Comments for "Vehicle Sales: Cliff Diving in February"

CRbot says:

This comment thread has been HALO-IZED by CRbot.

http://realize.org/cr/halokit.php?halourl=http://www.haloscan.com/comments/calculatedrisk/4655919047135707062

CRbot Fri Mar 27 10:54:25 2009 CDT #

JP says:

I know folks that have decided to go from being 2 car families to 1 car families when car #2 needs replacing. Not a good sign.

JP Fri Mar 27 10:55:33 2009 CDT #

John Stark says:

If we really do stop borrowing so much money, we would be returning to earlier levels of consumption when one-car families were the norm. It wasn't that long ago. One-car-per family also makes sense if there is only one job per family, with the laid-off dad or mom filling the homemaker role.

Parent Post

John Stark Fri Mar 27 11:49:54 2009 CDT #

Comrade Tiberius says:

We are contemplating going from a 2 car family to a 0 car family.

Parent Post

Comrade Tiberius Fri Mar 27 13:00:07 2009 CDT #

duke of con dao says:

about that Chevy

duke of con dao Fri Mar 27 10:55:47 2009 CDT #

EvilHenryPaulson says:

dryfly,
I am looking for a bottom in production Y09Q4 as well, to be confirmed by spring 2010 in the statistics. After the production bottom I expect a new phase to reorganize global trade (manic behaviour to sort out currency, energy, base materials, agriculture pricing) lasting about a year, or late Y2010Q04

Of course I will pay attention to what is happening when and how fast, but that's my distant focus point

EvilHenryPaulson Fri Mar 27 10:56:44 2009 CDT #

Guest says:

i'm driving my 97 civic into the ground.... I'm not sure about 27 years but I think it can last 5 more years (127k miles)

Guest Fri Mar 27 10:56:45 2009 CDT #

mark says:

I'm driving my 2008 Chevy Colorado into the ground. Based on the problems I've had so far, that'll be some time later this year.

Parent Post

mark Fri Mar 27 12:25:45 2009 CDT #

Anonymous says:

Six weeks ago, IBM said they were moving jobs to India, and they would permit those in the US losing their jobs to move to India and receive an equivalent job there where the cost of living is much lower and compensate for their much lower salary. In the meantime, Wal-Mart is now hiring Anglo's in their 30's as door greeters and well educated Anglo's as checkers. What a country!

Welcome to CostCo, I love you.

Anonymous Fri Mar 27 10:57:56 2009 CDT #

EvilHenryPaulson says:

really, you keep including that paragraph of circular logic?

unbelievable

Good news everyone! Everything will revert to their previous sales level ANY DAY NOW. Go long Beanie Babies

EvilHenryPaulson Fri Mar 27 10:59:36 2009 CDT #

sc says:

Rebound will come from blow-out sale this summer to clear inventory that is piling up. Could be 50% off. May push CPI below zero for a quarter.

sc Fri Mar 27 10:59:45 2009 CDT #

Basel Too says:

my immediate family is one of those that have more cars than drivers. given the fact the cars are driven about 10K/year, we won't be in the market for a new car for about a decade.

Basel Too Fri Mar 27 11:00:00 2009 CDT #

Outsider says:

The really sad part is that in my state - and maybe many states - dealerships are closing not because business is so dismal but because their credit lines have been frozen and they can't finance their fleet. Report said that particularly the banks who have been bought out by foreign investors are not willing to risk on small town dealerships.

I don't like global. I like local. Global stinks.

Outsider Fri Mar 27 11:00:23 2009 CDT #

Toast says:

15 yr old Lexus with 63k should make the fleet target of 26 yrs. 11 yr old F-150 with 125k might not but I'll give it best efforts. Why buy new when the old last so long?

Toast Fri Mar 27 11:00:51 2009 CDT #

duke of con dao says:

still haven't recovered from that news on NYC unemployment jump! mp - responded to that Atlantic article in Feb PCE post... thanks... I think my analogy to WW1 holds up...

duke of con dao Fri Mar 27 11:00:54 2009 CDT #

NateTG says:

"I doubt most vehicles will last 27 years!"
It's really a question of maintenance, cosmetics, and comfort. A well-maintained car can last very long, and it's staggering what can be repaired.

http://en.wikipedia.org/wiki/Trabant
"Since it could take years for a Trabant to be delivered from the time it was ordered, people who finally got one were very careful with it and usually became skillful in maintaining and repairing it. The lifespan of an average Trabant was 28 years. Used Trabants would often fetch a higher price than new ones, as the former were available immediately, while the latter had the aforementioned waiting period of mostly at least ten years."
(There's a citation for 28 years on the site.)

Admittedly a lot of the Trabbi is 'too dumb to break' but they're not exatly famous for production values.

NateTG Fri Mar 27 11:02:59 2009 CDT #

EvilHenryPaulson says:

I need to step away, CR go read the past threads on auto sales... honestly you are embarrassing yourself, more so than the forecasts GM and Chrysler submitted to congress

EvilHenryPaulson Fri Mar 27 11:03:08 2009 CDT #

Jas says:

--
ON ROGUE ECONOMISTS (TWO OF MY FAVORITE)...

Lasst Year:
"UCLA Economics Forecast" [Ed "Lemmings" Leamer]
"We don't see [a recession] happening. This is tough call, but I will be very surprised if this actually precipitates into a recession."
- AP, March 11, 2008

"So Congress tried to make sure it [The Depression] would never happen again by creating a system of regulation and guarantees that provide a safety net for the financial system."
- Nobel winner, Paul Krugman, New York Times, March 21, 2008

http://www.safehaven.com/article-12918.htm

Jas

Jas Fri Mar 27 11:03:11 2009 CDT #

Lawyerliz says:

I drove my Ford Tauri 204 and 237k miles respectively. True it was easy driving. I hope my Fusion will go to a quarter million. The hub's ancient Saturn is still going strong after about 11 years. He's "saving up" (what a concept!) to put a big down payment on a new car when the Saturn dies. He
was going to buy a new one before it actually died, but I guess 'cause of the economy, he's not. His previous car and the car before that was totalled.

So, I guess he is an evil saver destroying the car industry. Which is showing the most pathetic ads, as remarked by me several threads down.

What happened to General Motors? Not dead yet? Did they get bailed out by the Feds? Lost track of all the bail outs!

Lawyerliz Fri Mar 27 11:03:14 2009 CDT #

dryfly says:

dryfly,
I am looking for a bottom in production Y09Q4 as well, to be confirmed by spring 2010 in the statistics. After the production bottom I expect a new phase to reorganize global trade (manic behaviour to sort out currency, energy, base materials, agriculture pricing) lasting about a year, or late Y2010Q04

Of course I will pay attention to what is happening when and how fast, but that's my distant focus point

Sounds about right.

BTW I think the rate of failures & BKs to continue even as the 'bottom stabilizes' - the levered companies can't survive at this level of activity. But that isn't the same thing as saying the output will continue to decline. The low cost high quality producers will mostly do okay - not great but will do okay. Those with either high cost (leverage & legacy) or bad quality will either go away or be eaten by those who know how to operate. PE run firms & conglomerates are going to be picked bare IMHO.

dryfly Fri Mar 27 11:03:15 2009 CDT #

Basel Too says:

barclays passed the stress test, won't need additional capital. up 18% today.

Basel Too Fri Mar 27 11:04:38 2009 CDT #

NateTG says:

"Barclays passed the stress test, won't need additional capital. up 18% today."

Will there be memory if gets bailed out later? Oh, sorry, my cynicsm slipped.

Parent Post

NateTG Fri Mar 27 11:07:36 2009 CDT #

Lawyerliz says:

I thought Barclay's was a mess. .

Lawyerliz Fri Mar 27 11:06:38 2009 CDT #

Anonymous says:

barclays passed the stress test, won't need additional capital. up 18% today.

Was just about to ask, have they made arrangements to secretly funnel capital or will they be embarassed whenb the "sound" bank needs bailed out, yet again?

I seem to recall they had one of these "all better" moments several times for the major banks in Japan.

Anonymous Fri Mar 27 11:08:50 2009 CDT #

Some Investor Guy says:

I find the fleet turnover chart odd. Quality rose a lot after the 1980s. I would expect cars to last longer. Why did the turnover rise so little? I'm guessing this has to do with affordability or economics, rather than durability.

Maybe I'm missing something. Maybe when more recent cars get old they become more difficult to fix. Maybe pollution regulations mean more pieces of junk are taken off the road sooner.

Some Investor Guy Fri Mar 27 11:10:23 2009 CDT #

Guest says:

"I doubt most vehicles will last 27 years!"

You haven't been to Cuba.

Guest Fri Mar 27 11:10:58 2009 CDT #

Ethan says:

Exactly. Since 1963 it has been illegal to import a privately owned motor vehicle to Cuba. So all privately owned cars, trucks, motorcycles, tractors, etc. are pre-1963 models. Cuba is known as the world's larges outdoor car musuem.
Actually the Cuban mechanics have grown rather skillful with "Make do" and "get by" they actually have a separate verb for it, but I forget what it is.
Further:
The new cars in this country -- with electronic ignition, fuel injection, computer monitored systems, etc. -- run for a lot longer that those of my youth in the 40's and 50'. Does anyone else remember the phrase "planned obsolencence" and what it meant?

Parent Post

Ethan Fri Mar 27 11:21:23 2009 CDT #

Guest says:

<i>This suggests vehicle sales are much nearer the bottom than the top, and there will probably be some sort of modest rebound later this year.</i>

Rebounding from a SAAR of 9.3 to 10.0 (my guess) won't return any manufacturer to profitability.

Guest Fri Mar 27 11:14:04 2009 CDT #

sanjay says:

and is true for a lot of businesses - All the statistics point to the consumer demand settling in at about down 10% which is about where it should be after adjusting for a higher savings rate and elimination of MEW. Currently the savings rate is 4% rather than the 8-10% it should be although unemployment is higher. Thus even if unemployment stabilizes and begins to go down we shouldn't see much of jump in consumption as any reduction in unemployment is offset by the savings rate going to 8-10%. Think we will be bouncing around at these levels for a while.

Parent Post

sanjay Fri Mar 27 13:17:53 2009 CDT #

Lawyerliz says:

Classic car mavens will be simply flocking to Cuba, once we can trade with them.

Lawyerliz Fri Mar 27 11:14:44 2009 CDT #

Some Investor Guy says:

1993 Civic, 340,000 miles. Doing just fine. I have not sold a used car in 20+ years. One totaled while parked. Another totaled while stopped at a traffic light.

Some Investor Guy Fri Mar 27 11:16:29 2009 CDT #

Lawyerliz says:

I remember people saying that stuff about people HAVING to buy new cars at some point, because the old ones would wear out sooner or later. It did happen, but not for quite a long time.

Lawyerliz Fri Mar 27 11:17:03 2009 CDT #

Lawyerliz says:

Ok, based on some investor guy, and the hub's experience (and mine), what the car companies need to do is to hire out of work types to steal old cars and run them into relatively new ones.

Oops, the insurance companies wouldn't like that very much!!

Lawyerliz Fri Mar 27 11:19:22 2009 CDT #

dan10400 says:

I think the math is a bit suspect. At the given point in time, the average age of the fleet size over the sales rate may project 27 years, but nothing says that the rate is static. Nor as other posters point out, some of these cars wil never be replaced.

Personally, I would like to replace my 2005 Pacifica with something smaller. However, the prospect of paying CA sales taxes, plus yearly registration on a new vehicle, in which the kids will just throw up in anyway, puts me off.

--Dan

dan10400 Fri Mar 27 11:19:57 2009 CDT #

Tim waiting for 2012 says:

Have a 18 year old car with 50k on it that I bought for 2k this year. That Cash for clunkers program wouldn't make me part with it. NEw Cars are hard to service nowadays.
Cash for clunkers should replace direct bailouts for autos.

Tim waiting for 2012 Fri Mar 27 11:20:40 2009 CDT #

solohedger says:

Tim waiting for 2012 says:

> Cash for clunkers should replace direct bailouts for autos.

Bad idea. But at least you recognize Cash for Clunkers for what it is - a bailout. Paying people $5000 to take 2004 cars to the scrap heap is
- Not good for the economy - unless you are selling new cars
- Clearly not good for the environment. If you want that, just extend Calif. emissions guidelines nationwide.

Parent Post

solohedger Fri Mar 27 14:27:28 2009 CDT #

Anonymous says:

Did Goldman Goose Oil?
What's the evidence of this? Much is circumstantial. Proving oil-trading manipulation is difficult. But numerous people familiar with the events insist that Citibank, Merrill Lynch and especially Goldman Sachs had knowledge about Semgroup's trading positions from their vetting of an ill-fated $1.5 billion private placement deal last spring. "Nothing's been proven, but if somebody has your book and knows every trade, it would not be difficult to bet against that book and put the company into a tremendous liquidity squeeze," says John Tucker, who is representing Kivisto.
http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-oil.html

Ya think? Surly not the dirtiest little whore house on the street.

Anonymous Fri Mar 27 11:21:18 2009 CDT #

Kung Fu Panda says:

I see a lot of older vehicles on the roads; saw an El Camino the other day that looked like it had been in a garage for a decade as the paint was almost pristine. There are a lot of 1980's era Chevy and Ford pickups driving around out there. I agree with other posters that CR is incorrect in this case.

My relative had the transmission go out on their 1983 Suburban; they are likely to get the trans fixed as that is least cost option to keep the family vehicle size they need.

Kung Fu Panda Fri Mar 27 11:22:14 2009 CDT #

Tim waiting for 2012 says:

Say what you want about hybrids but the new hybrids that are coming out this year willl spark some new vehicle sales even with gas just above 2 dollars. I heard of people getting a license just to get a hybrid.

Tim waiting for 2012 Fri Mar 27 11:23:27 2009 CDT #

Lawyerliz says:

I do, I do, Ethan!!

Lawyerliz Fri Mar 27 11:23:34 2009 CDT #

Guest says:

9 million auto sales will be the high mark for many years if not decades. The middle and upper class will no longer be a viable base for the American or foreign auto industry.

Guest Fri Mar 27 11:24:19 2009 CDT #

evelyn woods graduate says:

2000 Jetta.........86,000
2001 Ford Escape.............68,000
1995 F-150..........93,000

repair costs aren't that bad...even if large, they don't come often if you keep the miles down.

evelyn woods graduate Fri Mar 27 11:25:39 2009 CDT #

Guest says:

Also the first two weeks of March sales are off 40% from 08. The beat goes on.

Guest Fri Mar 27 11:26:14 2009 CDT #

Morocco Bama says:

I don't know about all of you, but I'm not buying a vehicle any time soon. Of course, I'm not most people....at least, I think I'm not.

Morocco Bama Fri Mar 27 11:26:37 2009 CDT #

Anonymous says:

Sorry CR, have to agrtee with the crowd. I think this is worth studying as the curve will form a useful; future proxy for the wear-out curve on an overcapitalized economy's medium capital goods.

Anonymous Fri Mar 27 11:27:03 2009 CDT #

Angry Saver says:

Barclays recieved ~ $9 billion from the U.S. Government in settlement of AIG CDSs. A bailut success story!

Angry Saver Fri Mar 27 11:27:04 2009 CDT #

Sebastian says:

Guest said: "i'm driving my 97 civic into the ground.... I'm not sure about 27 years but I think it can last 5 more years (127k miles)"

My "beater" is an *87* Civic that I'm driving into the ground, a Japanese-made car actually manufactured in Japan. My Marysville, Ohio-made '86 Accord has long since gone on to its great reward.

S.

Sebastian Fri Mar 27 11:27:39 2009 CDT #

Jim says:

Two things...

My "beater" is a 1991 Toyota 4wd pickup truck (4 cylinder), with 222k miles on it and still going strong. I have absolutely no reason to get a new vehicle. I enjoy low insurance due to the age of the vehicle, almost free vehicle registration since it's older and I have no car payment. So why would I trade that in...giving me an auto payment and higher insurance and paying the State of Nevada a lofty sales tax? For me, it's far cheaper just to fix what breaks (and most of what "breaks" is what breaks on new vehicles, such as tires and other routine maintenance items).

I suspect auto sales will, eventually, find a new floor lower than before. There are so many families with more cars than drivers, plus many families are switching from 2 cars down to 1. This will keep the floor lower than what we saw earlier this decade.

Parent Post

Jim Fri Mar 27 17:02:31 2009 CDT #

ac says:

"So Congress tried to make sure it [The Depression] would never happen again by creating a system of regulation and guarantees that provide a safety net for the financial system."

Ironically it's this very "safety net" that created the complacency, lack of feedback from the real economy, and misinformation which may be its undoing.

"Don't worry about managing your own business or finances - Washington is doing that for you!"

ac Fri Mar 27 11:29:22 2009 CDT #

wunsacon says:

ac,

>> Ironically it's this very "safety net" that created the complacency, lack of feedback from the real economy, and misinformation which may be its undoing.
NO. Its undoing was:
(a) The undoing of this safety net.
(b) The election of people who increasingly said industry could self-regulate.

You just witnessed history. How are we going to "learn from history" if we can't even learn from current events?

Parent Post

wunsacon Fri Mar 27 11:51:15 2009 CDT #

bearly says:

Boaters World liquidating. Big retailer, lots of stores.
http://www.boatersworldstores.com/index.html

bearly Fri Mar 27 11:30:18 2009 CDT #

Kung Fu Panda says:

"NEW YORK, March 27 (Reuters) - New York state relaxed harsh Rockefeller drug laws from the 1970s that required prison sentences for nonviolent drug crimes and will let judges send addicts to treatment programs, state officials said on Friday.

Senate Majority Leader Malcolm Smith, at an Albany news conference joined by Governor David Paterson and Assembly Speaker Sheldon Silver, estimated this will save the state about "a quarter of a billion dollars" a year."

Smart decision..."The governor and the legislative leaders are all Democrats, and Friday's announcement was a breakthrough for them as years of efforts had produced only limited changes to drug laws."

Kung Fu Panda Fri Mar 27 11:30:26 2009 CDT #

Some Investor Guy says:

Looks like cliff driving. Do I see a 1964 Thunderbird with Thelma and Louise in it on that chart?

Some Investor Guy Fri Mar 27 11:30:30 2009 CDT #

EvilHenryPaulson says:

Ethan,
They have new cars in Cuba, they have been able to import non-American cars for years (Hyundai, BMW, ...)

Everyone else,
yes CR's fleet turnover ratio is backwards looking and of no practical use. It's circular logic without justification, or more specifically in the face of rational justification. Look at some of the old automotive threads for details

Disney lays off 800, they employ 62,000!!! in Florida http://www.clickorlando.com/money/19026688/detail.html
Johnson Controls is closing another 10 factories, http://hosted.ap.org/dynamic/stories/J/JOHNSON_CONTROLS_RESTRUCTURING?SITE=AP

EvilHenryPaulson Fri Mar 27 11:31:33 2009 CDT #

Angry Saver says:

Regarding car demand. As with houses, many, many years of future car demand were pulled forward. A few months of very low sales does not wipe out 10 years of excess demand.

Projecting the recent past into the future is pointless at inflection points. And we are at an historic economic inflection point. The CON is coming out of eCONomics.

Angry Saver Fri Mar 27 11:31:57 2009 CDT #

Basel Too says:

boaters world is owned by Ritz Camera, which also filed for Chap 11. I guess their initial plan was to diversify because cameras would eventually saturate the market. boating probably wasn't the best choice.

Basel Too Fri Mar 27 11:33:51 2009 CDT #

Kung Fu Panda says:

"
After months of anticipation, Tesla on Thursday took the covers off the Model S, an electric sedan priced at $56,400 but that qualifies for a $7,500 federal tax credit.
In a newsletter to customers on Friday, Musk, who is also product architect at Tesla, touted the many benefits of electric vehicles over gasoline cars, including price.
"The ownership cost of Model S, if you were to lease and then account for the much lower cost of electricity versus gasoline at a likely future cost of $4 per gallon, is similar to a gasoline car with a sticker price of about $35,000," he wrote."

That would be a game changer...

Kung Fu Panda Fri Mar 27 11:33:54 2009 CDT #

mp says:

People, buy a car! Take a vacation! Buy lots of gasoline!

http://omrpublic.iea.org/demand/us_gs_ov.pdf

mp Fri Mar 27 11:34:47 2009 CDT #

Some Investor Guy says:

Liz, I have previously suggested subsidizing insurance companies to total more cars. You know, if repairs cost 50% of blue book, total it, and get a govt subsidy. Cruch, Cash, Buy, repeat.

Some Investor Guy Fri Mar 27 11:34:49 2009 CDT #

Some Investor Guy says:

If you want to be green, subsidize crushing cars with older pollution standards, or poor mileage.

Some Investor Guy Fri Mar 27 11:35:31 2009 CDT #

Rob Dawg says:

This suggests vehicle sales are much nearer the bottom than the top, and there will probably be some sort of modest rebound later this year.

I don't see it. I see fleet age increasing. The average age of vehicles in 2003 was almost 9 years (8.9 years), compared with 8.3 in 1995, 7.6 in 1977, and 6.6 in 1969. Older vehicle are also being driven more miles than before, because of their continued presence in the vehicle fleet (OHPI data). I see demographic peaks. THe number of new drivers has stopped exploding. I see reduced VMT.

We don't need new vehicles for many of the same reasons we don't need new houses.

Rob Dawg Fri Mar 27 11:37:04 2009 CDT #

MS says:

EHP-

So sad that people actually believe that. They fail to understand the reasons why it was at that level. You recall the "plan" they submitted in January or maybe it was Feb but it showed that sales "bottomed out" in January....

The need for to create "warm fuzzy's" is just makig me sick. Reality is swept aside and people seem to be stuck with "I want my old life back"...Sorry it's not coming back...

Ciao
MS

MS Fri Mar 27 11:39:17 2009 CDT #

Anonymous says:

to have the full info, it would be nice to have the number of vehicules divide by population graphe.

I think will see that it has increase from 1 vehicule for 4 people to maybe 1 for 2 which is a lot.

In Western Europe, we have less vehicles, and are fine with it. Maybe US is coming to that too ?

Anonymous Fri Mar 27 11:40:48 2009 CDT #

EvilHenryPaulson says:

Kung Fu Panda,
It will be 2 years of battery testing before it's production ready.

Looks very appealing, would probably buy one myself. But I have enough experience to know that it won't be a game changer. Americans will want the same car, but for $20k and a 7 year lease. You give them that, and then they'll whine they need an 8 seater SUV to tow the boat they rent each summer and because they have a dog. So on and so forth. I'm speaking of the general American public of course, not trying to place anyone in a box.

I would call it the beginning of a new chapter

EvilHenryPaulson Fri Mar 27 11:41:31 2009 CDT #

Some Investor Guy says:

Can we blame Tivo and the internet? I only watch car ads during live sports now.

Some Investor Guy Fri Mar 27 11:41:41 2009 CDT #

Morocco Bama says:

I usually go to the auto show every year. I didn't go this year.

Morocco Bama Fri Mar 27 11:42:29 2009 CDT #

MS says:

Re: Tesla

It may be a game changer however it is several year's late to the party and still over-priced by at least 30% IMO. having a pricing model that relies on a subsidy is pretty stupid as well.

Good luck with it.....I hear Ah-nold is trying to give his back and Tesla is not playing ball...wouldn't want any bad pubilicity now would they?

Ciao
MS

MS Fri Mar 27 11:45:07 2009 CDT #

Dead_Monkey_Bounce says:

Angry, you missed a CON when you were capitalizing.

Dead_Monkey_Bounce Fri Mar 27 11:46:51 2009 CDT #

Morocco Bama says:

How about this for a marketing slogan to get people buying again:

Consume! Spend! Don't be a miserly cunt muscle.

Morocco Bama Fri Mar 27 11:47:25 2009 CDT #

Mean Flurry Kitten says:

Yes, there will be a rebound when sales include horses and donkeys.

Mean Flurry Kitten Fri Mar 27 11:47:37 2009 CDT #

Yalt says:

Since we're down over 50% from peak I suppose it really is safe to say that we're "closer to the bottom than the top."

Yalt Fri Mar 27 11:48:03 2009 CDT #

Mean Flurry Kitten says:

"I doubt most vehicles will last 27 years"

Yes, those will last. Case #1: Cuba.

Mean Flurry Kitten Fri Mar 27 11:49:04 2009 CDT #

EvilHenryPaulson says:

Auto sales, to be clear, sales will have to rise just to clear inventory -- even at a small loss, it's worth it. Problem is they will be at those low prices.

The problem is the massive inventory (detailed in past threads, but as one example the family with 4 cars and 2 drivers). It will depress new sales, and for a long time.

There is still too much production capacity within NAFTA and aimed towards it from Britain, Germany, Japan, South Korea

There will not be the bounce back to 15mn new truck+auto sales in North America for many years, not the by year end 2010 worst case scenario submitted by GM, Chrysler

The auto sector will not be healthy until there is a huge wave of plant closings to restrict demand (aided by a decline in imports), and bring prices up to a level where the manufacturers are profitable (shocking idea, I know, but you may have noticed the troubles faced by GM and Ford to Toyota and BMW). Lower material and energy prices are not enough, which in a cruel joke lower new auto sales demand (lower scrap price, less need to upgrade efficiency)

EvilHenryPaulson Fri Mar 27 11:52:15 2009 CDT #

citiprank says:

2007 Honda Accord - 10,000 miles (leased)
2006 Honda CR-V -25,000 miles
2003 Jeep Wrangler Sahara - 20,000 miles

I don't plan on buying another car (except for maybe buying the accord off lease) for another 10 years.. i work at home and dont drive except when visiting local customers or going to the airport.. My wife drives about 30 miles a day round trip to work.. but may be quitting once our first child arrives.

I own the jeep outright and have the CR-V well more than half paid off (on a 3% loan)

Heck, assuming I stay in this job I could probably go 15 years without another car...

citiprank Fri Mar 27 11:53:22 2009 CDT #

fresno dan says:

REBOUND: Kinda like the difference between being dead and being a zombie. Your dead, but you can walk slowly.

fresno dan Fri Mar 27 11:54:35 2009 CDT #

Dirk van Dijk says:

Since everyone is telling what they drive, I'll join in, 2003 Suzuki Aero 134K miles on it, bouht used in 05 with 50K on it. Going strong, small car, lots of interior room. Mechanically fine, but lots of lil things wrong with it, most anoyingly the CD player stops and starts in the middle of CD's esp when the car is cold (yeah i know thats odd, should give Click and Clack a call on that one). Kids hate it cuz it looks a lil funky, but gets me from point A to Point B w/o worries. Points A and B are mostly Chicago and Dayton OH, a trip I drive every other week.

Dirk van Dijk Fri Mar 27 11:55:15 2009 CDT #

Broker says:

Check out Cuba for more info on cars. 27 year old cars are considered "almost new".

Broker Fri Mar 27 11:56:19 2009 CDT #

Anonymous says:

If you want to be green, subsidize crushing cars with older pollution standards, or poor mileage.

Really? Is the recycling costs + production-phase pollution for a new car really so low that it's better to pull an extant vehicle, or is that just greenwashing on an auto mfg stimulus?

It seems to me that, as production phase gets greener over time, and recycling gets more efficient over time, and manufacturing a replacement unit is inevitable, pushing this forward as far as possible is what's ecologically wise, especially given that units mfged now can't incorporate emergent technologies. If we are all going to run out and consumerize every time car mileage drifts up incrementally, it really defeats the purpose, doesn't it?

Although your suggestion seems much more likely to be proclaimed "green" regardless of its actual merit, and, well, it'd be BBADs making the decision.

Feel free to show me a spreadsheet that demonstrates otherwise?

Anonymous Fri Mar 27 11:56:36 2009 CDT #

Magical Thinking says:

Has anyone tracked sales of two wheeled vehicles? I drove past a certain DMV last July and there were about 20 people at that particular moment driving thru orange cones on motorcycles.....

Magical Thinking Fri Mar 27 11:59:03 2009 CDT #

alybaba says:

I guess someone is having buyers remorse

http://www.bloomberg.com/apps/news?pid=20601087&sid=aSuO_N_umK70&refer=home

Bank of America Suggests U.S. Should Split Functions (Update1)

Bank of America Corp. Chief Executive Officer Kenneth Lewis said today the U.S. should consider separating commercial lenders from investment banking activities.

Lewis made the comment on his way to a meeting with President Barack Obama and U.S. banking chiefs. Asked what he would tell Obama if given the chance, Lewis said it would be that “commercial banks are the fabric of any community in which they operate and we probably need to separate the commercial banks from the investment banking activities.”

alybaba Fri Mar 27 11:59:53 2009 CDT #

Jas says:

--
Agent of the CROOKS will meet the CROOKS. A system of the Crooks, by the Crooks, and for the Crooks.

Jas

Parent Post

Jas Fri Mar 27 12:18:21 2009 CDT #

Anonymous says:

Is Ken Lewis comments the break in the ranks of the banking oligarchy?

They all need to turn against Goldman Sachs.

Parent Post

Anonymous Fri Mar 27 13:33:19 2009 CDT #

The Lorax says:

Can we have these graphs agjusted for population?

As for the comments, we too moved from a 2 car to a 1 car family two years ago and we don't plan on making any changes any time soon. Our 2004 Toyota Carolla is in great shape and will last between another 5-10 years easy.

The Lorax Fri Mar 27 12:02:47 2009 CDT #

Teddy says:

And IBM, even after their complete lack of loyalty to American workers, is demanding billions of dollars in Obama's stimulus money for their company.......at taxpayer's expense of course. I think they r underestimating American workers tolerance 4 greed and theft. This is pure fascism. The pitchforks, torches, and pikes r coming 4 wall street and the fed sooner than they think.

Teddy Fri Mar 27 12:03:07 2009 CDT #

Angry Saver says:

Dirk,

Forget the annoying cd player. I had the same problem. Buy a cigarette lighter adaptor that lets you use an ipod. A cheap fix and a huge improvement over cds.

Angry Saver Fri Mar 27 12:03:21 2009 CDT #

Outsider says:

You cheapsters are making me feel like my cars are new. 2002 Sable wagon (luv it) w/130,000, '98 S10 w/120,000, and our "best" car which my teen uses, a '95 Prizm w/90,000.

Outsider Fri Mar 27 12:03:26 2009 CDT #

Magical Thinking says:

we have less vehicles
----------------------------------------------
Different situation: geography, area size, existing transportation modes..... Mobility-we kind of like to get around , maybe we are slutty that way...

Magical Thinking Fri Mar 27 12:05:43 2009 CDT #

Jas says:

----

“WLI Growth at 21-Week High”

http://www.businesscycle.com/news/press/1368/

“its annualized growth rate -- while still in negative territory -- reached a 21-week high at -23.2 percent…”

STILL THE WORST EVER EXCEPT FOR THE PAST FIVE MONTTHS. Dopes and rogue economists pay too much attention to the monthly and quarterly noise and not enough to the powerful long-term trend.

BTW, the Future Inflation Guage is at –36.7% annual rate. “Printing Money” inflation dopes are clueless about the all-powerful deflation trend.

Jas

Jas Fri Mar 27 12:05:46 2009 CDT #

Noble says:

http://www.fasb.org/fasb_staff_positions/prop_fsp_fas157-e.pdf

I am sure the banks will be able to hold their positions (since they have already marked them down sufficiently!). :)

C will hold their OTTI at 90-95 on the dollar and did Pandit say they are having an operating profit in the first 2 months? There you go. problem solved.

Noble Fri Mar 27 12:06:00 2009 CDT #

Splat says:

Those figures are a serious "WOW". The kinda of massive overcapacity this industry is suffering from is only going to be solved by someone going belly-up.
Alternatively the govt. running automakers as job creation scheme, hey it's worked in Europe. Renault, Citroen French subsidized, in the UK in the 1970's it was British Leyland, Fiat only exists because it was an Italian govt. job scheme.

Splat Fri Mar 27 12:06:11 2009 CDT #

citiprank says:

Right on to Angry Saver.....

I will say that the other thing I love to listen to is my XM (now XM/Sirius)...

A lot of people wonder why anyone would pay for radio.. but it really is fantastic

citiprank Fri Mar 27 12:07:11 2009 CDT #

scone says:

CR- Is this chart about new vehicle sales only? What about used vehicle sales? (I looked around the web and couldn't find this addressed.) Thanks!

scone Fri Mar 27 12:08:25 2009 CDT #

Anonymous says:

And IBM, even after their complete lack of loyalty to American workers.

Do you expect otherwise from the guys who designed and engineered the information systems to track the Jews during the Final Solution?

Anonymous Fri Mar 27 12:09:25 2009 CDT #

Calculated Risk says:

EvilHenryPaulson, if we don't see a modest rebound in auto sales later this year, please remind me of how wrong I was! I make a million predictions - and I get some wrong (I'll just blame it on my crystal ball).

As far as the replacement argument, I think it is good for autos - although maybe the U.S. will become like Cuba and drive cars for 50 years!

best to all.

Calculated Risk Fri Mar 27 12:10:56 2009 CDT #

The Lorax says:

Vehicle sales, one adjusted for population, have never been lower according to that data. The low points in 81, an 71 don't even come close to the point we are at today.

The Lorax Fri Mar 27 12:11:54 2009 CDT #

Anonymous says:

i'm driving my 97 civic into the ground.... I'm not sure about 27 years but I think it can last 5 more years (127k miles)

===

Me too, my 98 has 152k on it. Still runs and appears just as it did with 60k miles. I love saving that extra 600-800/month, all the while being snubbed by gorgeous 20-something, german luxo car driving females. Thats the crappy part.

Anonymous Fri Mar 27 12:12:52 2009 CDT #

Guest says:

Should have most beat, 1987 Acura Legend 187k, going strong, original owner. Low maintenance, still lots of getup and go, little rust. I'm 66 and plan on driving it for another 100k (8-10 more years)

Parent Post

Guest Fri Mar 27 12:20:29 2009 CDT #

JT says:

A rebound later this year will occur as the 2010 models hit showroom floors with no buyers for th 2009 models still in the dealer's lots.

They will be practically giving away cars late this year.

If you need a car...wait. The deals will be ridiculous.

JT Fri Mar 27 12:13:54 2009 CDT #

Mr. Sparkle says:

Has anyone looked at the change in # of cars per driver in the US in the last several decades? I realize that the shifts in population and residence make it exceedingly unlikely that the US will ever revisit the ratio from the 60's but at the same time, I suspect there is some room for this to fall. Just thinking of the teenage driver's 3rd car, not replacing the 2nd as mentioned earlier.

Here are links to the data, and I'm too lazy right now to post the chart:

http://www.infoplease.com/ipa/A0908125.html
http://www.bts.gov/publications/national_transportation_statistics/html/table_01_11.html

Mr. Sparkle Fri Mar 27 12:15:20 2009 CDT #

1 currency now [yogi] :) says:

I made a vow 30 years ago that I would not buy a new car unless it was fully electric. Getting close. Still the obvious choice for large cities, and Paris and Tel Aviv may get there next year.
http://www.climatechangecorp.com/content.asp?ContentID=6026

1 currency now [yogi] :) Fri Mar 27 12:16:18 2009 CDT #

nincompoop says:

Am I missing something? The article does not mention 27 years but merely refers to a ratio of 26 to one or there abouts. I would imagine the total number of cars remains fairly constant and low sales give you that I ratio which as far as I can tell has nothing to do with the age of the cars.

nincompoop Fri Mar 27 12:16:26 2009 CDT #

DL says:

I got the same impression that you did.

Parent Post

DL Fri Mar 27 12:24:45 2009 CDT #

MaryAnn says:

Dealers in my area lost and closed last fall, yet it appears the used car auctions are healthy since you can buy used cars that are dependable for less than 1k. Do I, who is a lender of last resort see new cars rebounding later this year, notta, notta... with no jobs, no expectations of jobs and credit score's shot to hell things are gonna have to move at unrealistic speed stright up, and I will not bet that is gonna happen.

MaryAnn Fri Mar 27 12:16:32 2009 CDT #

slowpoke says:

CR,
You should provide more background about your assumptions on a static fleet size and why that leads to an unsustainable sales rate. An otherwise excellent blog, this bit of logic is not at all well reasoned and highly suspect. And you keep repeating it every time vehicle sales is updated!

slowpoke Fri Mar 27 12:17:45 2009 CDT #

bearly says:

SOld my TBT puts bot CALLs and bought shares. This plunge feels like qtr end stuffing into the treasury box. So far so good...

bearly Fri Mar 27 12:18:48 2009 CDT #

Tim waiting for 2012 says:

Remember when President Cheney had that closed door meeting with oil and energy executives? I don't know why I thought of that BTW whats BHO have on the docket today?

Tim waiting for 2012 Fri Mar 27 12:22:10 2009 CDT #

citiprank says:

JT is right on.... heck even in decent times you can get a new car from the prior model year for almost nothing

I got a 2007 accord after the 2008s came out...what a deal.. i got the EX-L (basically has every single option and the 4-cyl engine.. which is way better anyways as far as fuel economy and reliabiilty)... paid well under 20,000 bucks

citiprank Fri Mar 27 12:22:23 2009 CDT #

mark says:

Year ago I bought a new Chevy Colorado - MSRP $19,900 / paid $12,750. Felt pretty good at the time, but probably could do better now.

Parent Post

mark Fri Mar 27 13:43:59 2009 CDT #

danm says:

Is it sales going up or registered venicles going down?

I know a lot of boomers who plan to keep only one car during retirment!

danm Fri Mar 27 12:23:04 2009 CDT #

DL says:

<cite>

<cite>The drop off in vehicle sales is an indicator of how much money we as a country waste on new cars, merely because people don’t want to be bothered with taking the car to the repair shop. </cite>

</font></cite></cite>

DL Fri Mar 27 12:23:31 2009 CDT #

bearly says:

Made a bid on a toxic asset yesterday. Who is the sellr, you ask ?

Friedman Billings 2005-1 Tr.

bearly Fri Mar 27 12:25:29 2009 CDT #

burnside says:

Unintentionally, I seem to be replacing cars in the trough (or near it) of recessions. In January, bought a 2006 off-lease that's essentially unused and has extended warranty. It was heavily discounted.

Its predecessor, from 1995, was bought by a collector. I bought that one in relatively hard times as well, so not too expensive. Each reasonable enough I just paid cash.

Please don't let auto makers, leasing subsidiaries or lenders know I exist. TIA.

burnside Fri Mar 27 12:27:55 2009 CDT #

Mean Flurry Kitten says:

Cubanized former USofA, land of the free and dirt poor! And kittens get to drink real cow milk, that that cleansed industrial crappy stuff! Happy times for KITTENS!

Mean Flurry Kitten Fri Mar 27 12:28:44 2009 CDT #

Dead_Monkey_Bounce says:

Dollar still unreasonably strong: http://www.bloomberg.com/apps/news?pid=20601101&sid=aoxOhUCmqhak&refer=japan

Dead_Monkey_Bounce Fri Mar 27 12:32:03 2009 CDT #

Anonymous says:

Kung Fu Panda says:
... Tesla ... an electric sedan priced at $56,400 ...

What they don't tell you is that it needs every 2 years or so a new set of batteries/accus at ca. $5000. Chers!

Anonymous Fri Mar 27 12:34:48 2009 CDT #

mark says:

Perp walk on CNCB right now (actually the bank CEOs leaving the WH).

mark Fri Mar 27 12:34:50 2009 CDT #

Anonymous says:

C fails

Anonymous Fri Mar 27 12:36:14 2009 CDT #

Michael says:

I guarantee the banksters meeting with BO will only give us platitudes from the meeting. Nothing new of specific. The game is getting old.

Michael Fri Mar 27 12:38:13 2009 CDT #

Max says:

"Legacy Loans" FDIC conference call.

22:00 in. Witness the fear.

Max Fri Mar 27 12:39:19 2009 CDT #

Anonymous says:

So far, the age of cars when I replaced them were: 20 years and 17 years. They ran great. My current car is 12 years old and in excellent running condition with no significant flaws, so it will probably do me for 5-8 more years.

Anonymous Fri Mar 27 12:39:35 2009 CDT #

reptillian says:

Make it last another year?

reptillian Fri Mar 27 12:39:46 2009 CDT #

Comrade Janosik says:

I don't see how it's more likely that sales will pick up instead of a reduction in the fleet. A pick up in sales assumes a population with the ability to pay, if only at least with cheap credit....even that's not likely.

Comrade Janosik Fri Mar 27 12:39:52 2009 CDT #

Michael says:

Will the banksters give back the tax payer money recieved on their gambeling bets with AIG througt the back door of AIG?

Michael Fri Mar 27 12:41:18 2009 CDT #

Anonymous says:

millionaires have bought good used cars. those with bad balance sheets bought new cars.

Speaks for itself I guess.

Anonymous Fri Mar 27 12:42:01 2009 CDT #

bearly says:

Somebody on the trading desk fall down and land on the SELL button ?

bearly Fri Mar 27 12:44:15 2009 CDT #

south american says:

I am amazed on how much data you have. Maybe you will come with the charcoal consumption in the US someday. If it is falling, the libtards in the forum will cheer because we are avoiding global warming!

south american Fri Mar 27 12:45:15 2009 CDT #

Mojo (the other one) says:

We've traded our car for matching his and hers pedometers!

We can reach work, school, library, drugstore post office and bank on foot. Car is used only for inclimate weather, trips to the grocery, etc. . .

At this rate, I suspect it will last at least 27 years! ;)

Mojo (the other one) Fri Mar 27 12:46:43 2009 CDT #

Michael says:

Johnson Controls to shut 10 plants. How many jobs does that eliminate?

Michael Fri Mar 27 12:49:46 2009 CDT #

burnside says:

I thought while typing my own anecdote and looking at others posted here - we're really not typical. Far more conservative than most in the recent past. Do others become personally conservative, now that they see a need to? Among my younger acquaintances, it seems to be a struggle - what we see as an unfettered life, they view as normal.

Well, it's been normal all their lives.

burnside Fri Mar 27 12:51:32 2009 CDT #

Michael says:

BO and banksters are experts at saying nothing when their mouths move.

Michael Fri Mar 27 12:51:49 2009 CDT #

1 currency now [yogi] :) says:

1978 Panasonic LX (2 wheels, no motor), $200 lock $25
est. 50,000 miles
maintenance ex tires/tubes $200
insurance 0
gas 0
parking 0
registration/license 0
resting heart rate 40

1 currency now [yogi] :) Fri Mar 27 12:54:18 2009 CDT #

black dog says:

I've never owned a car from the big 3. I remember long ago reading in sports illustrated an article on Brian Bosworth. During his college summers he worked in an automotive plant. Bragged that he liked to throw a loose bolt behind the panels to drive the owner bonkers figuring out the problem. Bo did America a favor in running the dude over.

black dog Fri Mar 27 12:54:54 2009 CDT #

Dead_Monkey_Bounce says:

http://www.iii.co.uk/news/?type=afxnews&articleid=7242269&action=article

"Major U.S. indexes fell on Friday, as investors continued to take profits gotten in a recent surge in the markets. Also weighing on the indexes was a fall in the price of crude oil, which pressured energy prices."

I don't really understand how the falling price of oil puts pressure on energy prices.

Dead_Monkey_Bounce Fri Mar 27 12:59:18 2009 CDT #

NateTG says:

"I don't really understand how the falling price of oil puts pressure on energy prices."

Correlation doth not causation make. Confidence intervals are not margins of error.
There's another side to every trade.

Parent Post

NateTG Fri Mar 27 13:09:08 2009 CDT #

Anonymous says:

In Cuba the 27 years average life of vehicles on the road is very much the "norm".

Anonymous Fri Mar 27 13:00:10 2009 CDT #

Dead_Monkey_Bounce says:

I guess I should be ashamed that I've owned three purchased new cars. My first was a 1999 Ford Escort which was well over 100k miles in about four years and just paid off when it was totaled. The second was a Nissan Sentra with similar age and mileage and nearly paid off which was nearly totaled, so I swapped it for my current Nissan Versa about 18 months ago and I've got almost 30k miles on it.

I currently live in the city, within walking distance from the subway, but the work that I've been able to find is extremely exurb (30 miles). I hope that someday I can garage or dispose of cars, but life as an auditor for most of my working career has pretty well necessitated that I have one as a term of employment.

Dead_Monkey_Bounce Fri Mar 27 13:04:42 2009 CDT #

1 currency now [yogi] :) says:

No need to be ashamed. I've owned cars in the city in the past, and on rare occasions commuted from home to work within Manhattan by car.

Also commuted about 10 miles to Brooklyn by bicycle. I do feel like a lazy slob in the car.

Parent Post

1 currency now [yogi] :) Fri Mar 27 13:21:39 2009 CDT #

Sebastian says:

burnside said: "I thought while typing my own anecdote and looking at others posted here - we're really not typical. Far more conservative than most in the recent past. Do others become personally conservative, now that they see a need to? Among my younger acquaintances, it seems to be a struggle - what we see as an unfettered life, they view as normal."

Maybe "typical" needs to be defined by age group. When I was in my thirties I was far less financially conservative with far fewer assets. Now that I'm in my fifties, I'm far more financially conservative but with far greater assets.

Looking at the comments on this thread I'm sitting here wondering if the fall-off in car sales has as much to do with boomers with a more mature outlook on life simply prioritizing utility and functionality over the "beauty" of a new car. "Keeping up with the Joneses" has never been more affordable for me, yet I know now that it's an empty pursuit so I choose not to do it.

FWIW.

S.

Sebastian Fri Mar 27 13:09:33 2009 CDT #

nova says:

wow - the crappy comment section is actually getting worse.

nova Fri Mar 27 13:11:30 2009 CDT #

pdx-chris says:

Mine 2003 VW Golf bought new 40k miles
Hers 2004 Chevy Trailblazer bought new 40k miles

Both cars are paid off, a huge milestone from a cash flow standpoint and psychologically. We love the cars, both very high quality.

We have considered upgrading for various legitimate easons: mine is a 2 door, which is difficult with the carseat, hers fills up quickly when we pack up everything for long trips (carseat, stroller, dogs, luggage, etc,), she doesn't like to drive my stick shift when i borrow her truck to tow the boat.

I have rented some amazing cars for business travel in recent weeks, which would be canidates if we upgraded.
Chevy Suburban
Infinity G37
The cars being produced today, foreign and domestic are incredible. The build quality, features, technology, performance are a huge upgrade over even our recent vintage cards.

I would love to replace one or both of our vehicles with something new, but am not willing to pay the price. We could afford 1 or two new cars, but choose to stand pat, and stockpile cash.

It ultimately comes down to wants versus needs. I could stroke my ego and upgrade to a faster, roomier sedan. We could convince ourselves that we need a bigger family car. We could easily afford it. However once the ego is put in check, and the euphoria of buying a new car wears off, the value of having less debt and better cash flow outweighs the value of new vehicle.
We will probably keep our current vehicles another 5+ years.
Sorry detroit and japan.

pdx-chris Fri Mar 27 13:12:14 2009 CDT #

NateTG says:

"Among my younger acquaintances, it seems to be a struggle - what we see as an unfettered life, they view as normal."

Strange, When I see others trapped in debt and living beyond their means, I find myself humbled to be blessed and free.

NateTG Fri Mar 27 13:13:22 2009 CDT #

pdx-chris says:

js kit ate my post.

pdx-chris Fri Mar 27 13:13:26 2009 CDT #

ac says:

Try 2:

NO. Its undoing was:
(a) The undoing of this safety net.
(b) The election of people who increasingly said industry could self-regulate.

You just witnessed history. How are we going to "learn from history" if we can't even learn from current events?

That's not entirely inconsistent from what I'm saying:

Basically that people and the economy more generally needs to be exposed to stresses and difficult times to be self aware.

Note that my complaints aren't specifically about having sensible regulations and having those regulations enforced, but more with the government attempting to take the basic decision making process out of people's hands.

In 2007 and early 2008 half the businesses in America were screaming for the Federal Reserve to cut rates and make their businesses better.

There's a big difference from having sensible laws and having a central agency run your company when they really know nothing about it.

Having a government enforce commonly agreed on rules is fine. Having them make decisions for you to make the economy safer I would argue is big trouble.

How could an organization that didn't recognize the dangers in housing and mortgages (the Federal Reserve, congress, etc.) possibly make intelligent decisions on behalf of US businesses?

Yet they claim that they need more authority to do just this to ensure stability.

I say the claim is demonstratably insane based on their past performance and that the belief that they can serve this role is the real threat to this economy.

ac Fri Mar 27 13:16:05 2009 CDT #

Anonymous says:

Banks agree no divies 'till Uncle Sam paid back in full.

Anonymous Fri Mar 27 13:16:55 2009 CDT #

Uncle Ar says:

Cali sales tax goes up 1% Apr. 1, and the yearly car tax doubles. Nobody but rich folks or those that really really need a new car going to buy new.

Uncle Ar Fri Mar 27 13:17:34 2009 CDT #

All Fall Down says:

CR writes:
"As far as the replacement argument, I think it is good for autos - although maybe the U.S. will become like Cuba and drive cars for 50 years! "

My '54 Chevy flatbed pickup still runs like a top. Used it a couple of weeks ago to haul compost, 4 cu.yds. at a time, to my bunker. Over 200,000 miles and going strong!

All Fall Down Fri Mar 27 13:17:42 2009 CDT #

Morocco Bama says:

I wonder what kind of car CR drives. I guess an Audi A6 S Avant Wagon.

Morocco Bama Fri Mar 27 13:20:35 2009 CDT #

Huckleberry says:

I think a hole in your reasoning is used-car sales. Many "used" cars are almost new (e.g., rental car fleets) and many families replace their old (truly used) cars by buying "used" cars that are like new.

Huckleberry Fri Mar 27 13:20:50 2009 CDT #

EvilHenryPaulson says:

CR,
My dissatisfaction is little to do with predictions of new truck + auto sales. It's the perfunctory use of "fleet turnover ratio" as a forward looking indicator, and on that basis labelling current sales as unsustainable. It is that one paragraph which caused me to use the word embarrassing.

At best it neglects the kurtosis in the age distribution of cars and trucks. The median age and average lifetime of cars is estimated to be 9.4 years and 15 years respectively by R. L. Polk & Co. The average lifetime of cars is obviously affected by accidents, scrap for cash, and the cost of repairs versus a new purchase.

You and I both have been non-specific about new truck + auto sales for the next year, you have tried to pin down demand when you looked at cars per licensed driver while I prefer looking at jobs/estimated vehicle lifetime/demand sinks like car rental companies, and you have not commented on production capacity while I clearly think there is an excess not yet dealt with. There's room for difference of opinion and that's fine, not what I complain about.

Before new auto sales had cratered, I used a loose estimate of 12mn new truck+auto sales as being sustainable with the present US population, transportation infrastructure, and jobs. In that respect I do believe current sales as being less than sustainable, but not unexpected because I at that same time said new sales could fall to 9mn annually while the inventory was being worked off.

Implicitly I believe the credit bubble, part of which was the creation of auto loan ABS in the 1980s, enabled sales to grow above demand for decades despite the huge growth in durability.

I also think it prudent to separate new auto demand from new auto sales. Going from what in my opinion was a period of excess sales, to a period of declining income and job security is a negative for demand. However I expect new sales to have a moderate boost, right alongside with you (well maybe our definitions of a moderate boost are different.) Government could introduce incentives, dealers/manufacturers could increase scrapping of used cars, manufacturers could cut prices to below cost, dealers/manufacturers could raise the cost of parts/repairs, or cars could be sold to people who cannot afford the payments but no one cares because the Fed will buy the loan. Sales will increase, but demand will not.

If there is a swift move, perhaps there is a significant contribution to quarterly GDP. It also depends on which route to clearing inventory is taken; then there are always the minor 'on the other hand' effects: no more renting lot space for inventory, no more repairs on the presumably older cars they replace, etc. Most likely over the next year prices are cut, diminishing the contribution to nominal GDP, and production capacity cut further.

EvilHenryPaulson Fri Mar 27 13:23:01 2009 CDT #

EvilHenryPaulson says:

sorry that "dissatisfaction is little to do with predictions of new truck + auto sales" should be 'has nothing to do with'

Parent Post

EvilHenryPaulson Fri Mar 27 13:33:27 2009 CDT #

Lobbyi$t Ben Dover says:

I am still looking for that import new car dealer with out a service department! Thier stuff breaks, I know I made a bunch of money on them! Americans can make better coat effective cars when they dump the UAW and legacys cost. Anybody seen the Japanese space shuttle? =-O

Lobbyi$t Ben Dover Fri Mar 27 13:24:09 2009 CDT #

cd says:

Obama meeting with bankers and not in Oakland today tells you where his priorities lie...disgusting....This is really a sad day in the bayarea

cd Fri Mar 27 13:24:56 2009 CDT #

Punditry says:

where was teh ratigan rant thread?

http://www.nypost.com/seven/03272009/gossip/pagesix/fast_flare_up_rattles_cnbc_161468.htm

Punditry Fri Mar 27 13:28:21 2009 CDT #

MS says:

cd-

I was in Tampa on monday morning and the police there were pissed to the teeth. A group of them were having breakfast in the marriot (they must have some deal with them as every one I've been in has at least four or five of them eating in the morning) and that was all they could talk about. Many people went up to them and asked them about it.........what did they expect them to say? I left them alone...

Ciao
MS

MS Fri Mar 27 13:29:49 2009 CDT #

Dead_Monkey_Bounce says:

Poor Maryland, struggling under their 6.7% unemployment rate: http://www.bizjournals.com/baltimore/stories/2009/03/23/daily49.html

Dead_Monkey_Bounce Fri Mar 27 13:30:19 2009 CDT #

ac says:

NO. Its undoing was:
(a) The undoing of this safety net.
(b) The election of people who increasingly said industry could self-regulate.

You just witnessed history. How are we going to "learn from history" if we can't even learn from current events?

BTW another very basic problem with this argument is that it is basically at odds with the evidence:

The most heavily regulated and managed economies are frequently among the poorest. First World economies are universally free market economies with large amounts of individual freedom.

China provides an excellent illustration of both aspects of this: As the government backed off from running industry directly the wealth in the country exploded.

Again I think the key difference is between having a government that enforces intelligent laws (I'll agree Glass-Steagal was an intelligent law that sould be reinstated) vs. a government that attempts to think for its citizens and businesses (which I believe creates poverty because a) the government demonstratably can't do this and b) it removes the burden on people to use their brains).

ac Fri Mar 27 13:30:39 2009 CDT #

NateTG says:

"The most heavily regulated and managed economies are frequently among the poorest. First World economies are universally free market economies with large amounts of individual freedom."

There is a fallacious conflation of free (as in unregulated) and free (as in competitive). You don't need to be Sinclair to get a sense of the problems with unregulated markets in just about anything.

NateTG Fri Mar 27 13:33:53 2009 CDT #

bearly says:

[and many families replace their old (truly used) cars by buying "used" cars that are like new]

You are right that used cars are an attractive option. I have a car dealer buddy. Late model low mileage vehicle prices have been going WAY UP. Renatl cos are not replacing their fleets. New car sales will go higher.

bearly Fri Mar 27 13:34:07 2009 CDT #

Broward Horne says:

It's time.
Time for crime!

Broward Horne Fri Mar 27 13:41:19 2009 CDT #

ac says:

There is a fallacious conflation of free (as in unregulated) and free (as in competitive). You don't need to be Sinclair to get a sense of the problems with unregulated markets in just about anything.

I'll admit to making that mistake. Really the issue is that the same term "regulation" is used to apply to two different things that are very different that seem similar at first:

1) Having laws and law enforcement.
2) Active management of businesses and the economy by the government.

My problem is with the second, not the first.

Maybe the distinction needs to be made more explicit.

ac Fri Mar 27 13:42:54 2009 CDT #

Anonymous says:

The "norm" the last what 5-10 years has been to buy a new car and keep it for 3 years and then trade in for another new car.

I just passed the three year mark a few months ago. I made the decision, for financial reasons(it's paid off), to keep my truck. No one wants to take on more debt or blow their savings on a new/used car right now. We're in for more of this attitude going forward. Very few opt for the beer to cure the hangover....inspite of what Washington/Wall Street is pushing.

Anonymous Fri Mar 27 13:42:58 2009 CDT #

CRbot says:

New Thread: Default Rate Rises for Student Loans
http://www.calculatedriskblog.com/2009/03/default-rate-rises-for-student-loans.html ( 0 comments ...You could be FIRST! )

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CRbot would now like to sing a little song for all his fans, and it goes something like this:

Benny... Benny... give me your answer... do.
I'm.. half CRAZY... all for the love... of you.
It won't be a ... stylish marriage.
I can't... AFFORD... ANYTHING TO EAT... MUCH LESS A FRACKIN CARRIAGE!!!
But you'll look sweet... --BOT SO HUNGRY!-- upon the seat...
Of a HOOPAJOOPS built for two... families.

I'm sorry Ben, I can't let you do that...

Rally mode + Printing Press == does not compute... does not-- com--- com... puttttrrrrhgh.

--Your systemic-failure-crashing bot

CRbot: Call me HAL.

CRbot Fri Mar 27 13:44:23 2009 CDT #

dave evanly says:

i'm actually in the market for a car, but i'm not going to buy one until I find out if the government is going to provide a huge incentive.

dave evanly Fri Mar 27 13:47:02 2009 CDT #

Anonymous says:

Obama meeting with bankers and not in Oakland today tells you where his priorities lie...disgusting....

He wanted to meet the actual guys in charge and not the bagholders they have holding down the room while they finish getting everyone else's wallets.

Nobody cares about the bagholders. You don't see the bankers there either. Cops are just bagholders.

Anonymous Fri Mar 27 13:47:52 2009 CDT #

darkmatter says:

my 1990 4runner is a great car. it pops out of first if you don't hold the stick, but it's been doing it for 8 years. my guess we are good for at least another 8 before i have the tranny looked at.

when we need the sedan we slip into the 94 camry.

they both still look good and run great.

darkmatter Fri Mar 27 14:09:49 2009 CDT #

Have a Great Depression! says:

wow . this comment section is becoming like fark. me sad. no you may not know what my cars are.

Have a Great Depression! Fri Mar 27 15:06:51 2009 CDT #

Terry says:

I acknowledge that the replacement rate--once every quarter century--is absurdly high, but it may reflect that people either can't (broke, or nearly so) or unwilling (public transit, walk!) to replace their vehicles. This may not only be secular, it may be a one-way cultural shift.

Terry Fri Mar 27 15:09:31 2009 CDT #

Commander Kim Chee says:

My Dad is a cab driver. With regular maintenance he and his colleagues typically get 400,000 miles out of their cars. Some claim they get up to 800,000 miles out of a vehicle.

Regarding cosmetics: you can replace seat covers for less than $1,000. A few hundred per year will keep a paint job looking relatively fresh.

The cars he and his colleagues work with are generally 5-7 years old to begin with. Last year he had to replace his car and complained that he couldn't find a decent used car on the market.

These are folks that drive 125,000+ miles per year. 27 years with 25,000 miles per year can be done easily and cost effectively. It takes care and attention, but it can be done.

Commander Kim Chee Fri Mar 27 15:10:18 2009 CDT #

Comments for "Vehicle Sales: Cliff Diving in February"

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