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TheStreet Open House

Detroit Hopes for Friendlier White House

Stocks in this article: gmftm

You may hear a lot about enticing loan and lease rates in commercials, but only consumers with the strongest credit scores are actually qualifying for the sweet deals. The rest of the foot traffic in showrooms, depressed as it is, is walking away without new car keys in hand.

That's where the new president and Congress come in. Plans are afoot to buy up troubled auto loans and also allow the beleaguered automakers to tap funds made available to struggling banks. That could help dealers start moving the metal again.

Although current forecasts call for another brutal year for Detroit in 2009, the industry might actually be facing a slightly more bullish outlook, provided it has the cash to lend. That's because several industry headwinds are starting to become tailwinds:

  • Gasoline pump prices have fallen 35% since peaking early this summer, and with oil at $65 (at the time of this writing), pump prices could fall another 10% to 15% this winter.
  • The average age of the country's fleet of cars and trucks had been quite young, thanks to the above-average sales pace seen in 2005 and 2006. But since then, the fleet has steadily aged, and a large number of vehicles, especially pick-up trucks used in heavy-duty environments, are moving closer to the end of their useful range.
  • The automakers have been working feverishly to roll out freshly designed fuel-efficient vehicles, a number of which are expected to hit the market in 2009.

On the campaign trail, Obama called for massive funding to help Detroit modernize its plants and more quickly develop extremely fuel-friendly cars. That plan has several holes in it. For starters, it's hard to make case for supporting Ford , GM and privately held Chrysler and not helping foreign brands such as Honda (HMC) and Toyota (TM) when the lines between domestic and foreign have completely blurred.

Every one of these firms have manufacturing operations and shareholder bases throughout the world. At this point, we don't want Japanese, Korean or German governments to think about funding R&D for their major companies.

More importantly, Obama's R&D pledge would be of little help in 2009. And right now, the automakers are a lot more concerned about survival than long-term engineering competitiveness.

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