The bad news for November auto sales has not been released yet, but sales declines for U.S. Auto makers is expected to be bad. Dismal sales have forced GM, Ford, and Chrysler into a precarious financial position, and Congress wants definitive plans before loosening the purse strings on a bail-out. The situation is so dire, even the unions are now backing off of their "No Concession" position.
In some circles, they refuse to label the cash requested as a bail-out, citing that it is simply a bridge loan to keep the company afloat during troubled times. The issue however is that it costs the U.S. makers more to make a car. Legacy costs for retired workers, health care, executive pay, and deals where employees have guaranteed jobs are things that are open to scrutiny. Of the three U.S. makers, Ford is perhaps the best positioned, and has more latitude in whether or not they will need to seek a "loan".
For satellite radio investors, the big three auto makers represent the lion's share of OEM satellite radio installations. Survival of the big three is seen as a critical component of satellite radio growth. There is some insulation in the numbers given a more active roll by makers from Korea, Japan, and Europe.
In the wake of all of the activity, the UAW is now holding emergency meeting to brief members and discuss concessions that may be a key component to a bail-out. The elimination of a jobs bank will be critical. The job bank guarantees that a worker will still be paid in the event they are laid off. With dismal sales, and production slowing to a crawl, the OEM's are being saddled with huge costs which further deteriorates profit margins.
As a whole, auto sales are a critical component to satellite radio growth. Sirius XM should at some point address the issue regard how reliant the company is on GM, Ford, and Chrysler. At this point various assumptions in models are being made by investors and analysts alike. Understanding the contribution of OEM partners outside the Big Three in terms of installations will help the street and investors better gauge the 2009 outlook.
Position - Long Sirius XM, No Position Ford, GM, Chrysler