On Tuesday, GM stunned everyone by reporting a 1% increase in U.S. vehicle sales. Analysts were forecasting a 6% drop.
In a new note, Morgan Stanley's Adam Jonas offers a potential explanation for why: The recalls are leading to new sales during a time when there usually aren't many.
GM is taking control of its US commercial position, showing real market share resiliency despite the very negative PR surrounding the recall. This is thanks to dealers flooded with hundreds of thousands (ultimately untold millions) of customers they would have never normally seen at this part of the cycle who are coming in with recall slips. Additionally, GM is benefiting from Ford's F-150 changeover and its pre-production run out. We think this creates ideal conditions to support GM's stock price through the summer or well into the fall.
Jonas also recently discussed another unusual factor that has pushed industry-wide receipts to record levels: Dealers are back-loading contracts, spreading out the terms of contracts over unusually long periods of time in order to record a sale. This has occurred in part thanks to loosening credit conditions.
Jonas now wonders whether we are actually seeing a sell signal.
"17mm is one of the classic sell signals we've been waiting for this cycle," he said referencing the annualized pace of vehicle sales, or SAAR. "It's too early to call the top (which we see at 18m or more by 2017), but it's just as much as sell signal as 9mm SAAR was a buy signal in early '09.
GM shares were up 0.5% Wednesday.
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