by Mish

Please consider General Motors Will Idle 5 U.S. Factories Next Month.
General Motors will idle five of its U.S. factories for one to three weeks each in January, as it confronts high inventories that have drawn concern from analysts.
As first reported by Automotive News, GM will idle factories in Michigan, Ohio, Kansas, and Kentucky to reduce inventories. GM had an 86-day supply of new vehicles in the U.S. as of Dec. 1, up from 70 days’ worth a year ago.
A GM spokesperson told Automotive News that the company is aiming to get supplies back down to about 70 days’ worth. For most car models, about 60 days’ supply is generally considered ideal.
GM’s inventories as of Dec. 1 were the highest they’d been in eight years — since November of 2008, in the midst of the economic crisis. The huge inventory was despite generous incentives: GM’s spending on incentives in November was almost $4,900 per vehicle, up about 35% from a year ago. (The overall industry average was up about 19% year over year.)

Negative Equity

As incentives increase, residual values of used cars dive.

Zerohedge noted last month that a Record 25% Of Used Car Trade-Ins Are Underwater.

Image placeholder title

Zerohedge accurately commented “since most people simply roll their negative equity into their new loans, many used car buyers are likely sitting on loans where ~15-20% of their outstanding balance simply reflects their negative equity from their previous car.”

RECOMMENDED ARTICLES

Lovely.

And with increased incentives (with even bigger incentives coming), the value of those new cars people just bought are sure to increase that negative equity.

About Those Supply Numbers

By the way, all those day’s supply numbers assume sales will keep up at the current pace.

Why should they? And if they don’t, GM will have to idle plants longer, provide even greater incentives, or both.

Fed Going to Hike Three Times?

Retail sales, led by autos, was point number five in my December 17 article Five Reasons Fed Won’t Hike Even Twice in 2017.

Mike “Mish” Shedlock

GM to Close 8 Plants, Lay Off Close to 15,000 Workers

Things are worse than widely thought in the auto industry. Today, GM provided the proof.

Auto Inventories Highest Since July 2009:Concerns Mount, Ford Vehicle Sales Decline 7.2%, GM Up 1.6%

More auto numbers will come in later in the day, but the initial reports show Mixed Sales Results in March.

Inventories Bounce, Led by Autos: Inventories Adding To GDP?

Adding to silly Commerce Department reporting of “auto sales”, today we learn business inventories were up 0.3%, led by autos up 1.1%. The rise in inventories matched the Econoday consensus estimate.

Inventory to Sales Ratios: What’s Really Going On?

On November 15, the Census Bureau released its monthly report on Manufacturing and Trade Inventories and Sales. Despite the fact that is it mid-November, we are just now getting data for September.

Wholesale and Retail Inventories Rise

Census bureau reports show wholesale and retail inventories jumped in November.

GM Says “Market is Definitely Slowing” Lowers Outlook for Vehicle Sales

Reuters reports GM Lowers Outlook for U.S. 2017 New Vehicle Sales, but not by enough in my estimation.

Trump Knows the Correct Number of Cars GM Needs to Produce

GM wants to close unprofitable plants. Trump and the unions demand GM keep the plants open.

Auto Sales Puke Again: Year-Over-Year Totals: GM -6%, Ford -7.2%, Toyota -4.4%, Fiat-Chrysler -7.0%

Auto sales are down for the fourth consecutive month. Final numbers are not yet in, but the preliminary year-over-year totals are miserable.

Junk Bond Yields Highest in Four Years, Goldman Discusses Oil in Teens

Under $20 Oil? Oil dipped below $30 again today. As usual dip buyers or shorts covering pushed the price positive for a while. This time, however, the bounce did not last even one day. Oil is flirting with $29 and Junk Energy-Bond Costs Soar.