Interview: President of Automotive Data Service
>> the summer driving season kicks into high gear this holiday weekend and perhaps of e of the 33 million cars expected on the road are new thanks to general motors’ employee discount. that discount, opened to the general public, boosted sales 47%, making june sales the largest of any month for general motors since 1986. let’s put this in perspective to see what it means for the company and auto sales. jeremy anwyl is president of automotive data service, edmunds.com, joining us from our los angeles bureau as we take a closer look. hi, jeremy.
>> hi, how are you?
>> i’m doing well, thanks. i assume the general motors’ numbers are what stand out to you. what’s your reaction to the 47% figure?
>> obviously, it’s a huge number, and i don’t think anyone expected this program to work as well as it has. for june overall, it’s a record month for the industry as well as for g.m. sales last month were the largest for the industry as they have been since august 2002.
>> in terms of general motors, are they actually making money on these cars?
>> it’s really interesting. if you look at the money they’ve been spending to support sales, the incentives, it’s down in june, not by a major amount. in effect, they launched the program and it’s not costing them more than they were spending anyway.
>> how does that happen?
>> i think it worked on maybe three levels. one level, which isn’t talked about much, is that when people buy a car from the dealer, generally, the price will be a fixed price, the sticker on the car showing the discounts. so consumers feel comfortable they’re paying the same price as everyone else and the other part is that price is intuitively interesting because it’s the “insider” deal, which makes sense for people, too. they hit a home run with that one.
>> we have daimlerchrysler saying they will match g.m.’s employee discount program. what will that mean for july sales?
>> i think g.m. will announce beginning of next week that they’ll extend through july so our expectation is july will be another large month, as well. >> in terms of what you’re seeing on edmunds.com, what are consumers looking for? are they checking out new cars that they hadn’t checked out before? i’m trying to get perspective on if these are people just accelerating the purchase or consumers coming in because they believe the cars are being given away?
>> probably what we’ll see is if these programs that run through july, but august and september will be softer than you would normally see so there is a lot of the pull-ahead effect where late summer sales are occurring now. the other thing that’s happening is we see a continued drift away from the large s.u.v.’s over to smaller cars. if you look deep at the results, i think that’s clear. ford, for example, was up with car sales, down with truck sales. that’s an overall trend all year.
>> in terms of trends, i’m curious. do you see the davido-day changes, so, for example, when oil prices are higher, do you see consumers looking for more fuel-efficient cars on day when is crude prices fall, willing to look at the less fuel-efficient cars?
>> as i said earlier, that’s a trend we’ve been seeing for six months. traffic bounces from day to day but on a monthly basis, there’s definitely been a shift where people are more conscious of fuel economy.
>> you talked about how perhaps there’s a pull-ahead effect so that september sales may not be as strong as they otherwise would have been. what do you see coming down the pike from automakers in terms of the introduction of new models to attract consumers back to the showrooms?
>> that’s a big question. everyone hopes they have the next big hit coming out. obviously, the mustang, already in the market , is doing very well for ford and the 300-z -- 300 for chrysler. general motors will have an impala v-8 which hasn’t been around for a while. ford has the fusion coming out, a taurus replacement, a key car for them so there are major introductions coming up in september and october that are good to watch.
>> as we look out into the landscape into the fall area, what forecasts do you have in terms of sales we might see?
>> it’s all been changing based on what’s happened this month. what we’re looking at now is july will probably track close to what we saw in june and then we’ll see a big drop-off in sales in august and september. it usually takes 60 to 90 days for sales to return to trend so the critical introduction period could be soft.
>> in terms of softness, tell us what that might mean for incentives?
>> generally, what happens is, when incentives like this end, say, beginning of august, there will be a 30-day period where the market adjusts and what happens, of course, is manufacturers have to react and they’ll do that by pulling more incentives into the marketplace. so during the period when they would generally expect to pullback, when new models are introduced. this year will be interesting to watch.
>> jeremy, thank you. jeremy anwyl of edmunds.com. formula one racing fans getting tickets for free. the reason, tires. coming up, mike buteau with “money & sports.”
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Listen Market briefing --- Ellen (slow)
NYSE --- Deb (fast)
Oil prices --- Daniel (slow)
>> welcome back to “after the bell.” i’m ellen braitman. let’s recap the day on wall street. stocks climbed on stronger-than-expected manufacturing report, reinforcing the federal reserve’s suggestion that the economy can withstand higher interest rates. energy stocks led gains in the s&p 500. to get more details, while stocks were higher, not a lot of fanfare heading into the holiday weekend. deborah kostroun was there for the entire trading day, one of the few remaining at the big board and joins us with a wrap-up.
>> we did see bonds closing at 2:00 new york time. oil closed early, as well. commodities closed early but stocks were open regular time, trickling into the close. we did see below-average volume. as we get back into the swing of things next week, we are going to be looking at the s&p earnings, earnings for all companies. if you look at the first quarter, earnings rose in the first quarter. it was up 17%. in the second quarter, it looks like things slowing down a little bit, only up 6.6%. in the third quarter, of course, we just started the first day of trading in the third quarter, we’re looking at third-quarter earnings growth up 14.6% so after a lag in the second quarter, things ramping up for the third quarter. we kick off the second-quarter earnings season next thursday with alcoa reporting. that’s july 7. looking at today’s session, pfizer, the biggest drag in the dow jones industrial average. that’s mainly because pfizer and germany’s altana ended a partnership to develop an experimental treatment for smokers’ lungs that failed to meet a goal in a study. you did see pfizer and altana’s a.d.r. lower, as well. asbestos-related stocks lower on the day because a vote on a bill for a $140 billion fund for asbestos exposure victims may be delayed until next year according to one of the lawmakers. that’s one of the reason asbestos-related stocks lower. semiconductors with a mixed day. there was spill-over from the prudential analyst saying second-quarter revenue coming in at the high end of forecasts and computer chipmakers may beat analysts’ estimates because inventories are at low levels and the utilization rate are bottoming out. that should improve margins. back to you.
>> deb, thank you very much. as we look back, second-quarter earnings season kicking off next week. u.s. stocks may extend declines of 2005 and that’s because disappointing profit forecasts have been picking up for the quarter. so let’s get more perspective on the story, joined by bloomberg news reporter with this week’s edition of “taking stock.” you’ve talking to investors, looking at earnings expectations. set the stage for us. why is there concern?
>> i think one of the reasons, we’ve had eight or nine quarters where people have gotten used to companies coming in and beating expectations. so far, with companies that have already given outlooks for the second quarter, 65% of them have come in below what analysts were expecting. that’s a pickup from about 54% in the first quarter and about 53% from a year ago. also, one of the problems, you know, obviously we saw oil this year go to near $61 a barrel, a big concern for earnings. also, rates are going up. the fed didn’t give an indication that they’ll stop raising rates any time soon. also, the dollar had its biggest rally against the euro in the second quarter just ended, biggest rally since 2001. that’s also a concern for companies like mcdonald’s, colgate-palmolive with overseas business.
>> are there particular industry groups that investors are concerned about? >> right now, raw materials makers have stood out. of the 10 groups tracked by bloomberg, they have the highest percentage of misses, about 85% of the companies that have already given outlooks for the second quarter have missed expectations. some of them include nucor, second biggest u.s. steelmaker. they said that second-quarter earnings were likely to be at the low end of forecasts because of lower-than-expected steel prices. also, international paper had a miss this week, as well. in the second quarter, we’ve already seen those stocks slumping. u.s. steel was the biggest declining stock in the second quarter so investors are taking notice of that.
>> what about particular pockets of trends? you mentioned oil prices, certainly the energy expectations continuing really high for earnings expectations. any other group that looks particularly strong?
>> you mentioned energy and that’s obviously no surprise. right now, 56% of energy companies that have already given outlooks for the second quarter have beaten estimates. but obviously, that was something that investors could have assumed would happen. another interesting group is the technology sector. there is split opinion on that. some think, given that it’s a cyclical sector, it might be hurt by the fact the economy seems to be slowing down a bit from the first quarter into the second quarter. at the same time, a lot of people think that some of the estimates that analysts are giving are too conservative and we saw today that prudential, for example, came out with a note saying they thought all of the technology companies they look at will beat expectations for the second quarter. they raised their estimates on intel, as well. that’s going to be a factor to keep an eye on.
>> interesting thing about intel, coming in at the top end of the company’s forecasted range.
>> right, right.
>> daniel, interesting, thank you very much for joining us. when we return, we’ll look at the auto sector with automakers out with the latest sales figures. we’ll look at what is in store for the industry in coming months, speaking with jeremy anwyl.
