It is hard to imagine an industry where when sales are off 30% to 40% it is considered a good thing. Welcome, to the Detroit auto company bailout of 2009.
Sales of light vehicles at GM (GM) fell 31% to just over 220,000 units in December. That rate was much worse than for the entire year of 2008 in which sales dropped 23%. But, maybe December could have been worse, so GM shares are up almost 5% to $3.82.
Ford (F) had a drop-off of 32% in December to just over 138,000. It is hard to say how the company expected to stay in business long even with labor cost concessions from the UAW and negotiations with creditors which should sharply reduce Ford’s debt. Ford stock is up 4.5% today, trading at $2.57.
It gets even better. Toyota (TM) lost 37% of its domestic sales last month, down to 142,000 vehicles. It stayed in the No.2 place ahead of Ford. A Pyrrhic victory. The Japanese car firm’s shares are up slightly.
Why a market celebration? Because Wall St. assumes that the bailout of the car companies will go on well beyond the end of March when they will have spent the first $17 billion the government sent them.
The fact that the stocks trade at all after an astonishingly poor fourth quarter is a near-certain indication that the consensus among analysts and Washington is that, with the recession reaching remarkable depths, the nation cannot afford the bankruptcy of one or more of The Big Three and the rolling layoffs it would move across the industries that rely on car companies for their sales.
It is a bit of irony. The worse things get in the broader economy, the more likely it is that the Congress and new administration can’t let Detroit disappear.
Douglas A. McIntyre
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