Tuesday, July 1, 2008

Even Bad News Can Be Good

The first of every month, assuming it is a weekday, is the day upon which automakers report their monthly sales. Today, July 1st, was a day of great concern to stockholders, analysts, and other stock market prognosticators as auto industry-wide sales were expected to tank, largely driven by the death march of oil prices, the decrease in housing values, and is the pope Catholic (whoops, wrong retread saying). This expected massive decline would reflect on a weak US economy and further signal the end of the universe as we know it.

In many respects, the analysts' projections were on the right path. Industry sales were down significantly, including a 28% drop at Ford, an 18% drop at Nissan, and a 21% drop at the almighty and God-blessed Toyota. This was also to be the month that GM relinquished its crown as the largest US auto manufacturer to Toyota with an expected sales drop of 28%-30%. For one brief not-shiny-but-not-dull moment, GM beat the poor expectations with a drop of 18.5% and retained its position as #1 in the US. Also in this moment, the stock price shot from a daily low of $10.71 to (current) daily high of 13.12, a whopping temporary increase of almost 23%. Make no mistake, a drop of 28% at Ford and 18.5% at GM is bad news for the automobile industry and the economy, but it looks like some people may have prematurely counted GM as down and out.

Maybe these people will win out in the end, but GM is not going to go down without an is the pope Catholic (did it again).

No comments: