Just How Bad Is the Auto Crisis?

Early in the new year, automakers are likely to report the lowest rate of sales in the modern era -- even worse than the dismal figures posted at any point in the last six months. Uncertainty over whether General Motors (GM - commentary - Cramer's Take) and Chrysler would even survive past Christmas, coupled with consumer fears of possible year-end layoffs, has likely led the annualized sales rate to fall below 10 million units.

Yet the government's recent moves have bought time, and if December marks the sales nadir, as I suspect, the news flow could start to become less dire. The automakers are about to open up the lending spigot with low-interest loans and improved customer eligibility, on top of the massive price discounts on almost all vehicles. That's not a recipe for profit, but it is a recipe for improving sales trends. (In fact, GM has just noted that sales trends may be improving throughout December, but it is not clear what is behind that uptick.)

When these positive factors are combined with expected major further concessions from the United Auto Workers, the incoming administration might be inclined to keep extending lifelines to the industry. You may have little interest in the equities of these companies and may be opposed to any government support, but you still need to track how this drama plays out. If the auto industry truly implodes, the economic implications would be far-reaching.

With that in mind, here's a statistical look at the operating trends, and a look ahead at markers to watch over the next 60 days.

First, consider the annualized sales figure, which is known as SAAR (seasonally adjusted annual rate). Automakers are expected to weigh in with monthly sales figures next Monday, Jan. 5, and the monthly tally was likely below one million. That works out to around 9.5 million units annually (as December figures get adjusted due to seasonality). That figure was 10.2 million in November. The December figures are likely to roughly 40% below year-ago levels, with Chrysler and Nissan expected to take the biggest hit, according to Edmunds.com.

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David Sterman has been an equity analyst and financial journalist for 15 years, most recently serving as Director of Research at Jesup & Lamont Securities.