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Friday, October 27, 2006

AutoNation Car-Jack's Detroit's Earnings (DCX)(GM)(F)

AutoNation is the largest car dealer network in the US, and they have some bad news for the Big Three. You sent us too many cars.

In Q4, a critical quarter in the turnaround fortues for GM, Chrysler, and Ford, AutoNation is going to cut its orders 30% for the current Q which ends December 31.

The US automakers now have two choices, and they fall into "the lesser of two evils" category.

One option is to cut production in the first half of 2007, and hope that inventories fall as cars on the dealer lots are sold without immediate replacements. That means more idle capacity.

The other option is the Detroit standby of incentives. Zero percent financing for the first decade of ownship. Or, maybe $5,000 cash back. Or, a free Toyota hybridwith the purchase of a US-made SUV or pick-up.

Chrysler is considering restructuring its entire US operation and it is sending German executives to help. There are even rumors that Daimler may sell its US unit.

Any good news in Detroit. Not now.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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