tyler1.JPGEver since the Cash For Clunkers Program was initiated, there has been a general buzz around car dealerships. Foot traffic has increased and consumers are expressing interest. Many satellite radio investors, which have seen the impact of poor auto sales in the stock price, have grabbed onto the cash For Clunkers campaign as a savior of sorts.

Don't get me wrong, the program has its merits and it does have benefits for satellite radio, but those benefits are months away. So far the program has involved 250,000 184,304 cars. A healthy number, which does not include car sales that did not participate. If however you think the program is going to boost OEM subscriptions in significant numbers, think again. The program was mostly in July of 2009. The numbers will not be reflected in the conference call for Q2 and in many cases, because of how the OEM deals are structured, will not even help boost Q3 significantly.

The Top Ten Cash for Clunkers New Cars:

1. Ford Focus - These cars were likely already counted in the subscriber rolls in Q1. Some will boost Q2 if the cars were manufactured between April and June. More likely than not, the initial run from cash for clunkers has served to even out backlogged inventory. The Focus is not one of Ford's bigger contributors in terms of penetration rate.

2. Honda Civic - A big helper for Q3. Honda cars are counted as promotional subscribers at the time of sale. Thus, satellite radio equipped Honda's will boost Q3 subscriber numbers.

3. Toyota Corolla - Toyota cars that come with satellite radio receive a promotional period of the service, but are never counted as subscribers. A Toyota that sells in July will come with a three month trial. If the consumer elects to keep the service after the trial, then and only then will they be counted as a subscriber. Thus, satellite equipped Toyota's (of which there are very few Corolla's) can not help the subscriber number until October 2009, or Q4.

4. Toyota Prius - The situation here is similar to the Corolla listed above. A possible subscriber in Q4, but Toyota is not doing a heavy number of installations.

5. Ford Escape - More likely than not, these cars were already in the subscriber rolls in Q1. Given that the popularity of SUV's was down sharply, I would estimate that very few Ford escapes were manufactured in Q2.

6. Toyota Camry - More satellite radio installations in this model, but again, no possible subscribers until after the promotional period.

7. Dodge Caliber - Heavy installation rate of satellite radios, but Chrysler was closed from production for much of Q2. The vast majority of these sales were already in the subscriber rolls in Q1.

8. Hyundai Elantra - The Hyundai deal is very similar to the Toyota deal. No possibility of a subscriber until after the free trial period. Hyundai is fast approaching a 100% installation rate, so these sales will be helpful in Q4.

9. Honda Fit - Similar situation as the Honda Civic.

10. Chevy Cobalt - GM is a sub at the time of sale. GM also is a large contributor to the satellite radio rolls. These will be Q3 subscribers.

Should the program gain more footing, and sales continue to increase, satellite radio will see the benefits within the next quarter or two. The key is a normalized OEM channel with consistent sales and production. We have spoken to several dealers who have a "call list" for people who want to participate in the Cash For Clunkers program if and when it kicks into gear again.

Simply stated, the program might kick start the OEM channel, but it is sustained growth and a better annualized run rate that will help Sirius XM the most.  Satellite radio investors should enjoy the positive side of the news, but temper it with the reality of how subscribers are counted.

UPDATE The widely accepted assumption was that the program has involved 250,000 cars. The latest data through August 5, 2009 is that the number is actually 25% less and at about 185,000 cars broken down as follows:

General Motors 18.7%
Toyota 17.9%
Ford 16.0%
Honda 11.6%
Chrysler 10.6%
Nissan 7.0%
Hyundai 6.6%
Kia 3.8%
Mazda 2.3%
Subaru 2.2%
Volkswagen 1.9%
Suzuki 0.4%
MINI 0.3%
Mitsubishi 0.3%
Smart 0.2%
Volvo 0.1%
All Other 0.1%

Position: Long Sirius XM.