Where Do Auto Stocks Drive After Cash for Clunkers?

The Auto & Truck Manufacturing sector gained 1.9% last week based on strong earning results from Ford (Symbol: F) and Toyota (Symbol: TM) as well as bullish October sales numbers and the release of Chrysler’s plan to turn business around at the struggling automaker.

Ford

When Ford reported earnings last Monday, analysts were expecting a loss of .12 cents a share.  However, the “Blue Oval” reported a profit of .26 cents a share — a significant beat.  CEO Alan Mulally has long been dedicated to putting Ford back in the black.  To do so he cut ties with Ford’s non-core brands (e.g., Jaguar) and was “fortunate to leverage almost all of Ford’s assets before the credit markets closed up.”

Furthermore, when most car companies were shrinking their respective model lines, Mulally went in the complete opposite direction: he emphasized expansion of new brands.  This advantage in terms of new, fresh brands may have been key in allowing Ford to experience success in the Cash for Clunkers program. These brands will likely remain a key growth-driver in the future.

F

Also worth noting is the so-called “inflatable seatbelt” unveiled by Ford on Thursday.  It is considered a “potentially ground breaking innovation in safety aimed at better protecting people in the second and third rows of cars involved in accidents.”  However, it remains to be seen whether the inflatable belt ever sees mass-production.

October Sales

Tuesday was another strong days for autos as monthly sales beat expectations.  The sales breakdown as follows:

-GM (up) 4 %

-Ford (down) 0.6%

-Toyota (down) 3.5%

-Honda (down) 4%

-Chrysler (down) 32.3 %

-Nissan (up) 5.6%

Besides Chrysler, it was a good overall showing.  For example, Ford sales chief George Pipas expects the fourth quarter pace of auto sales to “come in at 10.4 or 10.5 million” — a healthy one million vehicle increase from the second quarter pace of 9.5 million.

Chrysler

On Wednesday, Sergio Marchionne detailed his plan for the resurrection of the Chrysler brand.  Among the primary aims of the plan are:

– Using a Fiat platform, Dodge will introduce a small car by 2013. That’s in addition to Dodge adding a compact sedan in 2012 and a model to replace the Avenger in 2013. Dodge desperately needs new, smaller, fuel-efficient models;

– Chrysler will share platforms with Fiat and by 2014 reduce 11 platforms to 7. A huge cost savings; and,

– Jeep will be adding a small SUV in 2013 as well as two other new models that year. Jeep, which currently builds just fewer than 500,000 vehicles, is targeting a major increase in production to 800,000 vehicles by 2014.

Still, it is worth noting that this is the third major plan for the future at Chrysler in the last 11 years (the others being those of Daimler and Cerberus (which didn’t work out so well, as you likely know).  We will probably need to give the plan about 2 years before we know whether the third time is the charm.

Toyota

Thursday saw the release of the first quarterly profit posted by the Toyota Motor Corp. in a year.  Though profits were down 84% from the period a year earlier, the mere fact that Toyota ended the quarter in the black represented an out-performance of analyst expectations.

Toyota also reformed guidance, lowering its expected loss for the full fiscal year by 200 billion Yen to 450 billion Yen.  This new outlook “reflects booming demand sparked by (government measures) as well as hot sales of hybrid cars,” Yoichiro Ichimaru, a Toyota executive vice president, said at a press conference.

TM

Though Toyota’s ability to turn a profit did surprise analysts, shares still traded down on Friday as worries of lawsuits for the company’s recent safety issues as well as stronger comparative recoveries from competitors Honda and Nissan loom.

Readers who liked this also enjoyed:

Chart Junkie: Goldman Sachs, SP 500 VWAPs, Real Estate, and First Busey

Reading the Tape: Trading the Open (Video)

FTMDAIHMCAuto ManufacturersStocks