Flint: Slow Months Coming
Sales have been pulled ahead by employee discounts.
by Jerry Flint (2005-09-26)
Slow times are coming forDetroit - two months for sure, three months likely, maybe even four months. After that we're in 2006 and we'll see.
There are four good reasons:
1. Payback from the sales boom of the last few months tied to the employee sales bargain days. People just buy ahead. That doesn't mean it wasn't the right thing to do. General Motors and Ford needed to lower inventories and they did. But sales will fall for a while because folks that wanted to buy took advantage of the deals.
2. Higher prices. The Detroit companies are trying to push prices up. They have better product, they have lower inventories, but the customers expect great deals, not fair prices. They will hold back for months.
3. Gasoline prices are inching their way down, slowly, but the shock won't wear off. The shock will slow sales and push the buyers to the Japanese and Koreans who have the high-mileage reputations. A friend just bought a Hyundai Elantra four-door for $16,000 and brags that he's getting 35.5 mpg. He's a happy camper. The big pickups and SUVs, the heart of Detroit's business recently, will shrink for the same reason so the home team's market share will take a beating.
4. And there's the issue of confidence. The disaster of Katrina and the bad news from Iraq hurt. That University of Michigan consumer confidence index has dropped to a 13-year low.
You know all this for sure. You know it is hurting business in September. Ward's Automotive Reports predicts a 28-percent sales decline for General Motors from a year ago, a 14-percent drop for Ford, and a slight gain for Chrysler. We'll see how it comes out in two weeks. It's reasonable to figure that October will be another down month, and probably in November and possibly December, too.
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