Auto Sales: 76-year Streak Broken
By S.R. Nunnally
In this article
GM posted a $2 billion loss last year and has been shedding personnel and plants in an effort to stay afloat.
In March 2007, TM's sales grew 11.7% while GM's dropped 3.97% and Ford's fell 8.99%.
Total gains for our TM recommendation were 18.43%.
Auto Sales: 76-year Streak Broken
Goliath's been slain… Automaker behemoth General Motors (GM:NYSE) -- for the first time in its 76-year history of being the world's top manufacturer -- was bested by Toyota Motor Corp. (TM:NYSE) in sales, and most likely in production.
It's no secret that U.S. auto manufacturers have been struggling to keep their heads above water. GM posted a $2 billion loss last year and has been shedding personnel and plants in an effort to stay afloat.
GM's not the only one, either. Ford (F:NYSE) has been in a similar predicament. DaimlerChrysler (DCX:NYSE) has even put the Chrysler division up for sale.
Here are the preliminary numbers:
GM Q1 Sales: 2.26 million vehicles (96.58% of production)
TM Q1 Sales: 2.35 million vehicles (99.16% of production)
GM had previously said it would produce 2.34 million vehicles, but it has not confirmed that number. Toyota on the other hand reported production of 2.37 million vehicles.
Auto Sales: Toyota's No David
As monumental as toppling GM might be, Toyota's no David. In fact, Toyota's been growing as the Big Three have been declining. In March 2007, TM's sales grew 11.7% while GM's dropped 3.97% and Ford's fell 8.99%.
Toyota's racked up a huge profit, too. For FY2006, the company posted an $11.8 billion in profits.
Some analysts site Toyota's innovation and environmental image as two keys to its success over the past five years. I wouldn't disagree, and neither would investors.
TM's shares have climbed 120% in the past five years while GM's have lost more than 53% and Ford's have dropped more than 52%.
It's not only U.S. manufacturer's poor performance that TM has outshined. For the past five years DaimlerChrysler's shares have climbed up 73% and Honda Motor Corp. (HMC:NYSE) shares are up 57%. As good as these gains are TM's annual 24% rise makes it King of the Hill.
Auto Sales: The MP Angle
Last year, I recommended Toyota to Material Profits members in my special report, “Going Off-Grid.”
At the time, TM's hybrid Prius sales had just increased 106%. We entered the play at $109.41. On March 8, 2007, we sold half our position for a gain of 23.25%, quite near TM's annual 24% rise.
We held the second half hoping to get more gains.
We employed our Heightened Security Stop Loss strategy. Traditionally we use a 25% trailing top with MP recommendations. When a stock gains quickly, we move that 25% trailing stop to a more conservative 10% trailing stop in order to lock in gains and limit downside risk.
TM did not move higher as we had hoped, but our HSSL strategy enabled us to take 13.61% on the second half of our play. Total gains for our TM recommendation were 18.43%.
Auto Sales: Is there Any Hope Left?
U.S. auto manufacturers aren't going to throw in the towel anytime soon, though. There's hope yet for them. Over the past three months, DCX has been performing better than any other company. The runners up? GM and Ford.
Additionally, GM's been growing its world presence. Sales are up 32% in China last year, making GM the number-one seller. The company's building a new plant in India as well. These two countries have been great markets for nearly everything you can sell… GM's expansion there might help make up for its losses here in the States.
GM's also cleaning up its image by including FlexFuel vehicles in its production line (vehicles that can run on high percentages of ethanol-blended gasoline). While Toyota's cornering the market for hybrids, there's room for all kinds of alternative fuel vehicles, particularly now when ethanol production could double in the next two years.
But these are all long-term factors that will most likely do little in the near-term to help current stock conditions.
Want to take advantage of the shift in power? Take a look at Honda (HMC:NYSE). It moves nearly in lock-step with Toyota, but shares go for less than one-third the price.
You may get slightly less gains, but you're paying a lot less for 'em.
***
S.R. Nunnally is a commodities expert and technical analyst for Taipan Financial News. She is the editor of Material Profits, a monthly newsletter providing in-depth, cutting-edge research in the commodities sector. She is also the founder of Material Profits Wildcatter, employing an elite group of aggressive investment strategies.
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Related Resources
Toyota Surpass GM: Preliminary Figures Show Toyota Sold More Vehicles Worldwide in Quarter Than General Motors. - Yahoo!Finance via AP
Global Sales: Toyota surpasses General Motors in global sales. - MarketWatch.com
Number One: Toyota claims global No 1 spot from GM. - FT.com