Bringing Back The Dead: Plymouth Road Runner Concept

“Meep-meep!” Anyone familiar with Saturday morning cartoons knows
what that is the sound of.

But, could it be the noise that
spurs the rebirth of an American icon, the Plymouth Road Runner?

Source: Michael Leonhard

Better yet, is this what Chrysler needs? With retro-inspired
designs seemingly never dying out, it appears an independent Austrian
designer, Michael Leonhard, has penned up a new concept that
could give a renaissance to the Plymouth nameplate.

Read more here.

rp

Obama extends short federal lifeline to GM, Chrysler

President Obama announced Monday that struggling automotive giants General Motors and Chrysler will be given a "limited" period of time to "restructure in a way that would justify an investment of additional taxpayer dollars."

Source: BusinessWeek.com

The federal government will give GM "adequate working capital" over the next 60 days to work in conjunction with the administration in developing a better recovery plan, he said.

Read more here.

rp

What Happened to Free Markets?

Another bailout? Again? Could it be possible?

Yes. Unfortunate but true, it is becoming more common talk that we could see another bailout with the automakers stepping into the batter’s box.

As my prior write-up noted, sales remain to struggle even taking into account August’s seasonality. Not very positive looking charts, down below. Year-over-year the “Big three,” have taken on serious debts and have managed to align themselves in an unfavorable position regarding their model offerings.

Now, the United States government has aided in two bailouts - namely Bear Stearns and the Fannie/Freddie debacle – and this has the auto industry feeling as though they deserve their fair share. Thus, this has raised the chatter on a possible automotive industry bailout due to the sizeable losses which have been reported from the domestic builders.

This is a tough situation.

On one hand, the government has to look to protect the workers of the automotive industry and guard the US economy. Remarkably, the US economy has managed to prevail relative to the damage already done. It is a wonder if this could be the final straw.

The other hand paints a different picture, depicting the government star-gazing as the manufacturers fail or consolidate to stay afloat.

American auto manufacturers got away with producing over-sized vehicles for far too long and the industry is paying the piper. To analogize, the American OEMs faltered precisely where the big banks ran astray - they got greedy. General Motors, Ford and Chrysler all had high margin truck portfolios which yielded big rewards; unfortunately, risk reared its ugly head.

The past year has provided some stellar collapses. Real estate, mortgage-backs and now sport utility vehicles. Unfortunately, there are going to be repercussions for these firm’s actions. The only way I can see the playing out is through mergers or consolidations.

Welcome to the SUV bubble.

rp

August SAAR data: A Fluke.

Although we are currently in one of the greatest eras for automobile development and innovation, sales are still tanking.

August’s US SAAR total sales have painted a reasonably grim picture. You may ask, “how?” or “why?” The approximate 1.2 million vehicle sales increase can be seen as artificial due to the incentives that you can find on 2008 models and gas guzzling sport utility vehicles.

Data: Bloomberg

A CNN report implied that due to oil’s recent pull back, currently near $106 per barrel, consumers are starting to get back into sport utility vehicles. Check the 8th and 9th paragraph of that story. I am not sure if I believe that as I do not see gas prices below $3.50 in my region; what would motivate someone to run out and buy a SUV?

Are the incentives that good? What does it matter if you pay your savings back in gas bills during the vested life of the vehicle?

Back to the SAAR data. Another crucial point which must be taken into consideration is that during this time of year, auto dealers are attempting to push out as many of the prior year’s cars out of their inventory before the new models are introduced. There is a seasonal re occurrence and you can see it on the Domestic Sales and Japanese Sales charts.

Data: Bloomberg

Last August, Domestics and Japanese autos saw a nice up-tick in their respective sales. This year, it appears that General Motors is seeing a similar trajectory while Ford and Chrysler are struggling. The Japanese are fairing well with similar trends in respect to last year.

Data: Bloomberg

Essentially, after taking into consideration the seasonality of August’s numbers, as well as the significant increase in incentives I can not foresee this year’s car sales to remain on this upward trend. I am calling August a fluke. It is extremely negative to see that Ford and Chrysler are struggling with sales this past month when there should have been an improvement in sales given the current incentive programs and 2008 model year liquidations.

Out of curiosity I inserted trend lines into these charts and it appears the only company which is doing well sales-wise is Honda. The company, known for its gas-sipping cars, recently surpassed the Ford F-150 as the most sold model in a given month - Three cheers for the Honda Civic. Pretty earth-shattering news for the car world.

If you want to see how bad things have gotten, look at the year-over-year numbers. They will turn anyone who is not squeamish a nice shade of green. US SAAR has declined nearly 16% while the big three, General Motors, Ford and Chrysler lost 20%, 25%, and 34%, respectively. The Japanese are doing much better albeit not well by any means; Toyota’s sales lost 9% YOY while Honda dropped 7% in sales.

The Domestics will have to keep their chin up during this time of distress and pray their new models and changes reverse their losses. Good luck, boys.

Watch for next month's SAAR data to downtrend, I can not see it rising or going flat.

rp