Has anyone seen the car industry stocks this morning?

[SHACOS]

It's a disaster right now. All the big publically traded companies are down at least 6.5% this morning?

Anyone have any ideas where this is coming from? It can't be from the GM announcement of raising capital, can it?

[XDCX]

I just checked the market - it must be a reaction to Sonic cutting their outlook and reducing their earnings forecast.

Sonic shares are down 21% as I type this post.

Sonic's Management indicated that they do not see any recovery in car sales for the rest of 2008. Let's hope things turn around in 2009....

[XDCX]

As I watch Sonic's stock get slaughtered this morning I had to re-read the Press Release and verify that they're still forecasting profits.

Yes, the profits are going to be lower than they hoped, but at least they're still profitable. I wonder if there is some other reason why Wall Street is hitting this stock so hard?

[carbizwiz]

Sonic simply issued a profit forecast warning at a bad time. The news is filled with negative stories about the car business right now, including our own industry publications (Automotive News, Dealer Mag, Ward's Dealer Business) They projected a reduction in forecasted profits of at least 25%. The stock is off by 21% to 25% so it's no big surprise especially given the mood on Wall Street. The financial sector news has been downright apocalyptic since Friday so analysts see rough waters ahead both in terms of consumer finance and corporate borrowing and liquidity.

Lets face it, if you were asked to invest or loan money to a large public delaership group right now, would you do it, considering Blue Sky reductions, current retail environments, the current stock free fall current debt obligations etc. What other collateral would you accept?

It will be interesting to see if Sonic's stock recovers. In my mind, $10 per share is a psychological threshold. It migh be difficult to climb above it for awhile.

[SHACOS]

All I can say is welcome to the club my friend. :) Lithia's stock hasn't seen $10 in quite a while.

[XDCX]

Sonic simply issued a profit forecast warning at a bad time. The news is filled with negative stories about the car business right now, including our own industry publications (Automotive News, Dealer Mag, Ward's Dealer Business) They projected a reduction in forecasted profits of at least 25%. The stock is off by 21% to 25% so it's no big surprise especially given the mood on Wall Street. The financial sector news has been downright apocalyptic since Friday so analysts see rough waters ahead both in terms of consumer finance and corporate borrowing and liquidity.

Lets face it, if you were asked to invest or loan money to a large public dealership group right now, would you do it, considering Blue Sky reductions, current retail environments, the current stock free fall current debt obligations etc. What other collateral would you accept?

It will be interesting to see if Sonic's stock recovers. In my mind, $10 per share is a psychological threshold. It migh be difficult to climb above it for awhile.

Wow, excellent first post. :) Welcome to DealershipForum.com - I hope you'll be a regular contributor.

You make some great points - there are so many other places to invest your money, why deal with the risks involved with the Retail Auto sector.

I also took note of your comment about Blue Sky reductions - that could be a huge issue if the Public Groups have to "mark to market" the current Blue Sky value of their dealerships. A domestic store that had a legitimate Blue Sky value of $1 Million+ a few years ago may be close to zero today.

The "Franchise Impairment Charge" wouldn't affect cash flow but it would sure change the appearance of the Balance Sheet.

Thanks again for your insight - great post.

[XDCX]

Well it looks like the Retail Auto Stocks are recovering a little ground today.

Was yesterday the bottom? I guess time will tell.