Dateline December 21, 2007, masses of automotive incentive forces have been taken back to the boarders, reduced production is planned. “We will not fight” acclaim Automotive Executives. Analysts are quick to publish reports on a more mature, financially driven industry, using buzz words like “market driven”, "ordered pipelines" and “Value Priced Products”.
But wait this is December.
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For those new to how automotive companies plan their calendar year, allow me to illustrate each month – along with the appropriate stock order.
Jan. - Buy
The big picture always begins at the Detroit Auto Show, where Automotive CEO’s from all corners of the globe project the promise of new markets, new segments and new profits. Most (if asked) underestimate first quarter forecasts. Keeping in mind this is Detroit and the month is January, most agree and go home, finding frozen inventories and little revenue.
Feb. - Hold
Ok a little push back from Wall Street on poor January results, no need to over-react its still February. Dealer meeting frenzy time - present confidential plans for a March close out – push new orders now, with the promise of increased incentive spending sometime around (pick a date).
Mar. - Sell
Hoping no CFO will notice, quietly borrow from fourth quarter incentive budgets and launch a March close out blitz, off-set spendings with increased wholesale gains and surprise Wall Street with a stronger than anticipated first quarter result.
Apr. - Buy
Follow January (different auto show / same story)
May - Hold
Follow February
June - Sell
Follow March
July – Buy
Similar to April
Aug. – Hold
Similar to May
Sep. – Sell
Yes it's June again
Oct. – BUY
New model launch.
Nov. – Hold
Short month - no one pays attention.
Dec. – SELL
Ran out of money, talk advertising / first quarter plans.
Ok now you know the secret – you can send me the commissions.
Happy Holidays.
Editor.
Friday, December 21, 2007
Friday, December 7, 2007
A New Deal
Last week, Automotive Stock Analysts down-graded the outlook for Publicly Traded Dealer Stocks (i.e., Auto Nation, Asbury, Group 1) explaining that both the economy and auto sales were going to decline in 2008.
Wall Street analysts were indeed right about short siding Publicly Traded Dealer Stocks (“Publics”), however for the wrong reasons. Sure it’s the economy that fuels the appetite for car sales, but for Publics, sheer sales increases can’t save an overall defunct business model.
If you view Publics in similar way you view (and invest in) large “box” retailers you will find three key differences:
1. Publics can't receive discounts for large stock orders.
2. Publics are restricted to sell only one brand per facility.
3. Publics can't profit from the sale of their new products.
Think about it, Wal Mart can buy 50,000 tubes of tooth paste for one quarter of the cost to your local drug store and then profit off any brand a consumer chooses, all displayed on the same shelf.
In automotive retailing, a dealer who sells five cars a month buys products for the same price as a dealer who sells 100 cars per month. Publics become large by committing to exclusive brand offerings (especially in expensive major markets) and then report significant losses in their new car departments. Sure there are exceptions, but unless everyone drives Toyota, Honda, BMW and Lexus brands the retailing business model will remain seriously flawed.
The only "real" value Publics have is real estate. Steer clear of Publics who pay more rent than mortgage (thus funneling rents to separate LLC’s - more of this at a later time).
The future of automotive retailing does indeed belong to big investors and CEO’s with vision and leadership (common traits of most Publics today). However only those Publics strong enough to lobby changes in franchise laws and distribution policies will prevail. Imagine IKIA sized retail facilities where customers can view products and services in the same way one clicks onto the Internet.
If you must sell Publics, sell because the business model is as out of date as the leaf springs I saw today on the new Hummer H3.
Wall Street analysts were indeed right about short siding Publicly Traded Dealer Stocks (“Publics”), however for the wrong reasons. Sure it’s the economy that fuels the appetite for car sales, but for Publics, sheer sales increases can’t save an overall defunct business model.
If you view Publics in similar way you view (and invest in) large “box” retailers you will find three key differences:
1. Publics can't receive discounts for large stock orders.
2. Publics are restricted to sell only one brand per facility.
3. Publics can't profit from the sale of their new products.
Think about it, Wal Mart can buy 50,000 tubes of tooth paste for one quarter of the cost to your local drug store and then profit off any brand a consumer chooses, all displayed on the same shelf.
In automotive retailing, a dealer who sells five cars a month buys products for the same price as a dealer who sells 100 cars per month. Publics become large by committing to exclusive brand offerings (especially in expensive major markets) and then report significant losses in their new car departments. Sure there are exceptions, but unless everyone drives Toyota, Honda, BMW and Lexus brands the retailing business model will remain seriously flawed.
The only "real" value Publics have is real estate. Steer clear of Publics who pay more rent than mortgage (thus funneling rents to separate LLC’s - more of this at a later time).
The future of automotive retailing does indeed belong to big investors and CEO’s with vision and leadership (common traits of most Publics today). However only those Publics strong enough to lobby changes in franchise laws and distribution policies will prevail. Imagine IKIA sized retail facilities where customers can view products and services in the same way one clicks onto the Internet.
If you must sell Publics, sell because the business model is as out of date as the leaf springs I saw today on the new Hummer H3.
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