There are 2 main cyclical drivers of the domestic market – autos and housing. We've been mentioning how well housing has been acting much of the year. Well look who suddenly is acting better as well – the major automakers. These names have been in the doghouse much of the year due to their European exposure but have cut so many costs (read: labor) domestically during the Great Recession that 14-15M a year in U.S. car sales (versus peak levels of 16-17M) is going to be a very profitable level for their business.
Specific to GM of course, they dumped a lot of debt in their government orchestrated restructure. Also reading a lot locally how subprime is back in a big way in the auto loan market because lenders notice now how car loans have come before home loans in importance to people if forced to pick one. We've talked about this many times in the past 3-4 years – a sea change in attitude, especially for those who put nothing down in the heydey of the housing boom. Hence, nothing to lose. Even now, you need a car to get to work and repossession happens much faster with a car than a house.
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