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NADA Headlines (June 30, 2010)

U.S. Finance Bill Heads For Final Votes With Bank Fees Removed

Democratic lawmakers cleared the way for final votes in the House and Senate on the U.S. financial- regulatory bill after reconvening to make a fix requested by Republican senators, who objected to charging banks and hedge funds $19 billion to help pay for the measure. House and Senate negotiators who last week merged each chamber’s version of the bill agreed yesterday to change the financing, offsetting the costs with an early end to the Troubled Asset Relief Program. House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said the House is likely to vote today on the bill. (Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat) said it was “probably doubtful” the Senate would vote this week because of the death of Senator Robert Byrd, a West Virginia Democrat. Congress has a break next week. The delay means that final passage of the bill and the signature of President Barack Obama will likely take place in the middle of July. Read more from Bloomberg.

Editor's Note: The revised conference report addressed the bank tax/fee, which was added by the conferees but was not in either the House or Senate versions of the bill. The auto dealer language was not addressed or modified by the conferees. The expectation is that the House will vote on the final conference report today and the Senate will follow suit, likely the week of July 12 after the July 4 recess. The bill will then be sent to the president for approval.

US Auto Sales Seen Slowing With Recovery in Doubt

DETROIT -- When it comes to car shopping, Americans are tapping the brakes. Forecasters think U.S. sales of cars and light trucks have slowed in June after months of improvement. It's another sign that people are beginning to doubt the economic recovery with unemployment still high. "The two big issues with consumers right now are employment growth and income growth, and they're not seeing much of either," said George Pipas, Ford Motor Co.'s top sales analyst. Three firms that track auto sales predict automakers will report a sales decline of anywhere from 9.5 to 12 percent from May to June when they turn in their figures on Thursday. A double-digit decline would be the biggest monthly drop since January. If the weakness continues into summer, automakers will have to sell more to rental car companies and other fleet buyers. Otherwise, sales won't be too much better than last year's dismal 10.4 million, the lowest since 1982. "With the recovery not progressing as expected, it's gut-check time for the automotive industry," said Jeff Schuster, executive director of global forecasting for J.D. Power. Read more from The Associated Press.

Editor's Note: The following is a statement by Paul Taylor, NADA chief economist, on the auto sales outlook: “Consumer confidence and spending are being affected by uncertainty about the outlook for economic growth and the environmental disaster unfolding in the Gulf of Mexico. A few analysts suggest a ‘double-dip’ in the economy may be on the way. NADA estimates that the economy will continue to recover at a modest pace with the probability of a double-dip in economic growth at only 15 percent. News on home prices stabilizing in the second quarter will help boost car sales, since a majority of households have most of their net assets represented by home equity. Measured unemployment remains high, despite the creation of new jobs, because people who are trying to re-enter the labor force are counted as unemployed. Optimism on the jobs front is a positive sign for long-term economic growth. The other bit of good news is that inflation remains extremely low.”

U.S. Consumer Confidence Plummets on Job Worries

U.S. consumers are increasingly worried about jobs and the economy, the Conference Board said Tuesday, as it reported that its consumer confidence index plummeted to 52.9 in June -- the lowest level since March -- from a downwardly revised 62.7 in May. "Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence," said Lynn Franco, director of Conference Board's consumer research center. "Until the pace of job growth picks up, consumer confidence is not likely to pick up." Consumers with plans to buy a home within six months fell to 1.9% in June - the lowest level since 1982 other than 1.7% in December, according to the Conference Board. In May 2.1% had plans to buy a home. Those with plans to buy an automobile fell to a record low of 3.7% in June from 6% in May. Read more from MarketWatch.

GM Touts New Cars, Growth Markets in Investor Session

DETROIT—General Motors Co. pitched itself to potential investors Tuesday, outlining a global strategy hinged on a string of new cars and growth in developing nations. In the first face-to-face meeting between GM's top executives and the investment community since its emergence from bankruptcy a year ago, the company cast itself as a leaner, simpler company positioned to win market share from rivalsacross the globe. More than 100 auto analysts, investors and others attended the event outside Detroit. In a separate presentation, Vice Chairman Stephen Girsky warned that while auto sales are improving, they are likely to remain volatile. In the past, deep declines in sales have usually been followed by solid recoveries, but the industry hasn't yet seen a strong bounce in the wake of the recession in 2009, Mr. Girsky said. "We need to be prepared for volatility going forward," he said. "Today we have a clear and simple vision at GM. We have a new management team that gets it … most importantly, we're making money," GM Chairman and Chief Executive Edward E. Whitacre Jr. told the group. Read more from The Wall Street Journal.

Ford Slashes Debt by More Than $4 Billion

Ford Motor Co. said Wednesday it is reducing its debt by more than $4 billion, a sign that the auto maker remains confident in its own turnaround despite a softening car market in the U.S. Paying in cash may have surprised some Wall Street analysts who were concerned that Ford would pay in stock because it feared a slowdown in the auto-sales recovery in the second half of the year. The payments still leave Ford with about $27 billion in debt, which is expected to increase as the auto maker takes on new debt from government loans designed to help improve the company's move to more fuel-efficient cars and trucks. The company said in a statement it is taking the action to further strengthen its balance sheet and remains on track to deliver solid profits and positive automotive operating-related cash flow this year. Read more from The Wall Street Journal.

GM to End Year With 4,500 U.S. Dealers

General Motors Co. will wind up with about 4,500 dealers in the U.S. later this summer following arbitration hearings mandated by Congress -- about 500 fewer than previously disclosed. Before bankruptcy, GM had 6,150 dealerships. Once the restructuring is completed this summer, the automaker will have about 4,500, GM North American President Mark Reuss said (Tuesday). "We are strategically aligning these franchise points so we don't have overlap," Reuss said. Reuss recently told the Associated Press that GM would have about 5,000 dealerships once the arbitration process concludes next month, but the automaker has cautioned the number changes every day as cases are concluded. The lower 4,500 figure does not necessarily mean GM is winning arbitration cases, spokeswoman Ryndee Carney said (Tuesday). In March, GM said the dealership network size would be between 4,100 and 5,300, so the figure mentioned by Reuss (Tuesday) falls within that range, Carney said. Read more from the The Detroit News.

Last Year’s Auto Dealership May Be This Year’s Grocery

WHITEHALL, Mich. — The Ford dealership in this town of 2,800 closed nearly two years ago, one more victim of the recession in a state that was among the hardest hit in the economic downturn. Yet the 30-acre site is once again filled with cars and trucks, as the home of a Save-A-Lot discount grocery store that opened in March. Since early 2009, said Norm Miller, vice president of analytics for the CoStar Group, some 2,300 auto dealerships have closed around the country, as new car sales plunged more than 40 percent and the government, after taking ownership stakes in General Motors and Chrysler, forced them to end longstanding franchise contracts. In the first quarter of this year, 152 dealerships were sold for a combined total of $300 million, he said. Prices ranged from $500,000 to $9 million, Mr. Miller said, though most sales were for $1 million to $3 million. It is unclear how many of the closed auto dealerships will find new uses, real estate experts said. As recently as 2006, there were more than 22,000 new car and truck dealers in the country; today there are just over 18,000, according to the National Automobile Dealers Association. Read more from The New York Times.

Who Will Rule the Auto World of the Future?

Like few other industries, auto companies measure their output in number of vehicles built and then report that data publicly. Besides contributing to a "mine's bigger than yours" mentality, the availability of these production numbers has created a cottage industry in massaging the figures and analyzing the results. But the numbers don't always tell the same story. (Former Merrill Lynch analyst John Casesa, who now advises governments, corporations, and investors about the direction of the auto business) extrapolated production trends from 2005 to 2009 to see what the auto world looks like in 2018 and discovered a radically changed global landscape. Casesa sees Volkswagen passing Toyota (TM) to become the new number one, followed by Hyundai/Kia in second place. IHS Global Insight, which produces economic and market forecasts, uses a more data-intensive method. Toyota remains number one, GM is the runner-up, and VW comes in third. Rounding out the top six: Renault/Nissan in fourth, Ford in fifth, and Hyundai/Kia in sixth. Read more from Fortune.