It may not be happy days again for the auto industry and its shareholders, but there is light at the end of the highway.
High fuel prices have boosted sales of smaller cars, while luxury brands have been energized by improving economies and strong Chinese demand.
Parts shortages limiting the availability of Japanese vehicles are proving beneficial to domestic brands. Financial incentives offered by U.S. carmakers to buyers have been reduced to their lowest levels in six years, according to
"I have a positive outlook for the auto industry because I believe we are in the early innings of a multi-year rebound in demand in the U.S. and globally," said
First-quarter earnings of
In past years, Japanese carmakers were the beneficiaries of any move to smaller cars, but it is no longer such a clean sweep. Domestic carmakers offer an increasing number of smaller vehicles and should benefit as well.
"But there's really no one big winner or loser in this changing mix of vehicles," Levy cautioned. "Ford or GM can offer substitutes for pickup trucks, but profit margins are still smaller on the smaller vehicles."
New vehicle sales in the U.S. were up 18 percent in April, according to the
"Summer is going to be the most difficult time for the auto industry because fuel is its number-one problem," said
If fuel prices simply remain right where they are now, motorists will adjust and sales will "be OK" through the end of this year, he expects.
"GM has been improving fundamentally, but it will be difficult to compete with Ford,
Analysts can see why auto stocks haven't performed better despite their improved financial results.
"2010 had been a fantastic year for automakers and that meant some profit-taking; the fourth-quarter results disappointed; and the Chinese government has taken steps to slow automotive sales growth," explained
He is optimistic about the potential for long-term future auto industry growth. The most mature sales markets are closer to the bottom than the top in terms of volume, which allows plenty of upside, Ludtke believes. Meanwhile, the emerging markets, especially
Investing in the stocks of carmakers is never a sure thing and always subject to industry cyclicality and factors such as energy costs. The move toward more fuel-efficient gasoline vehicles and electric vehicles can't happen fast enough.
Among the most popularly traded auto stocks,
The more lightly followed shares of
Some considerations for potential investors:
-- GM, still one-third owned by the U.S. government, has turned in five consecutive profitable quarters. Successful new models such as
-- Ford, which avoided a government bailout but faces a large debt maturity in 2013, is ahead of GM in common vehicle platforms that reduce costs. Ford Fiesta, Focus and Taurus are considered quality competitors for the Japanese brands.
The Consumer Reports 2011 Automakers Report Card ranked Ford fifth overall and ahead of the other U.S. carmakers in reliability and performance.
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