Miserable Numbers From Detroit

Got to at least mention the car sales numbers. They were abysmal but maybe not far off what we can expect for the foreseeable future.

Here are the numbers:

Ford Down 30%
Chrysler Down 35%
GM Down 45%
Toyota Down 23%
Honda Down 28%

Overall sales were 838,165 cars which translates into a seasonally adjusted annual rate of 10.6 million vehicles. The industry considers 16 million vehicles a year as healthy.

Let's stipulate that these numbers reflect sales in an extraordinarily rough period. That being said, the idea that the industry will soon see 16 million unit per year sales in the near term is a pipe dream. The sea change in the credit markets is going to put a crimp on sales for some time to come. In my opinion 12 million to 13 million sales per year are going to become the norm.

In that environment, the industry has to rationalize itself. There is simply too much capacity and someone has to merge or fail. We are probably going to go through a period of denial and government assistance before the music is faced. But faced it will be sooner or later.

Tom Lindmark

More Begging From Detroit

This is one of those posts where I have to include a link just to prove that I didn't make this up.

Bloomberg is reporting that the automakers, not content with umpteen billion dollars from the government have now come up with two new suggestions on how to spend your money. They are suggesting that the government give a tax deduction for new car purchases and also consider a program to have the government back a program that scrapped older cars to boost new car sales.

Toyota Motor Corp. and Chrysler LLC said federal income-tax deductions for interest on car loans could help stem the slide that sent U.S. sales to their lowest monthly total since 1991. General Motors Corp., the biggest U.S. automaker, also said today it had studied the idea of boosting auto demand through a government-backed program to encourage scrapping older
vehicles.

What can you say? The sad thing is that these tawdry people may well get a hearing from our elected officials.

Tom Lindmark

A Middle Class Squeeze

I was jumping around sites today when I came across this chart and it stopped me dead in my tracks.

Now I'm a fairly conservative person from both a political and economic perspective but when I saw the divergence in this pictorial, I was shocked. I've read a lot of opinion about the relative share of prosperity in the country over the past twenty years or so and it always seemed to me that the proposition that it was being shared inequitably was a political talking point for the Democratic Party. That it might be but it would appear that their might be some solid evidence that their lament is not without merit.

I can't imagine that a trend of this sort can for long persist without some quite serious societal problems developing. Those on the outside are not oblivious to what is occurring and are not likely to countenance it for an extended period of time. More importantly, perhaps, is that economically this would seem to be a dead end trend. The graph suggests to me that the consumer, which is the main driver of the economy, is slowly being starved. If that is indeed the case then long term prospects are not all that rosy.

If one factors in the likelihood that the middle class is not going to have access to credit as it has in the past then the trend becomes more ominous. It also helps explain how and why the credit load of the citizenry ballooned so much over the past decade or so. Shut off from participating in the growth from an income standpoint, they were forced to assume debt to consume.

It's a sobering trend and one that can't, in my opinion be sustained. There may be other factors at work here or maybe the chart misrepresents reality. If anyone has a different point of view, I would like to hear it.

Tom Lindmark

No Government LBO Loan For Chrsler/GM

Here's a surprise. The Bush administration has turned thumbs down on money for a Chrysler/GM merger. That takes some big ones.

Reportedly (NY Times Report Here) the Bushies are pushing to get the $25 billion already committed to the industry on the fast track. Apparently they didn't want to devot any of their $700 billion slush fund to the car makers. Could that mean they see bigger problems down the pike and thus more calls on the kitty from the financial sector?

This just gets more and more curious.

Apologies For The Poor Formatting

I can't quite figure out this blogging platform. I apologize for the messy look of the posts. The edit function doesn't seem to work. I edit and the same formatting errors recur.

At any rate I hope the content still makes sense. Somehow I'll figure this out or just ditch it for something better.

Tom Lindmark

Chicago PMI's Scary Numbers

From Jake at EconompicData.com here is a depiction of the components of the Chicago PMI that was released on Friday. For an analysis, consider these comments from Across the Curve.

Scary doesn’t do this report justice. This abysmal report follows all
other pre-ISM regional reports which carried the same tone - an abrupt change occurred in Oct. The plunge in the headline index left it at the lowest level since the 2001 recession. Demand side indicators collapsed. The 21.4 point drop in New Orders was the worst since the series began in 1968; the 40.5 drop in Production was the worst since its inception in 1946! The excess supply signal has never been worse - the New Orders-Inventories spread was -24.0. Price pressures eased rapidly - the 27.0 point drop in the Prices paid index was a record since 1946!

I think that sums it up perfectly. We may be getting the credit component of this crisis under a semblance of control (MAYBE) but the problems with the larger economy are just coming to light. There is a long way to go.

Tom Lindmark

Dow Rally In Perspective

It's been a crazy weekend trying to get this blog configured. A techie I'm not. I have no idea if anyone is reading this stuff yet. Nevertheless, here are some quick thoughts for you.

Infectious Greed has a very interesting chart. It shows that the Dow rally last week was one of the ten best. Sounds pretty good right? Not so fast, look at when the other big rallies occurred.

Sleep well.

Tom Lindmark