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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Chuck Williams who wrote (75266)	4/18/2001 5:07:55 AM
From: ajtj99	Read Replies (1) \| Respond to of 99985

Chuck, I'm saying that we shouldn't rely so much on the auto figures for March in looking at the health of the economy. They are still working out inventory problems. One way to keep production humming while riding out a perceived short-term downturn in sales is to push a lot of cars to the fleets (rental car companies). This keeps the assembly plants open and going (they have to pay the UAW workers 90% of their wages if they lay them off even temporarily) and gets rid of piled up inventory. The short term effect takes some profits away due to falling residuals on leased cars, as well as the fire-sale prices the cars are sold to the fleets. However, this may be a chance they take for a month or two to make their quarter sound nice (see Daimler Chrysler last year). I'm speculating that much of the March increase for autos is due to increased cars going to fleets to balance inventory during a perceived short-term downturn. Furthermore, they don't reflect if people who are re-leasing private cars are buying the same price range or trading down (going from a Taurus to a Contour, for example). Leasing does insulate the auto business a lot more from fluctuations of pure retail car sales. When your lease is up, you lose your car, so it forces you to take action (lease another car, or re-up). I believe about 1/3 of all new cars are leased now.