this is why i would maybe buy a car from autonation... i commend the ceo.

While looking at inventories as Autonation suggested is indeed a useful excercise if you are a dealership as you are financing the inventory that goes to customers -- here is the source of Autonation's complaint.

We need to keep in mind that sales are sales regardless of the buyer so from the OEM's perspective they are looking at it the right way.

Remember that fleet sales while delivered through dealers their margin is small and just aimed to pay for their costs of handling and delivering the cars.

Bottom line, this is an indication that the consumer is retracing. Fleet sales is a no-margin business used as a permissible way of selling sometimes at below cost prices (cynical me). When you are under pressure to keep the factories running, it helps you recover some of the fixed costs. While this is a first order effect, there are second and third order effects that are now well understood by the OEM's -- one example would be the deterioration in re-sale value of used cars which the OEMs need to re-market when those cars are returned from lease customers (second order effect), which then increases credit losses in repossessed cars at the credit companies of those OEM's (third order effect).

I suspect that production levels would be cut again in Q1. The multiplier effect of OEM's production cuts are going to be felt for the next six months at least.

Regards

I thought that GM's recent earnings release was interesting. The pom pom's were waving frenetically over the news of their better than expected earnings. Then.....Doug Kass parsed the numbers out and issued a more realistic view dousing the team of cheerleaders, not with the proverbial gatorade, but a double-barreled shot of something of similar color. I believe that there are some terrific opportunities for those who are quick to look beyond the headline number and catch the gap between the racy headlines (which are deceiving) and the real numbers. I found such with BUCY early in the year. I had them on my watch list and their earnings release was on my calendar to read and listen to the conference call. The headline numbers were so so, but their backlog (the well spring of future earnings) was up materially over previous periods. That spelled d-i-s-c-o-n-n-e-c-t to me. Nevertheless, I had a "deer in the headlights moment" where I thought it impossible that I could be right when so much smarter money was saying I was wrong. I bought (July calls, it was then March or so) and within 15 minutes, the stock had gone up about $8. The bid/ask on the calls looked like a Vegas slot machine they were going up so fast. It's tough for a novice like me to trust that disconnect, as no matter how thoughtful our thinking on any market matter, all that matters is how the market reacts. So the jump in is always a manageable position in the cases where the disconnect is really on my end.

Calculating days of supply with and without fleet volume is an excellent idea and I know that analysis is done internally by the companies.

And AutoNation's assertion that 60 days supply is ideal is commonly accepted within the industry. So it would seem they would agree with him if truth be told.

However, I disagree with the statement that the reason Detroit can't finance cars for ten years is quality. My daily driver is a 95 Cadillac and I find it to be excellent and economical transportation.

Americans still view cars as fashion, and the affluent for the most part won't keep a car ten years, so depreciation is non-linear. The big hit is the first two years; after 5 or 6 years cars depreciate slowly and more based on mileage and condition than age. Ten year financing would put the fashion concious new-car buyer perennially "upside down" unless there was a big down payment. In fact, many dealers discourage financing more than 3 years and push customers to lease because of the potential lost goodwill on an early trade (and the likelihood of repeat business on a lease renewal).