. Indeed, as Detroit News recently reported, of the five majorbeneficiaries of Cash for Clunkers, 4 were Japanese cars, with Toyota representing 19.2% of all cars sold under the program. And now that they got their sales out of the door, they are winding down capacity.
The June 1 ISM to June 5 NFP high to higher high was +10. The idea was that the Aug 3 ISM to Aug 7 NFP higher high would be roughly +10. If so, it would target 1013. That is precisely what has happened. Notably, the stock market sold off 32 points by the following Monday June 8 before setting a retrace high on Thursday June 11’s retail sales report that were goosed by automaker incentives of $6900 in rebates. Expecting July retail sales to be goosed by similar cash for clunker incentives, we expect the stock market to rally into Thursday’s Aug 13 retail sales report. In short, a rolling top similar to June’s is expected in the first half of August.
AIG (short interest of 16%) and CIT (13%) are today's latest squeeze puppets. Because non-bankruptcy prospects before both companies are just so hot. Will whoever is pulling all the borrow please fess up already.
The big story today was how the O-Team decided to unleash another 2 billion for the Cash for Clunkers program after the first round ran out in a matter of days.
The seemingly wildly popular program that gives an instant rebate for your old hunk of crap car, just may get crapped-out itself… Much sooner than planned.