Automobile sales are plunging in the United States, and that spells more bad news for Sirius XM Radio.
Once-bullish Americans are now putting extra miles on their older rides, or simply skipping that new car purchase. That means less dashboards and less activations from potential satellite radio subscribers, and continued financial pressure heading into 2009.
General Motors is getting hit the hardest. The company reported a month-over-month October sales drop of 45 percent, to a volume of just 166,744. But others are facing similar cliffs. Ford slipped 29 percent, Chrysler dropped 35 percent, Toyota shed 23 percent, Honda dropped 25 percent, and Nissan lost 33 percent. Collectively, European automakers fared the best with an 18 percent decline.
That, coupled with several other factors, prompted Merrill Lynch analyst Jessica Reif Cohen to substantially lower Sirius subscriber projections. The perfect storm includes slowing retail activity, shrinking consumer pocketbooks, and a totally illiquid marketplace for high-yield, risky loans. During a recent investor call, Sirius chief Mel Karmazin attempted to paint a best-case scenario amidst slowing automobile sales, though debt obligations surpassing $1 billion could spell serious stock dilution ahead. Shares of SIRI, now a penny stock, finished at 31 cents on Monday.
Story by news analyst Alexandra Osorio.