The Wastegate

Market Indicators

August 2009 Column Ryan Harris

Market Indicators

 

If you're wondering where the diesel light truck market sits amid the U.S. economic recession, join the crowd. It's difficult to pin down the current market condition. Manufacturers of aftermarket products have seen sharp declines in sales over the past 12 months, but that trend is turning for most of them. Many shops that specialize in performance parts installation and selling a few of its own parts are reporting to us that they are having the best months ever over the summer of 2009. Overall, we seem to be through the worst of it. But if you're looking for specific examples of the market condition, here's where we look for market indicators:


Used truck values


If you tried to sell an SUV or truck eight months ago, you experienced first-hand the steep decline in used values. Thankfully, those values have been restored (and in some cases gained some) recently. A June story in The Dallas Morning News showed that some dealerships are facing a shortage of used trucks and SUVs to meet the rising demand. This all transpired before "Cash for Clunkers" kicked in, proving that markets can begin to mend themselves without government intervention if given enough time.


Big Three stock values


Another place I look at for market conditions is the stock values of GM, Chrysler and Ford. We're all familiar with how that story has unfolded over the last 12 months. Stock prices of the Big Three dove like a Blue Angels F/A-18. President Obama's administration offered a multi-billion-dollar bailout to the auto manufacturers. GM and Chrysler, which both  took the bailout cash, have each since gone through bankruptcy. New GM, which went through bankruptcy court at a pace that make Michael Phelps do a double-take, is now picking up the pieces and preparing for its initial stock offering. Motors Liquidation Company, formerly known as General Motors, is currently selling parking lots and keyboards and trading pink sheets at about $0.40. Chrysler went into bankruptcy, sold to Italy's Fiat, and is now becoming familiar with mob persuasion (in Italy, not the U.S. government. Although I can see how that could be easily confused.) Ford declined the bailout, and its stock-which bottomed at $1.96 on November 19, 2008-has since rebounded to above $7.00 (as of July 27, 2009). With the U.S. Treasury holding a 60 percent stake in the New GM and Chrysler worrying more about not getting shot at than anything, Ford is the only example of a free market indicators for the Big Three. And since Ford stock is gaining value now rather than loosing, it shows an industry on the mend.


Truck sales


Speaking of Ford, it continues to see strong sales in the truck market, where it controls 46.1 percent of the market share in heavy-duty pickup sales through June 2009. That's down half a percent from the same time last year. GM showed a decline in market share compared to last year's numbers, falling from a combined (Chevy and GMC) share of 30.4 percent to 28.7 percent. Dodge gained what Ford and GM lost, but is still third in market share at 25.2 percent. New unit sales are down overall, however.


Diesel surplus


Specific to us diesel truck owners, this indicator shows that there is a huge surplus in diesel inventory. According to a Wall Street Journal article published July 8, 2009, diesel inventories are at their highest levels since 1985. Diesel consumption is also down. All of this will drive down crude prices. Lower fuel costs tend to lead to an increase in aftermarket spending, especially in the performance market.


Things have been bleak, but they are beginning to turn. There are still some components that could have a negative impact on the market, like the coming 2010 emissions regulations (higher costs), but things are looking better.

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