The June numbers for domestic vehicles sales were worse than expected. Most of the car companies posted 30% or greater declines in light truck and SUV units. For Ford (F), total units dropped 28.1% to 174,091 from 242,029 in June 2007. Truck sales fell 35.6% to 101,981

Toyota (TM) which has been doing so well in the US for the last decade was also damaged by its truck line. The world’s largest car company reported a 21.4% drop in June U.S. sales to 193,234 vehicles. Truck sales dropped 38.8% to 61,268 vehicles. Toyota has the global sales and balance sheet to weather the storm. Its US counterparts do not.

GM (GM) did slightly better than the balance of the large car companies. In June, sales moved down 18.2%. GM’s truck sales were off only 16%.

GM’s truck numbers seemed to give the stocks in the sector some relief.

The good news about its truck sales sent GM’s shares up 7%. Ford was down sharply after putting out its numbers, although it recovered as the day went on.

But, even if both Ford and GM stocks end the day in the plus column, they are facing losses that will put them in terrible financial trouble. With market caps around $10 billion, raising the money they will need to make it though 2009 will cause substantial dilution and more pressure on the stocks. The US market could produce total vehicle sales as low as 13.5 million this year. In 2007, that number was 16.1 million.

At some point, VW or Renault/Nissan will make an offer for one of the US companies. In doing so, they have a chance to get a large portion of the US market inexpensively and take out billions of dollars in duplicate costs.

Nothing short of a merger of two of the domestic companies will stop that.

Douglas A. McIntyre

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