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Saturday, September 27, 2008

Time to Buy the Distressed Auto Industry

Which car would you buy today? A GM Sierra Pickup Truck? A Ford Explorer SUV? Or a Toyota Prius Hybrid?

For the past few years US auto-industry put their focus on making higher margin Trucks and SUVs. The Japanese auto-maker who always emphasize on small and fuel-efficient cars, foresee the climbing oil price started making the ultra-fuel efficient hybrid cars. The Detroit giants just didn't see it coming.

Turn the clock to early 2008 as the oil price stay above $100 and fuel-efficiency became the only thing matters when buying the cars, sales on SUV plunged. So the stock price of GM and Ford? They plunged too. GM(GM) is now trading at $9.76, 77% off its 52 weeks high while Ford(F) is trading at $4.81, about half of its 52 weeks high and both are at multi-year lows. What's worse is the crumbling of the two giants may even be possible.

Good new is - Help is on the way. Today a huge spending bill that is about to pass in the Senate would allow U.S. automakers to access $25 billion worth low-interest loans to help them develop more fuel-efficient cars. This bill would definitely benefit both GM and Ford and GM is in need of cash to boost spending on fuel efficient car while Ford, whoes small size fuel efficient cars are popular in Europe, is planning to re-model the factories to make similar car models in US.

So this may finally be the bottom of the two hard hitting stocks.

1 Comments:

Blogger katty said...

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July 30, 2010 at 10:52 AM  

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