More than Economic Factors Lie Behind US Auto Sales Drop
Moody’s says US auto sales are running below the level implied by economic conditions, a symptom of the panic caused by the financial crisis and the prospect of an automaker bankruptcy.
In its lastest monthly Auto Navigator report, Moody’s says economic factors “predict a sales pace of 11 million units during the first quarter, while actual sales are running between 9 and 9.5 million units.”
In addition to the considerable weights on vehicle sales from the alarming deterioration in the labor market, record-low confidence, rapidly eroding household wealth, deteriorating credit quality, which is closing access to credit to skittish lenders, there are unexplained factors that are contributing to the plunge in sales.
“They are indicative of the panic that has gripped the nation’s households in the face of the financial crisis, the possible bankruptcy of domestic automakers and concerns about the very future of the nation.”
Other highlights of the report:
- Despite its promise of significant savings, the proposed restructuring will leave Ford’s (NYSE: F) cash generation profile and credit quality highly challenged. We explain why an improvement on its Caa3 CFR is unlikely through 2010.
- We continue to believe that there is about a 70% probability that one or more of the Detroit Big 3 will file for Chapter 11 bankruptcy with government DIP financing. This would most impact securitizations with direct links to the manufacturer and vehicle values such as auto dealer floorplan and retail auto lease ABS.
- Sales trends so far in 2009 show new car sales stuck in the mud, with the luxury lines in deepest. All five rated dealers experienced some sort of negative rating action in 4Q 2008.
For details see: Moody’s Auto Navigator.
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