Memo to Clint: Detroit's Doing Okay Now, But Just You Wait

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Memo to Clint: Detroit's Doing Okay Now, But Just You Wait

Peter Robinson · February 9, 2012 at 1:20am

From "Revisiting the Auto Bailout with Clint," a column in the Wall Street Journal (paywall) today by Holman Jenkins, whom it is impossible to read without coming across some really arresting fact or insight, as, for example, this:

GM, Ford and even Chrysler are reporting profits....[But] today's modest sales boom is essentially a horsepower boom. SUVs and pickups are selling strongly....Deroit is bouncing back because it's selling cars the public wants to buy.
This, in fact, isa great way to run a car business, but will soon become all but impossible if Mr. Obama's new fuel-mileage rules are not further rolled back. Hence a glaring anomaly amid the happy talk: GM's stock price is still down 22% from its public reflotation a year ago.

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show tabula rasa's comment (#1) ←

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Re: Memo to Clint: Detroit's Doing Okay Now, But Just You Wait

tabula rasa

I agree Peter. And don't forget that Detroit got a big boost from the lack of Japanese inventory due to the tsunami and the floods in Thailand. Wall Street knows full well that the Japanese are going to come back for their market share, and are likely to get it. I'm on my fourth straight Honda Accord--I haven't seen anything coming out of Detroit to convince me that I should switch back.

Edited on February 9, 2012 at 1:39am

#1 ·
February 9, 2012 at 1:36am ·
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show Percival's comment (#2) ←

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Mar '11

Re: Memo to Clint: Detroit's Doing Okay Now, But Just You Wait

Percival

Peter Robinson This, in fact, is a great way to run a car business, but will soon become all but impossible if Mr. Obama's new fuel-mileage rules are not further rolled back.

If you don't like the Laws of Physics, just pass new ones.

Yeah, that will work.

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February 9, 2012 at 1:58am ·
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show Roberto's comment (#3) ←

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Mar '11

Re: Memo to Clint: Detroit's Doing Okay Now, But Just You Wait

Roberto

It is even worse than that article indicates. A significant number of these "sales" are simply channel stuffing:

...dealer inventories rose once again, this time by over 36k units, or the second highest in its post-reorg history, to a near record 619,455 vehicles stored with dealers. This is just the second highest ever in fresh start GM history, second only to November's 623,666. The January-end number represents 89 days supply, but more importantly the recent spike in restocking, which was seen with all other major car dealers, explains the ongoing "expansion" in the US economy as measured by indices such as the ISM.

Dumping cars so they can just sit on a dealer's lot is not a sustainable business practice.

Edited on February 9, 2012 at 2:33am