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NADA Headlines (Nov. 5, 2010)

Automakers Expect Sales Gains for Rest of 2010

Economic picture looks brighter

With the country's midterm elections in the rearview mirror and slightly better economic data emerging, automakers are increasingly confident that auto sales will continue to increase for the rest of the year. "In a nutshell, we see an economy that is a little brighter," Don Johnson, GM's vice president of U.S. sales, said Wednesday. "It is going to be the rate of employment growth that determines just how fast the industry recovers." For most of the year, sales to fleet buyers, such as rental car companies and corporations, have been behind most of the industry sales increases. But in October, the seasonally adjusted annual rate for retail sales, which is what sales would be if the rate remained constant for a year, increased to about 10.2 million, the highest mark for the year. "The fact that we are finally seeing an increase in retail sales is an especially good sign," Bob Carter, vice president and general manager of Toyota said Wednesday. Read more from the Detroit Free Press.

Chrysler Proves It's Still in Race

Automaker exceeds financial goals but skeptics say it's not yet out of the woods

One year after Chrysler Group LLC outlined an ambitious, five-year business plan, the automaker is proving its skeptics wrong. The Auburn Hills-based company is exceeding financial goals, investing more heavily in products and plants than expected, and restoring jobs and morale. Where Chrysler could fall short is in meeting its U.S. market share goal this year of 10 percent to 11 percent. Still, through October the automaker holds 9.5 percent of the market, a performance that has surprised analysts. "They have done better than we expected," said Rebecca Lindland, director of auto industry research for IHS Automotive in Lexington, Mass. "We have to give them credit for that and for just being alive." Observers who didn't expect Chrysler to survive 2010 already have been proven wrong, and the automaker's first-year achievements post-bankruptcy lend credibility to the rest of its plan, according to analysts. "We're looking at a much stronger future for Chrysler going forward and something that hopefully will find recognition in the valuation of the IPO," (Chrysler CEO Sergio) Marchionne said during a recent conference call about Fiat's financial results. He said the doubts many analysts harbored about Chrysler have dissipated. Read more from The Detroit News.

GM Says Profit Before Interest, Taxes Could Reach $19 Billion in IPO Pitch

General Motors Co., pitching investors on its initial public offering, said earnings before interest and taxes may rise to as much as $19 billion in what it called a “high cycle” for the global automobile industry. GM, planning to raise as much as $10.6 billion in an IPO, has reduced its hourly labor costs and will be able to produce as much as $16 billion in free cash flow with profit margins as wide as 10 percent, Chief Financial Officer Chris Liddell said. “This will give us the type of fortress balance sheet that we believe is appropriate for a company in a high fixed-cost, cyclical industry,” Liddell said in a videotaped presentation on the website retailroadshow.com. Chief Executive Officer Dan Akerson said the automaker now has “a bias for action” and is “making and implementing decisions faster than ever.” The company is looking to lower the stake the Treasury Department acquired as part of a $50 billion taxpayer bailout last year to 43 percent from 61 percent. “We are making great strides in changing the GM culture to one that values speed, simplicity, accountability and action,” Akerson, 62, said in a presentation. Read more from Bloomberg.

Toyota Raises Full-Year Forecast ...

Toyota Motor Corp., the world’s largest carmaker, raised its full-year profit forecast as sales in Asia helped the company beat its first-half plan. Net income may total 350 billion yen ($4.3 billion) for the 12 months ending March 31, compared with an earlier estimate of 340 billion yen, the Toyota City, Japan-based company said in a statement today. Toyota predicted profit will plunge 77 percent for the remainder of the year. Based on the forecast, second-half net income may fall to 61 billion yen from 265 billion yen a year earlier. A stronger yen erodes profit by reducing the repatriated value of overseas sales. The yen touched 80.22 against the dollar on Nov. 1, the highest level since April 1995. “If the yen stays at this level in the mid- to long-term, this is an extremely painful prospect,” Toyota Executive Vice President Satoshi Ozawa said today. The company is aiming to maintain about 3 million units of domestic production capacity to protect jobs, he said. Read more from Bloomberg

U.S. Added Jobs Last Month for First Time Since May

The United States economy added 151,000 jobs in October, a welcome change after four months of job losses but still not enough to make a dent in unemployment. Private companies have been slowly growing their payrolls throughout 2010, according to a Labor Department report released Friday. Private companies added 159,000 jobs in October, while governments cut 8,000 jobs in the month. The month was much stronger than expected — most forecasts were for a gain of 60,000 jobs, 80,000 of which were from private employers. The unemployment rate was unchanged at 9.6 percent in October. The economy last added jobs in May, when more than 400,000 workers were hired by the federal government to help with the Census. In addition to the weak demand companies are generally facing, this resulting uncertainty about the fate of measures like the Bush tax cuts set to expire in 2011 has left many businesses hesitant to take the plunge and hire more workers. “When we don’t have a clue what two of our largest budget items are, taxes and health care, we’ve got to keep all the money we possible have,” said Patricia Felder, secretary-treasurer of Felder’s Collision Parts, a small company in Baton Rouge, La., that sells automotive parts to dealerships and body shops. “We may need it for taxes since we have no idea what we’re looking at next year,” Ms. Felder said. “And we may need it to provide the same level of health care for employees that they got used to having.” Read more from The New York Times.

Dow Hits Pre-Crisis Level

Central Bank's Spending Binge Stokes Global Rally; 'Don't Fight the Fed'

Global financial markets cheered the Federal Reserve's plans to spur the U.S. economy Thursday, driving commodity and bond prices higher and propelling the Dow Jones Industrial Average to levels last seen before Lehman Brothers collapsed two years ago. But the Fed's buying binge raised alarms, too: Officials in Brazil and South Korea criticized the move, saying it could spark inflation in their economies. The Dow industrials leapt 219.71 points, or 2%, to 11434.84, its highest close since Sept. 8, 2008, just before the Lehman bankruptcy filing triggered the most intense phase of the financial crisis. With their broad rallies in the months before and after the Fed announcement, markets are in some ways doing the Fed's job by making investors feel richer and more confident—which in turn can get them to spend again, which boosts the economy. The thinking goes that the added demand will push prices even higher, fending off a corrosive bout of deflation, and leading companies to hire again. "The market's mindset is that everything is good for stocks," said Stephen Ricchiuto, chief economist at Mizuho Securities USA. "Don't fight the Fed." Other factors also helped drive U.S. stocks higher throughout the day, some observers said, including hopes of a compromise between President Barack Obama and the new Congress on taxes, and a Wall Street Journal report near the end of the day that the Fed could soon let some big banks increase dividends for the first time since their bailouts during the crisis. Read more from The Wall Street Journal

2011 Annual Fuel Economy Guide Now Available

By law, dealers must provide the guide upon request

WASHINGTON – The Department of Energy and the Environmental Protection Agency have just released the 2011 Fuel Economy Guide. The guide provides detailed fuel economy numbers for MY 2011 light-duty vehicles, along with estimated annual fuel costs and other information for prospective purchasers. Dealers must display a copy of the guide and provide copies to customers upon request.

There are a number of options available for dealers to comply:

EPA/DOE is electronically distributing the guide to dealers for printing as needed.
Dealers can download the guide, save it and print it as necessary.
Dealers can order hard copies of the guide by clicking here, by calling DOE’s Information Center at (877) 337-3463 between 9 a.m. and 7 p.m. EDT; or by using a form to order copies by mail. The guides will be mailed for free in December.

Click here for the EPA/DOE letter detailing how to make the guide available to customers.
Source: DOE/EPA

Opinion: The Problem with the Economy? Confidence.

How could several trillion dollars of fiscal and monetary stimulus barely move the needle of gross domestic product growth? That's the question President Obama needs to answer in the wake of the midterm elections. Why was his policy so ineffective at multiplying its stimulative effects throughout the economy? Coming into office, Obama's greatest mistake may have been his hubris. The stimulus was presented as an elixir for overnight success. The White House mismanaged expectations at a time when fundamental economic changes were underway after the financial bubble burst. Today, Republicans risk making the same mistake if they offer simplistic bromides and fail to take a cold, hard look at the nature of America's economic predicament. Recovery will be a long, hard slog, and our national mood could make the difference between success and failure. Fortunately, America's problem is not a lack of money. Nor is it a lack of adequate stimulus. It is a lack of confidence. Between $2.5 trillion and $4 trillion of private capital is waiting on the sidelines to "reliquify" a new era of American confidence and innovation. Here's the essential question: What conditions would induce a talented innovator in this threatening climate of uncertainty to take the risk of striking out with a new job-creating venture? The president and presumptive House Speaker John Boehner need a consensus answer. Read more from The Washington Post.

Opinion: Some Relief for the Industry

Source: Automotive News

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