<This smacks of a huge inventory glut and no pricing power whatsoever.>
The evidence does support your observation about an inventory glut. If you will recall I've been short Autonation (covered for a couple buck gain), so I've been tracking them. Wall Street completely ignored a substantial inventory build yoy: 2,919.3 B vs 2,598.4 B(71 days vs 63 days). On the otherhand, you can't characterize auto sales as soft or "poor": 3,849.3 Bvs 3,786.1 B.
biz.yahoo.com
How do these guys maintain activity? I have a relative and friend who owns the local GM dealership, and he tells me never underestimate the power of easy money and finance. And you know, I fought that notion just like you have, but he's consistently proven otherwise. He says they can (and do) finance anybody: crack heads, the mentally ill, 14 yos, you name it. Pricing power? He tells me most buyers haven't a clue what they are paying, it's all about the "monthly payment". You could sell them a complete turd as long as it was zero down, and the monthly payment made sense. I believe that's generally true of housing and most big ticket consumer items as well. So this brings me back to my central point, as long as easy money and the credit bubble go on, vehicles will get moved. Can the auto companies, and dealers pass on increased inflation and costs? I suspect so, as long as cheap highly inflationary financing and stupid lenders (the BOJ based enabling chain) are available.
Message 19788706
But break up (inflationary panic?)the enabling chain, and it's over. |
