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Invest in North American Automakers

The sales figures are out US auto sales for the last month and they look great! November US auto sales are as good as they have been since before the recession started. After dismal times, the bankruptcy of General Motors, and all it may be time to invest in North American automakers for the long haul. A year and a half ago we wrote about Investing in US Auto Makers. At that time we were looking at the recovery of GM and others. Today, as the US economy slowly but surely climbs out of the recession fundamental analysis of the long term prospects on the North American car market and its suppliers is in order. Where is the North American economy going? Is a sustained recovery likely? How about the dollar, inflation, recession in Europe, and unrest in the Middle East?

What Fiscal Cliff?

Although investors may be exhibiting fiscal cliff stock worries, families are our shopping for cars in the best numbers since 2008. All global concerns aside the US consumer is buying from General Motors GM, Toyota TM, Ford F, Chrysler privately held, Nissan NSSANY pink slips, Hyundai KRX, and Volkswagen VLKAY pink slips. Many expected the twin onslaught of Hurricane Sandy and the threat of a fiscal meltdown to ravage the US economy and drive down sales and profits across the board. But the proof of consumer sentiment is in sales. People are buying cars in pre-recession numbers. More than a million new vehicles exited the show rooms of America in November of 2012. Although automakers would be pleased to see budget negotiations come to a happy conclusion the American consumer is consulting his own thoughts on the subject and buying cars.

What Are the Numbers?

Company Cars Sold Percentage Increase
Chrysler 186,505 3%
Ford 177,673 6.5%
GM 122,565 14%
Huyundai 53,487 8%
Nissan 96,197 13%
Toyota 161,695 17%
Volkswagen 36,728 29%

Picking the Most Profitable

Here is where sound fundamental analysis enters the picture. Whoever sells a lot of cars stands to make more profits. However, efficient manufacturing, low costs of labor and benefits, and innovative products will help auto companies stand the test of time. If you are going to invest in North American automakers you need to know who will do the best job going forward. Two years ago we posed the questions, Is GM a Good Investment? At that time the status of General Motors was questionable. Now the question is whether or not GM especially has learned its lesson, will be able to eliminate waste, will be able to negotiate reasonable labor contracts, and produce innovative products that a wide range of customers want. Toyota replaced GM as the world’s largest car maker, for a while. Then the Japanese car maker proceeded to prove that it was all to human with its brake fiasco and other mishandled issues. Profits certainly tell much of the story. As quarterly financials come out investors who want to invest in North American automakers will want to read and study. However, a more important issue will be the willingness of companies like GM to forego short term fixes like producing huge numbers of big cars. Although big cars led to big profits over many years they were to doom of GM when the economy sank. Look to see who can see the future and plan for it when you choose to invest in North American automakers.

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