Partnerships

Satellite Radio growth rests with gaining new subscribers. Gaining new subscribers is tied directly to the automobile (OEM) channel. It is through new cars that Sirius XM exposes consumers to their service. Roughly 60% of new cars sold are equipped with either Sirius or XM.

Edmunds has come out with a preliminary forecast for May auto sales and is expecting a SAAR rate of about 11.4 million. Just a few days ago the forecast was 11.2 million. This number is not as high as the peak in March, but should deliver car sales that are about 1 million for May. That 1 million in sales is the magic number for satellite radio that virtually guarantees positive subscribers for the month of May.

Earlier this month I had projected that May auto sales would fall in just below April. The newly released Edmunds data is actually giving indication that May could outperform April. Jessica Caldwell of Edmunds does note however that getting above the April number will rest on the shoulders of strong sales on the holiday weekend at the end of the month. Either way, sales will be in the zone that is positive for satellite radio. Increased production will also help push the promotional subscriptions higher.

Position – Long Sirius XM Radio

Over the last few weeks I highlighted news that Hertz was making a move on Dollar Thrifty, and how that move could benefit Sirius XM because of the revenue generation Sirius XM gets from Hertz on Sirius equipped cars in their rental fleet. Now, it turns out the Avis Budget was angling to make a deal of their own that they say was better than the Hertz offer. Avis Budget has now filed documentation with u.s anti-trust authorities under the Hart-Scott-Redino Act.

So does this change the landscape for satellite radio investors? Not really, but I didn’t want SiriusBuzz readers to have concern or confusion as new headlines begin to stream if a bidding war between the Hertz group and Avis group occurs. Avis Budget is also a revenue generating rental deal, and the also market Sirius XM. Thus, there is little concern over which company wins the rights to buy Dollar Thrifty. In the end, rental brands that seem to do little for Sirius XM will be absorbed by brands that at least bring something to the table.

Position – Long Sirius XM Radio, No position rental companies.

Auto Sales in March were stellar compared to a year ago, but still way down from the peak only a few years ago. April sales were not quite as good as March, but the sector did seem to show stability. May sales should continue the stability trend. As we here at SiriusBuzz projected, Toyota’s mis-steps could lead to a recovery in the auto channel as great consumer deals. As we also projected, Ford outpaced Toyota last month, adding still more pressure to the import giant to get things moving again. Nissan saw sales falter in April, and has now joined the 0% financing club in May in a much larger scale.

There are many dynamics at play in the auto sector that bode well for satellite radio. Taken singularly, the pieces of news may not seem like much, but when you put many pieces and factors together as we do at SiriusBuzz, you can see a better overall picture. By example, SiriusBuzz told readers about Ewanick taking the helm of GM’s marketing and his mission to move metal. This is good for satellite, as a move by GM will have to be matched by others. If GM is moving metal, all other brands need to have a response. The stars simply seem to be aligning to bring in another good auto sales month in May of 2010.

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Last week general Motors announced that General Motors brought on Joel Ewanick as their chief marketing guru. The move is substantial because Ewanick was essentially lured away from one of the fastest growing brands in America. Ewanick was in charge of the marketing surge for Hyundai before being stolen away by Nissan in March. GM must have felt that getting Ewanick was important because they made the investment to steal him away from Nissan in short order.

Hyundai has made huge strides in a short period of time, and now enjoys models that are among the top sellers in their class with growing share each passing month. So why is Ewanick so important to General Motors? Because he understands the dynamics of the auto business and what needs to be done from a marketing perspective to make that happen.

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It is now official. Toyota slipped to Ford in the sales category in the month of April. Earlier this month, I had project this scenario happening, and it did just that. Toyota joins other manufacturers in releasing their numbers, and the news demonstrates further stability in the sector. Toyota sold 157,439 units in April.

Toyota has ramped up satellite radio installations, but unlike other deals, Toyota’s promotional subscriptions are not paid for, and thus not counted in Sirius XM’s subscriber metric unless they convert to self paying subscribers after the three month trial.

Position – Long Sirius XM Radio

Chrysler not only reported year over year growth, but month over month as well. The company sold 95,703 units in April, and increase of 25% over last year, and 3% over their March 2010 figure.

“April was a very positive month for Chrysler Group, with concrete results that highlight the company is on-track and gaining momentum,” said Fred Diaz, President and Chief Executive Officer – Ram Truck Brand and Lead Executive for the Sales Organization. “Today we reported sales increased 25 percent compared with April 2009, building on the news from April 21 that the company posted an operating profit of $143 million for the first quarter 2010.”

Chrysler is one of the key brands in the OEM channel for Sirius XM, as they provide paid promotional subscribers to the subscriber metric.

Position – Long Sirius XM Radio

Ford has come out with their sales figures for April 2005, and the numbers, while slightly less than last month, remain strong. Ford sold 162,996 units sold compared to 178,188 last month, and were up 25% over the previous year. Fords sales number was slightly less than I anticipated. If they beat out Toyota, it will mean that Toyota’s drop was greater than I anticipated as well.

All of that being said, it is still possible that the auto sales data will be viewed as positive, and the totals should come in around 1,000,000 units.

Position – Long Sirius XM Radio

As we reported her earlier this week in our Article “GM May Pay Off Debt Early“, GM has announced that they have paid off their loans to the U.S. and Canada well ahead of schedule. The company wasted little time in getting the news out there, and has begun running advertisements to that effect.

The GM news campaign comes on the heals of an April that has seen continued record incentives for consumers thanks to Toyota stepping up 0% deals in order to stabilize sales after the company announced record recalls. SiriusBuzz pointed out that Toyota has already committed to running aggressive incentives throughout April, and that other companies would have to follow suit. This is evidenced in the sales data for March, in which Toyota sold only 2,000 units less than GM and 8,000 units more than Ford.

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