Sirius XM Loves Detroit

General Motors is delivering good news, for a change.

The distressed automaker is ramping up its production. It's adding overtime shifts to some of its plants to keep up with "Cash for Clunkers" demand for new, fuel-efficient vehicles. The end result should be 60,000 more cars produced by GM this year.

GM's spurt follows Ford's (NYSE: F  ) similar announcement last week. The steadier domestic manufacturer will boost its output by 26% during the second half of the year to keep up with the flurry of trade-ins.

This may be welcome news for the automaking industry, and encouraging news on the economic front, but it's downright spectacular for Sirius XM Radio (Nasdaq: SIRI  ) .

GM and Ford have been early believers in factory-installed satellite radios. Sirius XM could use the infusion of new drivers, after losing 590,421 net subscribers through the first six months of the year.

The new buyers may not be an easy sell for premium radio. One could logically assume that folks driving older cars worth less than $4,500 as trade-ins -- the only subset of the market drawn to the "cash for clunkers" program -- don't make up the ideal satellite-radio target market. Some may shy away from modern dashboard conveniences. Many can't just afford the service. In its latest quarter, just 44% of car buyers with satellite receivers installed chose to become paying customers. The conversion rate should, in theory, be lower here.

However, many of these buyers are in rural areas, where terrestrial radio is threadbare. Since satellite radios come with free trial subscriptions, many of these first-time users will be blown away by programming options.

There's always the fear that GM and Ford are overestimating the marketplace's appetite. Edmonds.com claims that "purchase intent" has fallen sharply in recent weeks. The first wave of "Cash for Clunkers" claims was naturally robust, but the pool of eligible participants thins out with every passing bucket of bolts that's surrendered for scrap.

I only fear that the rest of the potential buyers -- those without "clunkers" to hand over -- may be staying away, worried that dealers will be less reluctant to haggle their way down to great deals. As long as "Cash for Clunkers" is subsidizing drivers of stodgier cars, showroom bargains will be harder to find.

This will still be a net positive for companies such as Sirius XM, LoJack (Nasdaq: LOJN  ) , and perhaps even Garmin (Nasdaq: GRMN  ) , all of which feast on new car sales. However, investors will want to make sure that there's more to "Cash for Clunkers" than just the initial exhaust fumes of success.

More news than static on Sirius XM:

Garmin is a Motley Fool Global Gains recommendation. Try any of our Foolish newsletter services free for 30 days

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He owns no shares in any of the companies in this story and is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


Read/Post Comments (6) | Recommend This Article (14)

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  • Report this Comment On August 19, 2009, at 2:46 PM, mikecart1 wrote:

    Oh look another SIRI article. I wish I could purchase call options on "SIRI articles produced weekly at TMF". I would be rich.

  • Report this Comment On August 19, 2009, at 4:12 PM, Fredlee009 wrote:

    Hey Rick, every company in the world would take just 44%, in the worst economic envirnonment in decades. When times are better, its around 50%. Half of everyone exposed to pay for radio buys it. OMG. Thats staggering!! And yet you try to make it sound like a negative. Up to your old tricks I see.

  • Report this Comment On August 19, 2009, at 4:31 PM, yamazed wrote:

    Oh look the guy that should have been fired... Rather than saying BUY BUY BUY SIRI Rick bragged about a few weeks ago when it was only .45 per share.

    SIRI is under valued and should be at $6.00.

    This a ten-bagger stock. Get it while it is priced low!

  • Report this Comment On August 19, 2009, at 4:54 PM, arealist wrote:

    "just 44% of car buyers with satellite receivers installed chose to become paying customers"

    This has to be the dumbest statement I've read today on fool.com.

  • Report this Comment On August 19, 2009, at 5:46 PM, ThongLover854 wrote:

    Hehe....yes...great article. First, almost every human with ears knows that $13/month is peanuts for what you get from Sirius. If you complain about a buck or two increase, you should go grab a night job flippin' burgers...and enjoy the sat rad on the way home.

    Secondly, the 44% is silly...kinda like saying "in the worst economic year in decades, ONLY 44% of new car buyer threw a $100 bill out the window to guarantee they wouldn't have to listen to pathetic FM anymore.

    Sirius is like Rodney Dangerfield...no respect. They hurdle every pitfall and increase 1000%....avoid BK, get through last year...i mean F*&K....give me a break. It's a great service and the company has turned the corner. Give it some credit...oh wait...you're shorting it...ah...i see....too bad for you...

  • Report this Comment On August 20, 2009, at 8:15 PM, 2tipdotbiz wrote:

    SIRI Radio will rise up real soon!!!

    $2.00 Here we go)

    Search The Web: http://www2tip.biz

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