Crashing US Auto Sales
US auto sales for January came in below estimates at a seasonally adjusted annualised rate (SAAR) of 9.57m units. The figure, the lowest since 1982 was down from 15.4m last year and saw a dip below the psychologically important 10m reading. Whilst the European and Asian manufacturers were hurt; the US big three, GM, Ford & Chrysler were once again the notable underperformers witnessing their sales volumes fall by 51%, 43% & 56.5% on the same period last year.
The US manufacturers face huge challenges. Inventories remain high with consumers continuing to defer purchases of discretionary items. A poor product mix coupled with legacy healthcare and pension issues remain. Beyond that working capital requirements are consuming already decimated cash balances at record speeds and capital markets remain closed (long dated GM bonds trade around 15 cents in the dollar).
We remain deeply sceptical of most auto manufacturers with even the stronger European players now coming under ratings pressure. The development plans that the US manufacturers must present to politicians on Feb 17th will be one to watch.
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