Rebel Traders – Analysis Without The Hype

Here is the tally of vehicle sales for February 2010 in the United States

Most data figures reference sales on a year over year basis (y/y).

TOYOTA

February US Vehicle Sales (y/y): -8.7% (100K units)

FORD

February US Vehicle Sales (y/y) +43.1%  (142.2K units)

- Total Truck and van sales +36.2% y/y to 46.2K units vs. +14.5% in Jan (39.7K units)
- F series pick-up sales +39.3% y/y to 32.9K units vs. +9.5% in Jan (27.6K units)

GENERAL MOTORS

February US Vehicle Sales +11.5% (142K units)

HONDA

February US Vehicle sales (y/y): +12.7%  (80.6K units)

NISSAN

February US Vehicle sales (y/y): +29% (70.2K units)

CHRYSLER

February y/y sales flat

HYUNDAI

February US vehicle sales 34.0K (no report on y/y change)

MERCEDEZ-BENZ

Reports February US Vehicle sales +8.4% y/y;  (15.3K units)

VOLKSWAGEN

Reports February US Sales +32.6% y/y; (18.K units)

AUDI

Reports February US sales +33% y/y; (6.2K units)

MITSUBISHI MOTORS

Reports February US sales down 1% m/m (4,019 units)

MAZDA

No report yet

Even with the the last minute surge in December of buyers taking advantage of numerous incentive programs, it was still not enough to prevent another record year of sales declines. The year 2009 saw an industry wide decline of 21.2% from the 2008 year and the worst total sales since 1982.

Everybody thought that 2008 was the bottom for auto sales, in 2008 record declines were met with hopes and renewed vigor that 2009 would see a stabilization and return to growth. Unfortunately those hopes were dashed today as the final tally of auto sales figures were added up and 2009 was even worse than 2008.

For General Motors, automobile sales in 2009 were 30% lower than in 2008. Chrysler sales were down 36% compared to the prior year which was also the worst sales performance for Chrysler since 1962.

At Ford it was a little bit better, but year over year sales figures still put the auto giant at lower sales than in 2008 with a drop of 15% from last year.

Had it not been for the Government ‘Cash for Clunkers’ program, sales for 2009 would have been significantly worse. Now that the program has ended, the real tell of how well the auto makers are able to do will come through. General Motors is predicting that 2010 will bring an industry sales figure of 11 to 12 million vehicles. To that I say “good luck’ at meeting those figures, that is unless another Government handout is coming.

In 2009 the industry wide sales figures came in at 10.4 million units, down 21.2% from sales in 2008.

Who did do well in 2009? Hyundai and Subaru reported 8% and 10% gains respectively as their vehicles were among the most popular during the ‘Cash for Clunkers’ program.

With the ‘Cash for Clunkers’ program now over, reports of delinquencies still rising, and the unemployment situation my estimate for the 2010 sales figures are for a year end tally of 9.5 to 10.5 million units, much lower than forecast by General Motors and other economists.

BREAKING NEWS

Late night talks have broken down and it now seems like a sure bet that Chrysler LLC will be forced into bankruptcy as soon as Thursday morning.

The Wall Street Journal is reporting that talks between the US Treasury Department and lenders aimed at keeping Chrysler LLC out of bankruptcy have broken down, making it quite certain that the company will file for Chapter 11 protection Thursday, according to people familiar with the discussions.

The talks with Chrysler’’s lenders broke down after the Obama administration’’s automotive task force worked into the evening to persuade several hedge funds and other lenders to accept a deal to reduce Chrysler’’s debt.

The Treasury boosted its most recent offer to lenders on Wednesday by $250M to $2.25B in cash for the banks and hedge funds to forgive $6.9B in Chrysler debt.  J.P. Morgan Chase & Co., which leads the creditor group as Chrysler’’s largest lender, gave the other 45 banks and hedge funds 90 minutes Wednesday evening to vote on the deal. A large number of the funds voted no and refused to budge, paving the way for an all but unavoidable trip to bankruptcy court.

The Wall Street Journal is breaking the news tonight that Chrysler LLC may be forced into chapter 11 bankruptcy protection as early as next week, irrespective of any deal with Fiat.

[...]If an agreement with the company’s lenders can be reached, the automaker would file for bankruptcy protection to get rid of some liabilities. That would leave Fiat to pick and choose what segments of the storied automaker it wants, these people said. The government would provide bankruptcy financing while the bankruptcy process plays out.

The UAW is on board with Chrysler’s plans and would likely own a sizable stake in the restructured automaker, said these people. A relatively orderly bankruptcy filing along those lines would represent a measure of success for the Obama administration.

But if a deal with Chrysler’s banks and Fiat cannot be reached, the automaker would file for bankruptcy and begin the process of liquidation, said these people. Chrysler has shrunk radically in recent years but still employs tens of thousands of people.[...]

[...]A Chrysler bankruptcy filing, while long expected would nonetheless represent a watershed moment in Detroit’s long decline, and the first such move among the once-dominant three automakers. General Motors Corp. is working through similar issues and will likely be forced to file for bankruptcy in May.

In either scenario, the impact would ripple through the supply chain of car dealers, parts suppliers and others, as well as the economies of midwestern states.[...]

Auto suppliers are preparing to make another trip to your wallet. Auto suppliers are preparing to ask the U.S. Government (tax payers) for additional aid.

I guess we will begin to see auto parts manufacturers filing to become ‘bank holding companies’ so they can have a direct line to the tax payers (sarcasm intended).

US car parts suppliers are preparing to ask for more government aid, including incentives to encourage fresh private-equity investment in the sector.

The suppliers are also seeking access to the Treasury Department’s term asset-backed securities loan facility (Talf) and similar loans provided by the Small Business Administration.

The Treasury last month approved up to $5bn in government-backed credit insurance for suppliers to General Motors and Chrysler, the two carmakers being kept afloat by Washington.

Suppliers can also raise cash by selling receivables to the scheme at a discount.

But Neil De Koker, president of the Original Equipment Suppliers Association, said “there isn’t enough money in the programme to take care of all the suppliers. Many, many suppliers are still desperate”.[...]

[...]Delphi, which is GM’s biggest supplier and has been in bankruptcy protection since late 2005, has warned that shareholders are likely to recover nothing from its restructuring.

Source: Financial Times

Some satire this evening on President Obama’s plan to use tax payer funds to perform warranty repairs on General Motors and Chrysler vehicles.

P.S. – I know, it is ‘kind of creepy’. I only wanted to poke some fun at the ‘auto bailout’ plan. The video may be ‘creepy’ but my view is not. Using tax payer funds to backstop auto warranties is just ridiculous.

Let’s recap the events of the past 24 hours concerning the U.S. automobile industry.

• Last night the U.S. Government released their determination of the restructuring plans submitted by both General Motors and Chrysler. The findings by the auto task force said that both companies’ restructuring plans fall way short of being able to sustain the companies going forward
• President Obama this morning stated that General Motors will have 60 days to submit an entirely new restructuring plan that must be much more aggressive in cuts for employees, bond holders, and other stake holders. In other words.. make substantial cuts or the gig is up.
• Chrysler was given only 30 days to redo their restructuring plan. Additionally, the auto task force suggested that Chrysler must merge with Italy’s Fiat Company.
• The U.S. government will provide tax payer funds to both companies to carry them through their respective new deadlines (30 days for Chrysler and 60 days for General Motors)
• The U.S. Government will create a new entity that will backstop vehicle warranties for both General Motors and Chrysler. This new entity will be funded to 125% of the expected cost of future warranty claims. GM and Chrysler will provide 15% of the funds and the tax payers will provide the other 110% of the cost.
• The Wall Street Journal is reporting that President Obama has told both General Motors and Chrysler that he would prefer to see both companies enter into a Government forced bankruptcy to avoid a long drawn out process of restructuring. [RebelTraders note: This is what I am in favor of, a Government controlled bankruptcy will force the debt to be written down, and allow both companies plenty of time to restructure without more tax payer funds. It is also my opinion that bankruptcy will be the only way to get the UAW to make the concessions necessary to keep these companies alive, albeit crippled until they can completely restructure their broken business model].

It is my view that President Obama should not have provided yet time another extension. Both companies have had enough time to provide a resturcturing plan that would work, and all the while they have been playing around it has been on our tax payer funds.

President Obama has done the correct thing this morning in telling the companies that the public teet will be put back inside the bra. But, giving them another 30 and 60 days to ‘try again’ is ridiculous. It should have been done now.

A collection of headlines and comments off the news wires today relating to this story:

• General Motors Corp – Reportedly dealers will hold meeting regarding comments out of the Obama Administration
• General Motors Corp Spokesperson: Must still address talks with bondholders, unions and stakeholders; prefer completing restructuring outside bankruptcy, but would accept a court supervised process if necessary
• General Motors Corp Reportedly preparing to offer plan for consumers that allows buyer who loses job to return vehicle at no cost
  - this program would be similar to plans offered by Hyundai and other car makers.
• General Motors Corp Bondholders reportedly willing to reduce debt burden through debt-for-equity exchange, provided business plan has chance of success
  - Bondholders note they are “disappointed that the Administration and GM did not discuss restructuring plan with them.
• General Motors Corp Bondholders reportedly offered $0.08/dollar in cash with a 90% stake in GM – unconfirmed report
  - $0.16/dollar offered in new unsecured debt

General Motors and Chrysler may require even more financial aid according to Steven Rattner, the Treasury’s chief auto adviser.

Mr. Rattner states that the $21.6 billion being requested by General Motors and Chrysler may not be enough and the amount required from the U.S. government (tax payers) may grow “considerably”.

The auto task force will give its “sense of direction” by March 31, Rattner said. The companies have received $17.4 billion since December and asked for the additional $21.6 billion in aid last month, an amount that depends on achieving turnaround plans that are “somewhat ambitious,” Rattner said.

Rick Wagoner, GM’s chief executive officer, said in an interview on March 19 that the automaker hasn’t completed talks with the United Auto Workers and bondholders about cutting debt by $28.5 billion. The failure of those talks could drag Detroit- based GM into bankruptcy and possible liquidation, Wagoner said.

U.S. automobile sales figures for the month of February:

—

General Motors (GM) – REPORTS FEB VEHICLES SALES -52.9% V -49%E
- Delivered 127,296 vehicles
- Reaffirms Q1 production guidance at 380K vehicles
- Guides Q2 production at 550K vehicles (Note on 2/10 a GM executive noted they expected Q2 production above that of Q1)
- Inventories at 781K (337K cars, 444K trucks) v 941K y/y,
- Trucks Feb Sales -55% y/y, Car Feb Sales -50% y/y

—

Toyota (TM):  US SALES DOWN 37%
- Note – Toyota sales were down 32% in January m/m

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Ford (F) : REPORTS VEHICLES SALES -48.4% V -47%E
- Feb inventories 405K -32% y/y
- Guides Q2 production at 425K v 685K y/y, v 400K q/q
- In Q209 plans to produce 425K vehicles (135K cars and 290K trucks). In Q208, produced 685K vehicles (237K cars and 448K trucks).

—

Chrysler: REPORTS US SALES -44% Y/Y, TO 84K UNITS V 62.2K UNITS IN JAN
- says $1.5B TARP loan has begin to provide some traction to retail sales results.
- reports 100 day supply of inventory.

—

Nissan (NSANY): REPORTS US VEHICLE SALES -37% Y/Y, AT 54,249 UNITS
- US car sales -26% y/y
- US truck sales -51% y/y
- Nissan says that a lack of consumer confidence is the biggest issue in the US sales climate presently.

—

Volkswagen: REPORTS US CAR SALES -17.5%

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MERCEDES-BENZ USA: VEHICLES SALES -23.5%, TO 14,199 UNITS

—

BMW: REPORTS US SALES -34.7%, TO 15,805 UNITS

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Honda (HMC): REPORTS US VEHICLE SALES -35.4% Y/Y, AT 71,575 UNITS; FLAT M/M

—

Porsche:  REPORTS US VEHICLE SALES -11.5%, AT 1,518 UNITS

Plans will be submitted today to the U.S. Treasury Secretary designee. But will the plans be completed? Will the plans address the core issues needed to turn the companies around? And will the plans address the public tax payer funds they received to keep them alive for the past couple of months? Will the United Auto Workers give in to cuts in retire health care?

Many questions still to be answered. I still stand firm in my position that the ‘best’ outcome for the automakers AND the U.S. tax payers would be a Government backed bankruptcy for both General Motors and Chrysler. Both companies claim that a bankruptcy filing would make buyers shy away from their vehicles thinking that they are in bankruptcy and won’t be around to fix the cars later.

I have news for you GM and Chrysler.. a bankruptcy may be the ‘only’ way you can be assured of being around in ten years from now. Keep going the way you are now with bail out funds from the tax payers and you may end up going Chapter 7 before you know it.

General Motors and Chrysler must initiate a Government backed bankruptcy so as they can restructure the entire company, re-negotiate contracts and debt obligations. This will be the only way in my view that these companies can be assured of any future.

Anything else will simply bleed the public balance sheet and end up being money ‘down the drain’ in the end, for all parties involved.

GM & Chrysler: Time to face the music and stop playing with the American people.

From Bloomberg:

Jan. 15 (Bloomberg) — Chrysler Financial, the credit arm of Chrysler LLC, is seeking $1.5 billion from the U.S. bank-bailout fund to increase loans to buyers of the struggling automaker’s vehicles, people familiar with the request said.

Chrysler Financial has stepped up its appeals to the Treasury Department since GMAC LLC, the lender affiliated with General Motors Corp., became a bank holding company and received $6 billion in support last month, said the people, who asked not to be identified because the application is confidential.

(read more…)

Remember the prestigious Waterford Crystal that was sought after by collectors and connoisseurs alike? Today the company that has roots dating back as far back as 1783 announced it filed for ‘administration’ (the British term for bankruptcy).

From the Scotland Herald:

AROUND 2700 jobs are under threat at Waterford Wedgwood after the historic crystal and china maker became the latest big-name casualty of the economic turndown.

The luxury goods firm – best known for Wedgwood pottery, Royal Doulton and Waterford crystal – yesterday appointed Deloitte as administrators at its UK arm.

Receivers have also been brought in to parts of its Irish business. Waterford, which can trace its origins back 250 years, collapsed after talks over a potential sale to a US private equity firm failed and lenders walked away from the deal.[...]

Reports of December auto sales released today were some of the worst on record, Senate majority leader Reid says the stimulus package may go as high as $1.3 Trillion, and U.S. firms are lining up to become ‘bank holding companies’. Yep, the economy is just fine… (sarcasm)

(read more…)