We have all seen the headlines for the auto industry over the past few days, and they have not been good. Car sales are dismal. The message is plain and simple to see.

  • The Worst Auto Sales In 25 Years
  • GM Sales Down 45% - Ford Down 30% - Toyota Down 25%

However, we here at Siriusbuzz, and our readers demand information that goes a bit deeper. With that in mind, lets look back 25 years, the date by which current auto sales were compared. The year was 1983. February of 1983 was the bottom for auto sales. The industry was in a dire situation, and things were very bad. In early 1983, the discussion and headlines about car sales were all doom and gloom.

So how is there good news on the horizon? Well, fast forward to January 1984, and you will find an interesting New York Times headline that points to a banner year in the auto industry.

What we may be seeing between now and December of this year is that the bottom in auto sales has been reached, and that when the auto sector turns around, that is can do so in quick order. With gas prices coming down, the election behind us, credit beginning to flow, and stability in the banking system, the worst is perhaps behind us. I will project that auto sales will begin their rebound in December, and that by Presidents Day in 2009, the auto industry will be stabilized.

For satellite radio, the issue is getting through this slow period, and being in a position to grow and respond when auto sales increase. With many analysts projecting a weak auto market through 2009, it is little wonder that they have taken down their estimates. In my opinion, the auto industry will respond faster than many analysts think simply because of the nature of the business.

Cars depreciate with age. Holding onto a car longer means more repairs, and less value down the road. Consumers will begin to feel the pressure of the trade in value of their car, good deals on new cars, and repair costs that could be mounting.

Slumped sales in the auto channel have been happening for a year now. Depressed sales have been happening for a few months. In my opinion, it is virtually impossible for downward year over year comparisons to continue through all of 2009. By example, Merrill Lynch analyst Jessica Reif Cohen has 2008 projected sales at 13.8 million and 2009 sales at 12.4 million. This is calling for another year of slumping sales, something which I disagree with. If we look at sales since 2006, and projected sales, I feel we can see a flaw in the logic.

  • 2006 sales - 16,504,400
  • 2007 sales - 16,089,310
  • 2008 sales - 13,802,438 (Merrill estimate)
  • 2009 sales - 12,455,821 (Merrill estimate)
  • 2010 sales - 14,946,985 (Merrill estimate)

The auto industry will respond by giving consumers a better value. The used car market will be dryer environment for low mileage used cars, making the new car market more attractive. The dynamics of car buying and selling simply does not lend itself to two plus years of downward sales. The gap that existed between 2007 and 2008 is abnormal, and that will by nature cause i similar reaction to the upside at some point. It is my opinion that these analysts are projecting too gradual a recovery.

For satellite radio, this could mean that a more favorable opinion of the sector will happen when the auto sales become better. Some analysts are projecting doom and gloom for all of 2009. If sales increase faster, satellite will benefit.

Position: Long SIRI