We all know the impact that the current economic slowdown has had on American auto sales, and today we get news that European car sales are also feeling the pain, with auto sales dipping 15% during the month of October.
According to the European Automobile Manufacturers Association, or the ACEA, October marks the sixth straight month that new-car registrations have fallen, but things have been much worse since the summer, when concerns of a global recession really started to spread.
General Motors Corporation (NYSE: GM) was the worst hit major American automaker, which had a 25% decline in sales in October on a year over year basis. Japanese maker, Toyota Motor Company (NYSE: TM) did not fare to much better, with a 24% dip in sales. Ford Motor Company (NYSE: F) did a little bit better, with a reported 11.9% decline in October sales. Europe's largest automaker, Volkswagen, held up the best among the majors, with "only" a 7.9% drop.
Ford is expected by analysts surveyed by Thomson Financial to report a net loss of 93 cents per share, compared to a loss of a penny per share the same period of last year, on revenue of $28 billion. The company posted a much greater-than-expected loss in the previous quarter, but has also posted surprise profits in two of the past five quarters.
The company's revenues last year were $172.5 billion and its net loss totaled $2.7 billion. Its long-term EPS growth forecast is only 9.8%, much less than the sector average and the S&P. No surprise, the consensus recommendation of analysts remains to hold Ford.
The share price has fallen almost 60% in the past three months, and closed Thursday at $1.98, just 18 cents above the 52-week low.
Ford (NYSE: F) does not have much too much left to sell now that Jaguar and Range Rover are gone. Selling the Lincoln division might be a good idea. Nice luxury brand. But, it shares too many engines and parts with Ford brands.
All Ford has left that could be pushed out the door for cash is Volvo. Ford has said it will never sell the division, but desperate times call for desperate measures.
Word comes today from The Times, that Volvo may go to BMW to help the Ford balance sheet. The paper reports that "Ford may sell Volvo, the Swedish car-maker, to BMW as part of a drive to raise cash, say senior car-industry sources."
Ford might get over $2 billion for Volvo, which is about what it got for Jaguar and Range Rover. But, that amount would probably cover less that four month's cash burn.
The fact of the matter is that if Ford cannot get direct aid from the government in the next quarter, the entire company will have to be sold off in parts or in whole. The only two companies large enough to make a transaction of that size are Toyota (NYSE: TM) and Volkswagen. Toyota may not want to risk the U.S. government challenging it having 30% of the American car market if it made the acquisition.
Toyota (NYSE: TM) is supposed to do OK in a recession. It has about 15% of the U.S. car market. Overall sales in America are dropping but the Japanese company is a "low cost" provider which benefits from modest labor costs and super-efficient manufacturing.
Toyota's real problem is that its home market of Japan is moving into a vicious recession and its sales in Europe are also troubled. All of this is leading to a significant drop in profits and the first year that the Japanese car company's sales have dropped in more than a decade.
Reuters reports that "vehicle sales now appearing likely to drop 2 percent below the previous year's levels, hurt by weak sales in the United States, Europe and Japan." Things are bad enough that Toyota may have to chop its sales forecast.
All of that may sound more ominous than it is. Toyota still has an excellent chance of having a huge lead in global sales over GM (NYSE: GM) before the next two years are out. GM has been the largest car company in the world for decades. Toyota caught it in total sales earlier this year.
GM may barely make its payroll as it moves into 2009. Its chances of retooling its model line get worse as each month passes. The credit crisis means the U.S. company has almost no access to the capital it needs to stay competitive.
Toyota, on the other hand, has an especially strong balance sheet and the ability to continue product innovation to expand into alternative energy vehicles and other popular cars.
Things may be a bit tough for Toyota next year, but by 2010 it could have a huge global lead over its rivals in sales and profits.
Douglas A. McIntyre is an editor at 247wallst.com.
The company noted that we are in the middle of an "atmosphere of caution" as the troubled economic environment, and tightening credit conditions are still taking their tolls on the automotive industry.
We will hear more troubling news later today as more auto makers release their September numbers, and analysts are expecting to hear more of the same from the other major names in the industry. Fellow Detroit auto maker General Motors Corporation (NYSE: GM) is expected to announce sales dropping around 27%, while Japanese maker Toyota Motor Corporation (NYSE: TM) is expected to show a sales decline of around 17%.
Today's news from the major names should really come as no surprise, since we have been hearing much of the same through most of the year. Through August, nationwide sales of vehicles was down 11.2%.
As consumers continue to express their concerns over the overall economy it is going to continue to be tough for car dealers to get shoppers into their showrooms. Bigger incentives should help a little, but until consumers start to turn more positive on the overall economy, it is going to be tougher and tougher to sell them new cars.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
Lost in this weekend's news about the $700 billion bailout package for the banking industry was a $25 billion loan package for United States auto manufacturers. This package comes at a time when apparently Congress and the President believe that the American people will see $25 billion as a pittance compared to the $700 billion they're already planning to spend on mortgages. While there certainly is precedence for this move --- the government loaned $675 million to Chrysler in 1980--- this loan package is several orders of magnitude larger.
Ryan Pfenninger of MarketRiders is outraged at this loan package, claiming it is anti-competitive to startup companies like Tesla Motors who are investing their own money in alternative technologies like battery power. $25 billion is a lot of money. Detroit should not be able to argue for 30 years against improved fuel mileage and better technology, and then come back to the same government they persuaded into facilitating their failure, for a bailout.
He points out the immense irony in this loan to auto manufacturers. According to Ryan, General Motors (NYSE:GM), Ford (NYSE:F), and Chrysler are currently struggling significantly against Japanese and other foreign manufacturers who have spent the last many years improving fuel efficiency and developing hybrid and other alternative technologies. If Detroit had spent as much time, money, and effort in research and development as they did lobbying Congress to keep fuel mileage standards low, and made competitive non-gas guzzling vehicles, I would venture a guess these loans wouldn't be necessary.
Ryan believes that most people understand a mortgage bailout was necessary. But he's not so sure that if Detroit fails, this could cripple the United States economy. There are plenty of foreign auto manufacturers with operations in the United States -- Toyota (NYSE:TM), Honda (NYSE:HMC), and Nissan (NASDAQ:NSANY)-- who could easily pick up the slack. Their vehicles are outselling American automobiles. They are building plants in places like East Liberty, OH and Lincoln, AL, providing jobs for people displaced by the failure of Detroit.
Ford's (NYSE: F) latest PR push is based around the idea that the company can make money on smaller cars. Traditionally the big margins in the car industry have been on pick-ups and SUVs. But consumers don't want those anymore.
According to The Wall Street Journal (subscription required), "Ford Motor Co. is expressing new confidence about the auto maker's ability to sell new small cars at a profit in the U.S. market, citing new data about how Americans are beginning to value premium features and dynamic design over vehicles desired simply for their size." That assumption is based on two factors, neither of which is likely to be true.
Ford believes that it can cut its cost base low enough to make money on cars that retail for $20,000 or less. Chopping production expenses may lower overall costs, but it also cripples the company's ability to "turn on the juice" if car sales make a sharp rebound. Fewer factories with fewer workers puts some brake on the company's ability to quickly push out more vehicles in a short period of time. Cars that can't be made can't be sold.
The other challenge to Ford's assumption is that it can get a large market share in a part of the industry that is already dominated by Toyota (NYSE: TM), Honda (NYSE: HMC), and Nissan. As Ford ramps up, the Japanese car makers are moving into hybrids and improving their own small cars. Most consumer satisfaction surveys put Ford behind the Japanese in terms of the quality of their products.
Aside from those few small details, Ford's plans should work just fine.
Douglas A. McIntyre is an editor at 247wallst.com.
During the month, Ford was able to sell a total of 155,172 light vehicles, which was 3.6% below July's figures of 160,990, which was the worst month for U.S. car sales in the past 16 years.
As expected, truck sales really took a beating last month for the company. With consumers dealing with record high gasoline prices, truck sales have been weak for some time now, and last month the company saw truck off by more than 32%. Its car sales fell by nearly 9%.
Toyota (NYSE: TM) has already said that 2008 will be a bad year. Now it has revised down its sales numbers for 2009. The cut is about 7% and takes the company's estimate to 9.7 million vehicle sales worldwide.
The news may be bad for Toyota, but the company has a good balance sheet and has maintained a low cost base for years. Europe and North America is where the Japanese company said it is sustaining the most damage. According to The Wall Street Journal,the firm is "bracing for a long slowdown as robust sales to developing markets are failing to offset huge losses in the crumbling U.S. market."
For General Motors (NYSE: GM) and Ford (NYSE: F) the news could not be worse. Both rely on the U.S. market for the lion's share of their sales. Both are counting on some recovery in 2009 to allow them to stop the bleeding out of cash that threatens their abilities to remain independent and solvent.
The two U.S. car companies were going to go to the capital markets to raise money. Whether debt or equity investors would give them money becomes more problematic as each month of poor sales goes into the record book.
The government is talking about a $50 billion bail-out for U.S. car companies. That may be the only capital they can get.
Douglas A. McIntyre is an editor at 247wallst.com.
The Big Three seem to think that they are troubled money center banks. They want Washington to get them out of their financial problems. According toThe Wall Street Journal, "Battered by high gasoline prices and weakened earnings, the Big Three auto makers and their suppliers are now seeking significantly more help from Washington in the form of government-backed loans than the $25 billion they had previously been authorized to receive."
While the auto companies are important to the U.S. economy, they can be "replaced." If General Motors (NYSE: GM) or Ford (NYSE: F) fail, their brands and manufacturing facilities will almost certainly be bought by an overseas car company. VW has said it would like a larger market share in the U.S. So has Nissan. Both have the balance sheet to buy assets from a failed U.S. car company.
There is a sort of cruel reality to the thought that companies considered pillars of the U.S. economy could be gone sometime soon. It is certainly an indication that manufacturing is become less and less critical to the overall GDP of America. It is also a sign the the inefficiency of Detroit's habits have finally gotten so severe that it needs to turn to the government and not the capital markets for aid.
If the car companies cannot make it and cannot raise money on their own, they should be allowed to fail. That may mean that Toyota (NYSE: TM) will become the largest seller of cars in the U.S., but there was never any rule that said bad management would continually be rewarded.
Douglas A. McIntyre is an editor at 247wallst.com.
There's an upside and a downside regarding major auto companies and the quest to develop vehicles with increased fuel-efficiency.
The upside: Auto makers are positioning themselves to carve out niches in fuel-efficient technology and design, The Wall Street Journalreported Monday (subscription required).
The downside: Auto makers appear to be exhibiting a 'herd mentality' on the current propulsion technology -- hybrid engine cars with both a modest electric power source and a mainstay internal combustion engine. An electric hybrid focus
Following up on its successful electric-gasoline Prius hybrid, Toyota (NYSE: TM) announced it will make hybrid engine systems available on all models by 2020, The Journal reported. Meanwhile, Honda said it would import new hybrid technology to the U.S. to compete with Toyota and Ford (NYSE: F) plans to double its hybrid lineup next year, and Chevrolet's (NYSE: GM) Volt hybrid that will go on sale in 2010.
Economist David H. Wang said investors and consumers should not be overly optimistic or pessimistic regarding the sector's concentration on electric-fuel hybrids.
Toyota Motor Corp. (NYSE: TM) says that a hybrid version of every one of its vehicles will be available by 2020.
According to The Wall Street Journal, "The announcement came as all of the auto makers at an industry conference this week in northern Michigan maneuvered to carve out their own niches in fuel-efficient design."
But, 12 years from now, hybrids may be useless.
Nuclear energy may drive 100% of the U.S. needs for electric power.
The massive oil reserves found off Brazil and in the Arctic may have driven up oil supplies so that gas is back to $1.25.
Wind power may have undercut the need for oil-heat in many American homes.
Solar power will probably have replaced other fuels for furnishing most homes and small businesses with energy.
The hybrid car may not be such a great idea.
Douglas A. McIntyre is an editor at 247wallst.com.
Toyota (NYSE:TM) built a great deal of its US business, especially in the 1970s and 1980s, on assembling cars inexpensively in Japan and shipping them to the US. Then the world's largest vehicle maker built plants in the US to satisfy rising demand for its products and to offset resentment that it was only an importer with no interest in employing American workers.
Toyota may now regret its decision to build big manufacturing facilities on US soil. Many of the new facilities were set up to make SUVs and pick-ups for a market that moved to these vehicles in the 1990s and the current decade. High gas prices have killed that business over the last year or so.
Toyota may have come up with a good but ironic solution. It may ship SUVs and pick-ups from its US plant to countries where there is still some demand for the vehicles. The car company, once a leading importer to the American market, is now moving into the export business.
According toThe Wall Street Journal, "The auto maker, which produces the Tundra pickup and Sequoia SUV, is looking at other markets around the world, although no decision has been made," It shows how management moves that looked good in one decade can sour in the next.
This post is one in a series on prominent company nicknames. See all 25, and share your thoughts and memories about Ford below in the comments.
I didn't grow up in one of those families that placed a high premium on American-made goods. If the Japanese can make it better, we'll buy it from them! was the general consensus. And those foreign autos served the Harrows well. My parents bought their 1984 Toyota Tercel when it was new, and that unattractive but reliable compact was part of the family through the beginning of my college career -- even surviving my first, hilarious attempts to operate a manual transmission. So, it wasn't until I moved in with my friend Debbie, as an adult, that I learned the details behind a particularly unflattering nickname for the Ford Motor Co. (NYSE: F).
There are those who would joke that the letters in "FORD" stand for "Fix Or Repair Daily." I know from experience that if you make that particular wisecrack within Debbie's earshot, she probably won't crack a smile. Instead, you can almost see her wheels churning, as though she's trying to calculate the thousands she's already poured into her Ford Focus -- or maybe she's just trying to predict which part will break down next.
During the time we shared a mailbox, it was a not-out-of-the-ordinary occurrence for Debbie to receive recall notices bearing the familiar Ford logo. These repair-o-grams arrived with such frequency that the exact number now escapes my memory; when I questioned her via text message, she replied, "I have had six. Stupid car."
We all know the impact that the current economic slowdown has had on American auto sales, and today we get news that European car sales are also feeling the pain, with auto sales dipping 15% during the month of October.
Ford is expected by analysts surveyed by Thomson Financial to report a net loss of 93 cents per share, compared to a loss of a penny per share the same period of last year, on revenue of $28 billion. The company posted a much 
Ford
September proved to be yet another tough month for American auto maker 
Lost in this weekend's news about the $700 billion bailout package for the banking industry was a $25 billion loan package for United States auto manufacturers. This package comes at a time when apparently Congress and the President believe that the American people will see $25 billion as a pittance compared to the $700 billion they're already planning to spend on mortgages. While there certainly is precedence for this move --- the government loaned $675 million to Chrysler in 1980--- this loan package is several orders of magnitude larger. 
The Big Three seem to think that they are troubled money center banks. They want Washington to get them out of their financial problems. 
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