The decline in sales will be more pronounced for passenger cars, especially in countries where fleet renewal schemes have ended, while commercial vehicle registrations are expected to be flat.

In 2009, truck production in Europe fell 64% to an historic low. Meanwhile, passenger car output dipped 13% to 13.4 million units — the lowest since 1996 — partly offset by a favorable effect from scrappage schemes. Many European automakers suffered a loss during the year.

Daimler AG (DAI) lost €2.6 billion ($3.7 billion) or €2.63 ($3.67) per share in 2009, in sharp contrast to a profit of €1.4 billion ($2 billion) or €1.41 ($1.97) per share in the previous year.

The loss was attributable to a 24% decline in unit sales to 1.6 million vehicles due to the global economic crisis. Revenue for Daimler dipped 20% to €78.9 billion ($110 billion); adjusted for exchange-rate effects, the decrease was 21%.

Bayerische Motoren Werke AG (BMW) reported a 36% drop in profit to €210 million ($286 million) for 2009. Revenue shrunk 4.7% to €50.68 billion ($69 billion) as the economic crisis hurt demand for luxury cars. Volkswagen AG recorded an 80% fall in net profit to €960 million ($1.3 billion) during the year.

Zacks Investment Research

(DAI) European Autos Sales to Drop

The 5-year high was primarily driven by Moody’s Investors Service’s (MCO) upward revision of Ford’s corporate family rating and probability of default rating to “B2″ from “B3.” The agency also lifted the company’s secured credit facility to “Ba2″ from “Ba3,” and its senior unsecured debt to “B3″ from “Caa1.”

Moody’s upward revision was forced by Ford’s potential to improve its finances over time and its new product program as the company plans to start selling a new global Fiesta subcompact this year and a new Focus compact early in 2011.

The 5-year high stock price is a recovery from a low of $1.26 on November 19, 2008, when Ford was struggling with the global economic crisis. The company’s aggressive restructuring plan has enabled the take-off, which also helped it bypass bankruptcy unlike its cross-town rivals General Motors and Chrysler.

Last month, Ford led all U.S. automakers, outperforming General Motors for the first time in nearly a decade in terms of sales growth, sales volume and market share. The company’s sales advanced 43% to 142,285 vehicles with a staggering 74% rise in fleet sales, as it grabbed customers from Toyota Motors (TM), which has been struggling with automotive safety recalls. According to Autodata Corp., Ford won an 18.2% market share during the month.

In 2009, Ford has shown a profit of $8 million (excluding special items), driven by favorable net pricing, structural cost reductions and strong Ford Credit results. This was the company’s first annual profit since 2005 and an improvement of $7.3 billion over 2008.

Ford has achieved $5.1 billion in Automotive structural cost reductions, exceeding its full-year target of about $4 billion for the year. This was helped by lower manufacturing and engineering costs, reduction in pension and retiree health care expenses, and lower advertising and sales costs.

Ford’s Financial Services segment reported a pre-tax operating profit of $683 million, compared to a loss of $384 million a year ago. Ford Credit reported a pre-tax operating profit of $696 million, compared with a loss of $372 million a year ago. The increase reflected lower residual losses due to higher auction values and lower provisions for credit losses, offset partially by lower volumes.

Zacks Investment Research

(F) Ford Motor Shares Hit Five-Year High

In December last year, Daimler and Renault announced plans to jointly develop small cars. The talks about exchanging equity stakes are just a part of that announcement.

Daimler is now interested in enhancing the profitability of its Mercedes A-Class and smart fortwo cars by sharing the development of vehicles and engines with Renault (and thereby Nissan). In 2009, sales of smart fortwo cars plunged 41% to 14,600 units while sales of Mercedes A/B Class fell 14% to 215,500 units.

In 1999, the Renault-Nissan business was formed, in which Renault held a 44.3% stake in Nissan, while Nissan held a 15% stake (non-voting) in Renault. In 2006, General Motors had revealed its plan to join the alliance. However, the talks failed in the same year.

Although Daimler has a history of unhappy tie-ups with other carmakers, including Mitsubishi, Hyundai and Chrysler, it does need a partner for small cars, an area where it struggles to be profitable.

Zacks Investment Research

(DAI) Daimler AG to Join France’s Renault-Nissan

The agreement, which includes payouts for workers, is subject to a ratification vote by the plant’s workers, which is likely to take place later this week. The plant is scheduled to close on April 1.

Earlier this month, Toyota agreed to spend $250 million to fund transitional support for plant workers. As many as 5,400 direct jobs will be affected by the closure, including 4,550 hourly UAW workers. According to the East Bay Economic Development Alliance, the NUMMI closure would also cost 30,000 indirect jobs.

NUMMI, opened by General Motors in 1962, was shut down in 1982 due to operational inefficiency. However, the plant was reopened two years later under a 50/50 joint venture between General Motors and Toyota.

NUMMI was a remarkable joint venture in Toyota’s as well as America’s history. The joint venture taught Americans all about the famous Japanese ‘lean manufacturing system’ (focused on just-in-time delivery) and Toyota stepped into U.S. using GM’s supply lines.

NUMMI produces Corolla and Tacoma for Toyota and Pontiac Vibe (Toyota’s version of the Vibe) for GM. However, GM had decided to pull out of NUMMI after completing its bankruptcy filing in June last year, as it will discontinue the Pontiac brand.

Toyota will stop production at NUMMI in this month and will shift production to its other plants in the U.S., Canada and Japan. Production of the Corolla subcompact will be moved to Cambridge, Ontario, as well as Japan, and Tacoma pickups will be produced in San Antonio, Texas.

Meanwhile, the Californian start-up electric vehicle company Aurica Motors has shown interest in acquiring the NUMMI plant. The company intends to retain the NUMMI workers and launch a new model in two years.

Zacks Investment Research

($TM) Toyota Motors Reaches Deal With United Auto Workers

We saw a bigger decline in imports, which dropped by $3.1 billion or 1.69% to $180.0 billion, than we did in exports, which fell by $0.5 billion or 0.35%, to $142.7 billion. It is the wrong reason because both imports and exports fell. We want to see an expansion in world trade, not a contraction.

With the dramatic increase in both imports and exports in China release yesterday (both up by more than 45% year over year), the relatively small declines do not mean that overall world trade is declining. We are, however, the biggest economy in the world, so contracting trade numbers here are not exactly a sign of robust health in the global economy. Still, any decline in the trade deficit will help strengthen GDP growth, regardless if its source is rising exports or falling imports.

Taking a longer-term picture, things are a bit better. While the trade deficit is slightly higher than it was a year ago ($39.9 billion), both imports (11.91%) and exports (15.17%) are significantly higher than they were then.

The biggest import decline came from autos and parts, which fell by $1.5 billion. This could have something to do with the problems that Toyota (TM) has been having, although Toyota does build lots of cars here as well as import them.

Oil Imports Slide a Bit

We also imported “just” $27.3 billion worth of oil, down from $28.2 billion December. The import price for oil tends to lag the spot price somewhat, and recently oil prices have been rising, so look for our oil import bill to rise again in February.

A year ago, oil prices were near their lows as the world economy was falling apart. As a result, our oil import bill was just $18.3 billion, so we are up 49.2%. We actually do export some oil, as it sometimes makes more sense to send Alaskan crude to Japan than it does to the West Coast, so the overall petroleum balance was $22.7 billion, down from $28.6 billion in December but up from 14.9 billion a year ago.

The graph below (from http://www.calculatedriskblog.com/) breaks down the history of the trade deficit into its oil and non-oil components. It shows the massive deterioration in the overall trade deficit from 1998 through late 2005, then a stabilization at a very high level of over $60 billion a  month that lasted until the wheels fell off the world economy in the second half of 2008.

However, the overall composition of the deficit changed greatly during that time while we were bumping along the bottom. Our non-oil deficit started to stabilize much earlier, in early 2004, and started to improve significantly in early 2007. That improvement was masked by a sharp deterioration in the oil deficit as oil prices skyrocketed, eventually hitting $147 per barrel in July of 2008.

The plunge in oil prices in the fall of 2008 allowed for a massive improvement in the overall trade deficit. However, since then, oil prices have rallied from the low $30’s to the low $80’s and with it the trade deficit, particularly the oil side of it, has started to deteriorate again.

The oil side of the deficit is a particularly intractable problem, since it is not helped by a weaker dollar. If the dollar weakens, the price of oil just tends to rise in reaction. To solve this problem, we need to move to non-oil energy sources. We simply do not have the domestic oil reserves anymore for “drill baby drill” to be an effective answer, at least with regards to oil.

Domestic Natural Gas Usage Should Increase

It would be a very effective answer if we could shift over to using more natural gas, where supplies are extremely abundant thanks to the new shale plays. On an BTU equivalent basis, natural gas is also dirt cheap, welling for the equivalent of less than $30 a barrel.

Natural gas-powered vehicles are a well-tested technology, and are in use around the world…why not here? Both Ford (F) and GM already make them, they just don’t sell them here. It would even be possible to have a “gas station” at home if you already have gas for cooking or heating.

Yes, there are some potential environmental problems with shale gas, most notably potential groundwater contamination. However, those potential problems are very small relative to the environmental disaster which is coal. Not only does coal produce about twice as much CO2 as gas per BTU, is also creates massive amounts of fly ash that are left in huge piles near power plants. Last year, one of the dams holding back fly ash broke in Tennessee and cause one of the largest environmental disasters ever in the lower 48 states.

Coal also spew all sorts of other very nasty stuff into the atmosphere, including mercury, lead and arsenic. Clean coal would be nice, but then again it would be nice to catch a leprechaun and get his pot of gold. That’s not going to happen because leprechauns don’t exist, and neither does “clean coal.” The administration’s infatuation with clean coal is just plain silly, or just something that helps keep Senators Rockefeller and Byrd happy.

Weaker Dollar Helps Non-Oil Side

A weaker dollar would help greatly on the non-oil side of the deficit, however. Prices of imported goods would become more expensive relative to domestically made goods. People might decide to buy more Fords and fewer Toyotas, or at least Toyota might decide to sell more cars  built in its plants here.

Our exports could be more competitive with the offerings of other nations, either the country we are selling to directly, and against other exporting countries’ offerings. For example, General Electric (GE) might have a better shot at selling electrical generators in India rather than the order going to Siemens (SI) of Germany.

The rebound in the dollar over the last few months (mostly in response to the “Greek drama”) works in the wrong direction. “King Dollar” is a tyrant who needs to be overthrown. Yes, sending King Dollar to the guillotine would cause inflation to be somewhat higher, but the problem the country faces right now is jobs and growth, not inflation, which is very much under control. Not only do the economic statistics tell you that, but the bond market is practically screaming it.

If inflation were about to zoom to 5 or 6% why would any person with an above room temperature IQ buy a 10 year T-note at 3.7%? If inflation were the problem, not unemployment, I would favor a stronger dollar, but that is not the case today.

Looking Ahead in China

By country, our biggest deficit by far is with China, where it expanded to $18.3 billion from $18.1 billion in December. This presents another problem for solving the trade deficit problem as long as China keeps pegging the Yuan to the dollar. If the dollar weakens, then so does the Yuan, and U.S. imports from China will not fall, and our exports to China will only benefit indirectly — to the extent we displace other countries exporting to China.

To bring the world economy back into balance, the Yuan must rise as the dollar falls. China does not have a big problem with growth right now, but it is starting to have a growing inflation problem, so it would be in the interest of the Chinese people to see the Yuan strengthen as well. I think it will eventually happen, but probably in a controlled way.

As it does, firms that are tied to the Chinese domestic economy should do very well. A large-cap beneficiary of this would be China Mobile (CHL), which gets almost all its revenues from within the Middle Kingdom, not from exports.

Another way to play this would be through the Claymore China Small-Cap ETF (HAO), since small-cap stocks in China tend to be more domestically focused than are the large caps.

Trade Deficits Elsewhere

Our deficit with OPEC rose to $7.2 billion from $6.8 billion in December. Meanwhile, the deficit with Mexico fell to $4.6 billion from $5.2 billion. Mexico’s oil production is drying up, and with it, its exports to the U.S.

Our deficit with Canada increased to $3.9 billion from $3.0 billion. Canada is by far our largest source of imported oil, not to mention our largest trading partner overall. The deficit with Japan fell to $3.3 billion from $4.6 billion. Toyota’s troubles might be part of the reason for that decline. The gap with the European Union also showed a sharp decline, falling to $2.8 billion from $6.4 billion in December.

Overall, a decline in the trade deficit is still a good thing. I just wish it were happening for the right reasons. The persistent trade deficits are what drives our external indebtedness, not our budget defits.

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market beating Zacks Strategic Investor service.

Zacks Investment Research

(TM) U.S. Trade Deficit Falls, However…

Initially expecting further losses, CEO Alan Mulally warned that his company wouldn’t be “solidly profitable” before 2011. Yet it gained last year all the same, and without any sort of Federal bailout.

Quite the contrast to its Detroit rivals, General Motors and Chrysler, which both relied on Uncle Sam while going through bankruptcy last year.

Of course, Ford’s self-sufficiency created a bumpy road ahead. While GM and Chrysler can bask in the stacks of tax-payer funding going forward, Ford has only itself to rely on. And its $34 billion of debt and less-than desirable credit rating doesn’t help.

The company has to put the pedal to the metal in order to keep up with the competition.

Fortunately, it seems Mulally and his team have the situation under control. In addition to soundly beating its rivals, it also gained market share. Just back last month, its sales jumped 43%, marking the first time it outsold GM since 1998.

Ford’s market share should continue rising too, as industry insiders believe it’s working on Detroit’s best product pipeline.

And it also has a new focus on emerging markets – part of a larger business overhaul entitled “One Ford” – which should drive it forward even further.

Switching Gears In Asia

Ford plans to use its family of small cars to aggressively expand into Asia.

After two decades of focusing on sport utility vehicles and pick-up trucks, Mr. Mulally has decided to change direction and concentrate on new, small and mid-size cars. He plans to market them all around the world at around $7,500, since about 40% of Chinese and 70% of Indian consumers buy vehicles marked below that figure.

The company recently revealed a new version of its top-selling Focus. Contrary to past years, only the visible parts of the vehicle will change depending on local regulations and consumer trends. Meanwhile, what actually makes the car move will stay largely the same.

Ford believes the new platform will support up to 10 models around the world, accounting for 2 million annual units by 2012.

The company announced last September that it would use the Fiesta platform to build the Figo – a new small car priced at $8,000 – at its plant in Chennai, India.

It then went on to invest $500 million into the plant to boost production capacity up to 200,000 cars and 250,000 engines.

Ford only sold 40,000 cars in India last year. So obviously, it plans on expanding… big time.

It wants to grow its China market as well, where it sold 440,000 vehicles last year. So it’s re-launching the Fiesta there, as well as opening another plant in Chongqing in 2012.

Yet even with those lofty goals, Ford has even bigger sights on another emerging market…

Brazil In Overdrive

Ford can thank South America for its most recent quarterly results, where it tripled pre-tax profits. And that’s especially true in Brazil, where it has made gains for 24 straight quarters now.

All told, Brazil purchased 3.14 million vehicles last year. That 11% increase over 2008 marked an all-time record for the country. And vehicles sales and production should continue to rise from about 3 million in 2009, to 4.5 million by 2016.

Naturally, with those kinds of gains, car companies have made significant gains in the world’s fifth-largest auto market, even while losing out in more traditional areas.

For its part, Ford sold over 300,000 automobiles last year from its four Brazilian manufacturing plants. That puts it in fourth for sales, after Fiat, Volkswagen and General Motors.

And while Brazil is Ford’s third largest market – after the U.S. and the UK – it’s set to continue growing… a lot. In a country of almost 200 million people, only about 1 in 7 own a car.

To meet that rising demand, Ford has set aside $2.3 billion over the next several years to build up capacity and product development in the South American power house. That kind of funding should pay off nicely in the years ahead, as should the company’s overall strategy.

If the developing markets continue to lead global demand in this way, Mr. Mulally is probably right about his company making regular, solid profits as of next year.

Good investing,

Tony Daltorio

View original at: Investment U

(F) Ford Motor Company On The Path To Profits

Last year, as part of its restructuring, GM has revealed that it would not renew franchise agreements with about 2,000 dealers. However, on account of protests from the dealers, Congress passed a law last month requiring an appeal process for the dealers.

As many as 1,160 dealers who were seeking to stay with the automaker, have sought arbitration. The automaker plans to complete the arbitration process before the Congress’ mandated deadline of July 15.

Along with the 661 dealers targeted for reinstatement, the automaker will continue settlement talks with another 500 dealers who will not be offered reinstatement and will remain in arbitration. The company has also budgeted up to $600 million to compensate the dealers.

GM’s network will be trimmed from 6,150 dealerships as of 2008 to 4,800 dealerships if all the 661 dealers offered reinstatement indeed remain open. The trimming would help the automaker to compensate for lower demand for cars and trucks and concentrate on its four existing core brands — Chevrolet, Buick, Cadillac and GMC.

Last month, GM saw an 11.5% rise in sales to 141,951 vehicles. The improvement was attributable to higher fleet sales (114%) and strong new models.

The automaker won an 18.1% market share during the month, according to Autodata Corp. The automaker’s four existing core brands witnessed a 32% rise in sales. However, Ford Motor Co. (F) outperformed GM for the first time in nearly a decade in terms of sales growth, sales volume and market share.

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(F) General Motors to Reinstate 661 Dealers

However, the Japanese automaker is hopeful about regaining sales in North America in March after a sharp decline last month when the automaker suspended sales of 8 recalled models.

In January, Toyota suspended the sale of 8 models to correct sticking accelerator pedals. The models affected in the sales suspension were RAV4 crossover (2009–2010), Corolla (2009-2010), Matrix (2009–2010), Avalon (2005–2010), Camry (2007–2010), Highlander (2010), Tundra (2007–2010) and Sequoia (2008–2010). So far, Toyota has recalled 8.5 million vehicles.

In February, the automaker’s sales fell 9% to 100,027 vehicles. According to Autodata Corp., the automaker’s U.S. market share fell to 12.8%, the lowest since July 2005.

The latest string of recalls has no doubt hurt the reputation of the automaker. The company has been slapped with dozens of lawsuits due to the recall. The value of claims under the lawsuits is estimated to reach about $4 billion, reflecting an average loss of $600 per vehicle.

Kelley Blue Book — the largest automotive vehicle valuation company in the U.S. — which considered Toyota the best brand as per the resale value two months ago, has stated that its resale value is now worth $200 to $500 less per recalled model (a decline of 1%–3%).

Auto research website Edmunds.com estimated resale or trade-in values to fall up to 10% in the short term. Edmunds’ estimate for the trade-in value of a 2009 Toyota Camry has fallen 4%–6% to $13,967 while the 2009 Toyota Corolla has declined 6% to $11,233.

To regain consumer confidence, Toyota has been offering unprecedented discounts including zero-percent financing for five years on top-selling models such as the Camry. It will also offer attractive leasing terms and free maintenance for two years for Toyota loyals. Further, the automaker has apologized to the public in the U.S., Japan and China — its three biggest markets.

Zacks Investment Research

(TM) Toyota Motor May Suspend New Car Launches

Nissan has noticed that the brake-pedal pins in some of its vehicle models have partially engaged, causing a loss of normal breaking ability. The problem is related to a manufacturing error on the part of the supplier. The faulty makes include Nissan Titan, Armada, Quest and Infiniti QX56 of 2008–2010 model years.

Yet another set of models have problems related to fuel gauges that incorrectly indicate the amount of fuel is in the tank. This could cause a vehicle to run out of fuel before the gauge reads empty. This set includes Nissan Titan, Armada and Infiniti QX56 and Nissan Frontier of 2005–2008 model years as well as Pathfinders and Xterras that were produced between January and March 2006 and between October 2007 and January 2008.

However, the Japanese automaker has revealed that the vehicles that are on sale are free of these problems. So far, no injuries or accidents were reported related to the recalls.

Vehicle recalls have become the talk of the town after Toyota Motors’ (TM) recent announcement of largest-ever global recall of 8.5 million vehicles related to problems with accelerator gas pedals and braking systems. The recall included popular models such as the 2010 Prius hybrid and Toyota Camry.

In February, Toyota’s sales fell 9% to 100,027 vehicles in the U.S. However, Nissan Motors lagged Toyota in terms of market share despite clocking the highest sales growth among its Japanese peers in the U.S.

Nissan Motor has reported a 29.4% rise in sales to 70,189 units in February with a market share of 9% (as per Autodata reports) as Versa subcompact sales doubled. Nissan Division sales rose 31.9% for the month, while sales of Infiniti vehicles were 10.7% higher than the year-ago level.

Zacks Investment Research

(TM) Nissan Motor Company Joins Parade of Recalls

According to the Japan Automobile Dealers Association, more than 27,000 units of Prius were sold in February, making it the best-selling model for the 10th straight month. Sales of the Prius have definitely been boosted by its reputation for delivering incomparable mileage as well as by tax breaks and other government incentives.

Last month, Toyota expanded its global recall to 8.5 million vehicles, which included 437,000 units of its popular 2010 Prius hybrid and other hybrids such as the Lexus HS250h sedan (sold in the U.S. and Japan) and the Sai (sold only in Japan).

The 2010 Prius has an overhauled regenerative brake system, through which energy from the wheels is used to recharge the car’s battery. The car also has an antilock brake system. Toyota has found out that the problem with the brake system occurred as the car switched to conventional from regenerative brakes just as the antilock brake system kicks in.

Toyota has since begun offering new software to fix the braking problem on the Prius and two other hybrid models. The company has revealed that most of the fixes are expected to be completed by the end of this month.

In September last year, Toyota made a recall that included the older version of Prius (2004–09 model year) apart from other vehicles such as Toyota Camry (2007–10 model year), Toyota Avalon (2005–10), Toyota Tacoma (2005–10), Toyota Tundra (2007–10) and Lexus (2007–10 ES350 and 2006–10 IS250/350) due to a problem with the accelerator gas pedals.

In January, Toyota decided to suspend sales of 8 models to correct sticking accelerator pedals on specific Toyota Division models that did not include the new 2010 Prius. However, regulators in the U.S. started an investigation into the brakes of the 2010 Prius after drivers complained of being briefly unable to stop their cars on uneven surfaces.

The recurrence of recalls has no doubt blurred the image of Toyota vehicles. Toyota loyalists are now giving second thoughts prior to purchasing their vehicles. In February, Toyota’s sales fell 9% to 100,027 vehicles in the U.S.

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(TM) Toyota Motors’ Prius Still on Top in Japan

Ford Motor Co. (F) ruled among the U.S. automakers, outperforming General Motors for the first time in nearly a decade in terms of sales growth, sales volume and market share. Despite clocking the highest sales growth among its Japanese peers in the U.S., Nissan Motors lagged behind Toyota in terms of market share.

U.S. Automakers

Sales at Ford (including Volvo) advanced 43% to 142,285 vehicles with a staggering 74% rise in fleet sales, as it grabbed customers from the struggling Toyota. According to Autodata Corp., the automaker bagged an 18.2% market share during the month.

Ford’s car sales were up 54%, utilities 39% and trucks 36%. Among the brands, Ford sales rose 46%, Lincoln 19% and Mercury 24%. Meanwhile, Volvo, which is up for sale, clocked a 38% rise in sales to 4,641 vehicles.

General Motors (GM) saw an 11.5% rise in sales to 141,951 vehicles. The improvement was attributable to higher fleet sales (114%), strong new models and Toyota’s woes. The automaker won an 18.1% market share during the month, according to Autodata Corp.

GM’s four existing core brands – Chevrolet, Buick, GMC and Cadillac – witnessed a 32% rise in sales. The company has been phasing out its Pontiac, Saturn and Hummer and has sold Saab.

Sales at Chrysler (including the Chrysler, Dodge and Jeep brands) improved marginally to 84,449 vehicles from 84,050 vehicles in February 2009, as stronger demand for its 10 models was offset by steep declines in others. The automaker achieved a 10.8% market share during the month, reveals Autodata Corp.

Japanese Automakers

Toyota Motors has been hit hard by its recall of 8.5 million vehicles due to faulty accelerator gas pedals, slipping floor mats and defective braking systems. The automaker’s sales fell 9% to 100,027 vehicles in the month. The decline was led by a 20% fall in Toyota’s top-selling Camry sedan. According to Autodata Corp., the automaker’s U.S. market share fell to 12.8%, the lowest since July 2005.

Sales at Honda Motor (HMC) grew 13% to 80,671 vehicles. The company’s flagship division posted a 12% rise in sales to 71,732 vehicles due to a more than 40% spike in Accord sales and the introduction of new Crosstour crossover sedan. The company’s luxury Acura division saw sales gain of 17% to 8,939 vehicles. According to Autodata Corp., the automaker achieved a market share of 10.3% during the month.

Nissan Motor has reported a 29.4% rise in sales to 70,189 units with a market share of 9% (Autodata) as Versa subcompact sales doubled. Nissan Division sales rose 31.9% for the month, while sales of Infiniti vehicles were 10.7% higher than the year-ago level.

Global Automakers Elsewhere

Korean automaker Hyundai Motor Group, which includes both the Hyundai and Kia brands, posted a combined sales gain of 11% to 34,004 vehicles. This was attributable to a 58% increase in the sales of Sonata to 7,506 vehicles and 52% rise in sales of Santa Fe to 7,964 units. Autodata mentioned that the automaker won a share of 4.4% in the U.S. market.

Daimler (DAI) has recorded a marginal 1.4% rise in sales to 15,827 vehicles. Mercedes-Benz sales improved 8.4% to 15,385 vehicles, fueled by impressive sales of the sporty C-Class, the new 9th generation E-Class and compact SUV – the GLK. The smart USA recorded a 60% rise in sales to 442 units in February 2010.

There are enough signs to suggest that the U.S. auto industry is on the path to recovery. However, the pace of economic recovery is unsteady as consumer confidence is yet to be restored to its normal level. In order to lure customers to showrooms, the automakers will probably engage in price wars and will increase the pace of launching new and innovative products. In this respect, Ford has already announced plans to boost its North American output by 32% in the second quarter to 595,000 vehicles.

Zacks Investment Research

($TM) February U.S. Auto Sales Exceed 10 Million

The current 2,300 workers at the Flat Rock plant produced about 102,000 vehicles in 2009. The workers, represented by the United Auto Workers union at the plant, will be offered work at other Ford plants. The rest of the workers will be offered buyouts under the terms of the automaker’s contract with the union.

Nationwide, Ford has around 600 workers on indefinite layoff. Those workers and the ones to be laid off at Flat Rock will have the first opportunity to take jobs at facilities that are hiring.

In fact, most of the laid-off workers are expected to get jobs at other plants. Last month, the automaker announced that it will hire 1,200 workers at its Chicago Assembly Plant to build the new Ford Explorer at the end of this year. The company will also create 1,000 jobs in Michigan to make electric car batteries.

In 1979, Ford acquired a 33.4% stake in Mazda. Post-acquisition, the former began selling the latter’s Familia and Capella as Ford Laser and Telstar. In November 2008, Ford reduced its controlling interest in Mazda to a non-controlling interest of 13.4%.

Zacks Investment Research

($F) Ford Motor to Cut Shifts at Michigan Plant

Open up your web browser and go to Google.

Punch in “that little car in India.”

What you’ll see is a long list of stories about the Nano – a car manufactured by Indian automaker, Tata Motors (NYSE: TTM). When the company first launched it back in 2008, it generated a significant buzz.

That buzz increased to a roar when the car hit the market last year. And it’s easy to see why…

• The ultra-compact car is just 10 feet long and five feet wide – perfect for city-dwellers who need to find tight street parking.
• Because Tata specifically designed the Nano with families in mind, it still has 20% more room than the smallest car on the market and four people can fit in comfortably.
• Despite its small size, the Nano still possesses a four-speed gearbox.
• It squeezes out 50 miles per gallon in the city and 70 mpg on the highway – a boon for both the environment and cash-conscious consumers.
• It retails in India for the equivalent of just $2,500.

American consumers will have to wait another few years before the Nano comes Stateside, as the company makes modifications to the construction and price.

But just because you can’t buy the car at the moment doesn’t means you can’t buy shares of Tata Motors…

Tata Motors’ Vision: Go Small

Like many other publicly traded companies, Tata Motors’ shares fell during 2008 and didn’t stop until the market hits its lows in March 2009.

But with strong support in the high teens/low twenties, investors pounced on the chance to buy back into the stock.

Tata shares hit a high of $18.03 on January 4. And while the stock has shed a few dollars since – a victim of the vacillating markets – it has the potential to turn back towards that high – and perhaps beyond. Here’s why…

Tata’s strategic vision right now is to “go small” – but with cars like its Nano and also it’s business goals.

Not only did the company specifically design the Nano to meet India’s transportation problems, it’s also pushing the bulk of its products at home and in other emerging markets, rather than the developed world.

That means it doesn’t have to worry too much about how the West seesaws back and forth between “stronger economic growth” and a “weaker than expected” performance.

It’s working, too. Third quarter results showed a 5% rise in vehicle sales over the previous quarter and a 67% jump from the corresponding quarter a year earlier. And earlier this month, Tata reported that total sales, including exports, grew 77% in January year-over-year.

CFO C. Ramakrishnan attributed that growth directly to “the underlying Indian economic performance, as well as the result of many other price actions that the company has undertaken in the last year or so.”

And that looks set to continue – particularly within India itself…

Tata Motors Has Home Court Advantage

While the financial media likes to focus most of its emerging market attention on China, India’s consumers may actually have more opportunity to spend their money on discretionary purchases than its Asian neighbors.

While both countries have burgeoning middle class populations, according to BusinessWeek…

“While the nation [India] badly needs infrastructure, its consumers are in a far better position to spend. India can now boast an overwhelmingly independent middle class about 300 million strong, versus China’s 100 million to 200 million, depending on the parameters. Profits from India’s businesses, large and small, go into Indian pockets rather than the state’s.”

Recent figures bear this out, too. Despite many poor roads, Indian car sales jumped by 61% in November and another 40% in December. And as of the last quarter, Tata had close to a 65% share of the commercial vehicle market.

It’s on the prowl for more growth, too, having recently bid $75.8 million for an Indian Army vehicle contract. So before the stock approaches its January high again, now is the time to consider an investment in Tata.

Good investing,

Jeannette Di Louie

View original at: Investment U

(TTM) Tata Motors & The Nano: Why “That Little Car in India” Is Loaded With Big Profits

At the currently running Chicago Auto Show, all types have turned out to get a glimpse of what will grace our boulevards and freeways in the next few years. Clearly one does not need to be a hardcore gear-head to take a strong interest these days; after all, as American taxpayers we ourselves own a large chunk of GM and Chrysler. Their newest designs are on our dime.

This year’s concept cars at the Chicago Auto Show (the second of 11 auto shows held globally this year) seem to reflect this sentiment. Largely foregoing extravagant outer designs — and clearly dumping the gas-guzzling behemoth concept cars from auto shows a few years ago — this year’s auto show features many cars with hybrid engine technology and some with straight-up electric engines. Even GM’s Cadillac XTS Platinum concept is a hybrid V6 at this year’s auto show.

Elsewhere, new auto show models with 40+ miles per gallon are not uncommon, and many designs have taken a decidedly European (read: short-body) turn. In fact, both the new Ford (F) Focus and Fiesta have been developed by Ford of Europe. Hmm…suddenly, Chrysler merging with Fiat sounds a little less crazy…

OK, so what does the Chicago Auto Show mean for investors looking to take advantage of a burgeoning new auto market? Well, if what we’re seeing at this auto show in terms of advanced fuel efficiency does indeed point to the future of the industry, then one of the most promising new releases this year remains GM’s Chevy Volt.

GM Chairman/CEO Ed Whitacre has been quoted as saying the Chevy Volt will create an entire new ecosystem of battery developers, charging stations and electric motor suppliers (“The Truth About Cars“). But only a successful launch of the Chevy Volt late this year will begin to back up such lofty projections.

Besides, GM won’t be publicly traded again until this spring or summer, the earliest. And with GM’s other problems — chiefly the many billions of dollars GM owes to the U.S. Treasury, the UAW and the Canadian government — can one little electric car really turn around GM’s fortunes overnight? Probably not.

So while GM’s issues get sorted out — and speaking of GM’s issues, it’s hard to believe I’ve gone this long without even mentioning Toyota’s (TM) and Honda’s (HMC) recent spates of auto recalls — a good place to turn for investors would be select auto suppliers.

Even though the auto supplier sub-industry has been hit as hard if not harder overall than the major automakers during the sector’s deep downturn, and contains dozens of well-known companies currently awash in pink slips and over-the-counter trading, there is at least one bright spot to consider.

Wisconsin-based Johnson Controls (JCI) is a Zacks #1 Rank stock. Importantly, Johnson Controls’ businesses are diversified beyond the automotive industry, but 42% of Johnson Controls’ total 2009 revenue came from its Automotive Experience segment. An important part of this is Johnson Controls’ hybrid battery business, and Johnson Controls’ recent Delphi global battery acquisition is another big step to grow market share.

Following record-high earnings in its fiscal first quarter, Johnson Controls raised guidance for fiscal 2010 by 16%. 15 analysts covering Johnson Controls stock took notice and raised estimates for Johnson Controls’ current fiscal year; 11 of these raised fiscal second quarter estimates for Johnson Controls.

Zacks Investment Research

(F) Chicago Auto Show: The Future Is Now?

The document is presented to the Oversight and Government Reform Committee, one of three panels holding hearings over the next two weeks on Toyota’s vehicle safety problems. The savings estimate, dated July 6, 2009, was provided in an internal Toyota document used as part of a company presentation on its government relations and was among a bullet-pointed list of “wins.” It was given by Yoshi Inaba, one of Toyota’s top North American executives.

A month after presenting this document, regulators in the U.S. were shaken after finding out a 2009 Lexus ES350 high-speed crash, killing a California Highway Patrol officer and three members of his family near San Diego, was caused by a rubber all-weather floor mat that could have covered the accelerator pedal and stopped its functioning.

The incident prompted Toyota to announce the largest-ever recall of 3.8 million vehicles in the U.S. in September last year. This was followed by several other recalls involving popular vehicles, including the Prius hybrid.

So far, Toyota has recalled 8.5 million vehicles around the world related to problems such as faulty accelerator gas pedals and slipping floor mats as well as faulty braking systems.

The carmaker’s chief executive, Akio Toyoda, is set to testify before the oversight panel on Wednesday. The House Energy and Commerce Committee opens the round of hearings on Tuesday, while a Senate committee will meet on Toyota next week.

Zacks Investment Research

($TM) Toyota Saves $100 Million on Recall

Total sales for the quarter were almost flat year-over-year, declining marginally by 0.3% to $14.6 billion. Total same-store sales grew 1.2%, while comparable same-store sales for U.S. stores declined 1.1%. Sales were primarily driven by gains in kitchen and bath, paint, flooring and plumbing and international business, which were offset by weak market fundamentals.

Gross margin for the quarter expanded 45 basis points (bps) to 34.4% versus 34.0% in the prior-year quarter. The operating margin for the quarter expanded 317 bps to 5.0% from 1.8% in the year-ago period.

The company had cash and short-term investments of $1.4 million and a debt-to-capitalization ratio of 31%.

Concurrent with the earnings release, the Board of Directors declared a 5% increase in the quarterly dividend to 23.6 cents per share. Since 2006, this is the first time the Board has increased the dividend. The dividend is payable on March 25, 2010 to shareholders on record as of March 11, 2010.

Based on the performance in the fourth quarter, management provided an outlook for fiscal 2010. The company expects sales growth and overall comparable store sales growth of 2.5%. For fiscal 2010, the company expects to open 6 new stores. Moreover, Home Depot expects modest expansion in its gross margin for the year, while operating margin is expected to expand by approximately 8%.

Annual earnings from continued operations are expected to increase by approximately 15.5% to $1.79. Capital expenditures are expected at $1.75 billion, while cash flow of approximately $5.4 billion is expected.

Zacks Investment Research

(HMC) Home Depot’s Earnings Report Misses – Raise Dividend

Revenue dipped 20% to €78.9 billion ($110 billion); adjusted for exchange-rate effects, the decrease was 21%. EBIT (earnings before interest and taxes) in the year was minus €1.5 billion ($2.1 billion) compared to plus €2.7 billion ($3.8 billion) in 2008. Daimler expects to post an EBIT of more than €2.3 billion ($3.2 billion) for 2010.

Segment Performance

Mercedes-Benz Cars: This segment sold 1.09 million Mercedes-Benz, Maybach and smart fortwo cars in 2009, a decrease from 1.27 million units sold in 2008, due to a significant weakening of demand. Consequently, revenue fell by 14% to €41.3 billion ($57.6 billion). EBIT was minus €500 million ($698 million) compared to plus €2.1 billion ($3 billion) in 2008. The company anticipates an EBIT of more than €1.5 billion ($2.1 billion) for 2010.

Daimler Trucks: This segment reported a fall in unit sales to 259,300 vehicles from 472,100 vehicles in 2008. The decline in sales covered all the division’s core markets including Europe, the U.S., Latin America and Japan. Revenue in the segment shrank 36% to €18.4 billion ($25.7 billion). EBIT was minus €1 billion ($1.4 billion) compared to plus €1.6 billion ($2.3 billion) in 2008. The company expects an EBIT of €200 million ($279 billion) for 2010.

Mercedes-Benz Vans: This segment sold 165,600 units, significantly lower than the year-ago level of 287,200 units. This has led to a 34% fall in revenue to €6.2 billion ($8.7 billion). Despite the drastic fall in unit sales, the division achieved a positive EBIT of €26 million ($36 million) compared to €818 million ($1.1 billion) in 2008. The company anticipates an EBIT of €250 million ($348 million) for 2010.

Daimler Buses: This segment sold 32,500 buses and bus chassis, a decline from 40,600 units in 2008. The decline in unit sales was attributable to weaker demand in Mexican and Latin American markets. Revenue dipped 12.5% to €4.2 billion ($5.9 billion). Nevertheless, the division achieved an EBIT of €183 million ($255 million) compared to €406 million ($566 million) in 2008. The company expects an EBIT of €180 million ($251 million) for 2010.

Daimler Financial Services: This segment was adversely affected by lower unit sales during the year. The new business fell 15% to €25.1 billion ($35 billion). The weaker new business and the sale of parts of the non-automotive portfolio in North America led to an 8% decrease in worldwide contract volume to €58.3 billion ($81.3 billion). However, the division achieved an EBIT of a meager €9 million ($12.5 million) compared to €677 million ($944 million) in 2008. The company anticipates an EBIT of at least €350 million ($488 million) for 2010.

Financial Position

Daimler had free cash flow of €2.7 billion ($3.8 billion) in 2009 despite the difficult market conditions. This was attributable to the development of inventories and trade receivables as well as the reduction in capital expenditures, which offset the negative effects from the segment’s earnings.

In 2009, capital expenditures were reduced to €2.4 billion ($3.3 billion) from €3.6 billion ($5 billion) in 2008. However, Daimler expects to make a capital expenditure of €8.1 billion ($11.3 billion) in 2010 and 2011 due to the new requirements placed on its products.

Zacks Investment Research

(DAI) Daimler AG Reports it Loses Nearly $4 Billion

According to the website, Toyota is expected to lose more than 1 percentage point of the U.S. market share to hit 16.45% in 2010 due to its global recall of 8.5 million vehicles related to their problem accelerator gas pedals and braking systems. Meanwhile, Ford is expected to achieve 16.57% of the market in the year following General Motors with 18.12% of the market.

Toyota’s recent series of recalls have been highly focused and criticized, eroding the image of the automaker. Its latest recall included highly popular vehicles such as the 2010 Prius hybrid. News has recently leaked that the U.S. regulators are also reviewing dozens of complaints about potential steering problems in new Toyota Corolla vehicles.

Toyota loyalists are now having second thoughts prior to purchasing their vehicles. For years, Toyota has been praised for maintaining both superior quality and high resale value.

In January, Toyota lost more volume than any other automaker in the industry, due to the recall. Sales fell 16% to 98,796 vehicles, which comprised all the recalled models — Camry, Corolla and Avalon cars and the Matrix hatchback, the Tundra pickup, RAV4 crossover and SUVs including Sequoia and Highlander.

It was the first time since February 1998 that Toyota’s monthly U.S. sales fell below 100,000 vehicles. Car sales decreased 10% to 60,634 units while light truck sales slashed 24% to 38,162 units.

Kelley Blue Book — the largest automotive vehicle valuation company in the U.S., which considered Toyota as the best brand for resale value two months ago — has stated that resale value is now worth $200 to $500 less per recalled models (a decline of 1%–3%).

The Edmunds.com estimated resale or trade-in values of Toyota vehicles to fall up to 10% in the short term. Edmunds’ estimate for the trade-in value of a 2009 Toyota Camry has fallen by 4%–6% to $13,967 while the 2009 Toyota Corolla has declined 6% to $11,233.

On the other hand, Ford steered ahead by posting a sales gain of 26.4% to 116,534 units in January. The automaker bagged a 16% market share during the month, up from 14% in January 2009.

Ford’s car sales rose 43%, crossovers 20%, SUVs 8% and trucks and vans 14%. Sales of Ford, Lincoln and Mercury branded cars rose 24.1% to 112,406 vehicles. Despite being up for sale, Volvo clocked a 41.9% rise in sales to 4,128 vehicles.

The company, which was on the verge of a bankruptcy in the middle of 2009, has turned in a profit of $8 million (excluding special items) in the year, driven by favorable net pricing, structural cost reductions, net gains on debt reduction actions and strong Ford Credit results. In fact, this was the company’s first annual profit since 2005.

Zacks Investment Research

(F) Ford Motor Passing Toyota Motor in U.S. Market

In late 2008, the Daimler Truck division bought a 10% stake in the leading truck company of Russia (with a market share of about 30%) for $300 million. The acquisition was part of a strategic cooperation agreement that brought together Daimler, Kamaz and the two of latter’s shareholders — the state-owned conglomerate Russian Technologies (includes aircraft, defense and car manufacturing holdings) and Moscow-based investment bank Troika Dialog.

The cooperation with Kamaz was a part of Daimler’s growth strategy by entering the Russian market as well as the BRIC (Brazil, Russia, India and China) countries. It was also aimed at mutually beneficial cooperation in the sphere of technology transfers and a series of joint projects.

In November last year, Daimler and Kamaz signed agreements to establish two 50/50 joint ventures — Fuso Kamaz Trucks Rus and Mercedes-Benz Trucks Vostok. The Fuso Kamaz Trucks Rus will produce and sell the light-duty Fuso Canter trucks by Daimler in Asia in the first quarter of 2010, while the Mercedes-Benz Trucks Vostok will market the heavy-duty trucks, including Mercedes-Benz Actros and Axor, in Russia in 2010.

Zacks Investment Research

(DAI) Daimler AG to Raise Stake in OAO Kamaz

The recall — about 952,000 vehicles in total — includes 2001 and 2002 year models of Accord, Civic, Odyssey, CR-V, Pilot, Acura TL and Acura CL vehicles in the U.S., as well as the Inspire, Saber and Lagreat models in Japan. All the vehicles are manufactured at Honda’s U.S. and Canadian plants.

Honda originally announced the recall in November 2008, involving 4,200 vehicles of 2001 Accord and Civic sedans in the U.S. The recall was expanded in July 2009 to 514,200 vehicles globally, including the 2001 and 2002 Accord and Civic as well as 2002 Acura TL sedans.

Honda officials stated that the air bag inflator deploys with too much pressure, causing the inflator to rupture and injure or kill the driver. The company has noticed 12 incidents in the U.S., including 11 injuries and one death, and no accidents elsewhere linked to the problem until July 2009.

The airbags are manufactured by the U.S. unit of Japan’s Takata Corp, which was not aware of any defect in their airbags supplied to other automakers. An ongoing investigation has revealed that the defect was caused by insufficient stamping pressure during the production of the inflator propellant and not by the propellant’s excessive moisture intake, as previously believed.

Automotive safety recalls are regular issues with major automakers. Last month, Honda announced a global recall of about 646,000 cars for a fault with a window switch. Last year, Ford Motor (F) completed a series of recalls affecting 14 million vehicles due to a faulty cruise control deactivation switch. However, the recent recalls have been highly focused, denting the image of automakers like Toyota.

Recently, Toyota has expanded its global recall to 437,000 units (223,000 units in Japan, 156,000 in the U.S., 53,000 in Japan and 5,000 in other nations) of its popular 2010 Prius hybrid and other hybrids such as the Lexus HS250h sedan, sold in the U.S. and Japan, and the Sai, sold only in Japan. The recall addressed a problem related to braking system.

The latest recall of Toyota comes on top of a global recall of 8.1 million vehicles related to faulty accelerator gas pedals and slipping floor mats. About 4.45 million vehicles (2.21 million units in the U.S., 270,000 in Canada, 1.71 million in Europe, 75,552 in China and 180,000 in other nations) have been recalled for faulty gas pedals and 5.75 million vehicles (5.35 million units in the U.S. and 400,000 in Canada) for slipping floor mats. Of this, about 2.1 million vehicles have both pedal and floor mat related problems.

U.S. regulators are reportedly also reviewing dozens of complaints about potential steering problems in new Toyota Corolla vehicles, and the National Highway Traffic Safety Administration (NHTSA) is discussing the matter with Toyota to see if a formal investigation is warranted.

Zacks Investment Research

(TM) Honda Motor Company Joins Recall Parade

Revenue in the quarter rose 10% to ¥1.9962 trillion ($21.33 billion). Operating profit was ¥134.1 billion ($1.43 billion) compared to an operating loss of ¥99.2 billion ($960 million). The operating profit margin stood at 6.7%.

Globally, Nissan sold 882,000 vehicles in the quarter, a 20.6% increase over the same period in fiscal year 2008. In January, Nissan was the only automaker among its Japanese peers to post a sales gain of 16.1% to 62,572 vehicles. This was attributable to the automaker’s boost to incentive spending by 14% to $2,455 in January. Sales at Nissan Division rose 19.4% to 55,861 units, while sales of Infiniti vehicles declined 5.7% to 6,711 units during the month.

Nissan has upgraded its outlook for fiscal 2009 ended March 31, 2010, based on improved market conditions. The automaker expects to generate revenues of ¥7.4 trillion ($80.43 billion) compared to ¥7 trillion ($77.78 billion) in its previous forecast. Operating profit is expected to be ¥290 billion ($3.15 billion), an improvement from ¥120 billion ($1.33 billion) in the previous forecast.

Nissan anticipates an income of ¥35 billion ($380 million) for fiscal 2009, in stark contrast to a previous projection of a loss of ¥40 billion ($440 million). The Zacks Consensus Estimate for fiscal 2009 is a profit of 51 cents per share.

Zacks Investment Research

(NSANY) Nissan Motors Results Improve

In September last year, Toyota recalled the largest-ever U.S. batch of 3.8 million vehicles, triggered by a high-speed crash in August involving a 2009 Lexus ES350 that killed a California Highway Patrol officer and three members of his family near San Diego. Investigators with the National Highway Traffic Safety Administration have found out a rubber all-weather floor mat in the wreckage that was slightly longer than the mat and could have covered the accelerator pedal.

The September recall included the older version of Prius (2004-09) as well as the Toyota Camry (2007–10 model year), Toyota Avalon (2005–10), Toyota Tacoma (2005–10), Toyota Tundra (2007–10) and Lexus (2007–10 ES350 and 2006–10 IS250/350).

In January, Toyota decided to suspend sales of 8 models involved in another round of recalls of 2.3 million vehicles to correct sticking accelerator pedals on specific Toyota models that did not include the new 2010 Prius.

However, regulators in the U.S. started an investigation into the brakes of the 2010 Prius last week after drivers complained of being briefly unable to stop their cars on uneven surfaces. The Japanese government affirmed stating that it has received similar complaints about the braking system in Prius in Japan as well.

The 2010 Prius has an overhauled regenerative brake system, through which energy from the wheels is used to help recharge the car’s battery. The car also has an antilock brake system. Toyota has found out that the problem with the brake system occurred as the car switched to conventional from regenerative brakes just as the antilock brake system kicks in.

Toyota sold about 311,000 units of 2010 Prius, including 103,000 units in the U.S. and 176,000 in Japan, as of December 2009. According to Bloomberg, the automaker plans to recall about 270,000 units of the model in Japan and the U.S. to repair braking systems.

The recurrence of recalls has no doubt blurred the image of Toyota vehicles. The Toyota loyalists are now giving second thoughts prior to purchasing their vehicles. For years, Toyota has been praised for both maintaining superior quality and high resale value.

In January, Toyota lost more volume than any other auto group in the industry, driven by the recall. Sales fell 16% to 98,796 vehicles, which comprised all the recalled models such as Camry, Corolla and Avalon cars and the Matrix hatchback, the Tundra pickup, RAV4 crossover and SUVs including Sequoia and Highlander.

It was the first time since February 1998 that Toyota’s monthly U.S. sales fell below 100,000 vehicles. Car sales decreased 10% to 60,634 units while light truck sales slashed 24% to 38,162 units.

Kelley Blue Book — the largest automotive vehicle valuation company in the U.S. — which considered Toyota as the best brand for resale value two months ago, has stated that resale value are now worth $200 to $500 less per recalled models (a decline of 1%–3%). The auto research website Edmunds.com estimated resale or trade-in values to fall up to 10% in the short term. Edmunds’ estimate for the trade-in value of a 2009 Toyota Camry has fallen by 4%–6% to $13,967 while the 2009 Toyota Corolla has declined 6% to $11,233.

Zacks Investment Research

(TM) Toyota Motor’s Prius Faces Recall

Company Description

Ford Motor Company designs, manufactures and services cars and trucks worldwide. The company was founded in 1903 and has a market cap of $37 billion.

Ford continued its upward ascent from the brink of financial collapse with excellent Q4 and full-year results on Jan 28 that saw the company swing back to profitability for the first time since 2005.

Q4 and Full-Year Results

For the quarter, sales were up 22% from last year to $35.4 billion. Earnings also came in strong at 43 cents, 79% ahead of the Zacks Consensus Estimate. For the full year, net income totaled $2.7 billion, or 86 cents per share, up from a loss of $14.8 billion, or $6.50 per share, last year.

Ford noted that its results were helped by its commitment to controlling costs, with Q4 down $500 million from last year and full-year costs down $5.1 billion, far ahead of the company’s $4 billion goal.

Balance Sheet Improving

Ford’s balance sheet is also on the mend, with cash and equivalents up more than $10 billion to $34.3 billion against debt of $34.3 billion.

January Sales

Adding to the chorus of optimism was Ford’s January sales numbers, showing an impressive 25% gain on the heels of Toyota’s recent problems with recalls.

Estimates

Estimates have been on the upswing for most of the last few months, but popped higher on the good quarter and January sales results. The current year is up 25 cents in just the last week while the next-year estimate has added 21 cents in the same time to $1.38, a bullish 72% growth projection.

Valuation

In spite of recent gains and growing enthusiasm, shares of Ford still have value, trading with a forward P/E multiple of 13X, a discount to the overall market.

The Chart

Ford has jumped back to within striking distance of its 52-week high on the good quarter after a recent pull back. Take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service.

Zacks Investment Research

(F) Ford Motor Company – Balance Sheet Improving – Sales Were up 22% From Last Year

Consolidated net sales and other operating revenue in the quarter rose 11.5% to ¥2.2 trillion ($24.3 billion). This was attributable to unfavorable currency translation effects and decreased sales in the automobile business.

Segment Performance

Honda Automobile segment sales slipped 2.8% to 914,000 units. In Japan, sales increased 31.1% to 177,000 units due to favorable sales of Insight, Fit and Step WGN models, along with tax breaks and subsidies for fuel-efficient vehicles. Outside of Japan, sales dipped 8.4% to 737,000 units due to decreased unit sales in North America and Europe, more than offsetting increased unit sales in Asia, especially in China and India.

Revenue from sales to external customers decreased 11.4% to ¥1.75 trillion ($19 billion) due to decreased unit sales and unfavorable currency translation effects. Operating income increased 56.5% to ¥110.4 billion ($1.2 billion) from the same period last year.

The Honda Motorcycle segment sales fell 5% to 2.4 million units. In Japan, sales decreased 22.7% to 34,000 units, while outside Japan it dropped 4.7% to 2.3 million units. Revenue from sales to external customers decreased 20.2% to ¥273.4 billion ($3 billion) from due to decreased unit sales and unfavorable currency translation effects. Operating income decreased 37.2% to ¥15.8 billion ($172 million) from the same period last year.

Revenue from sales to external customers in the Financial Services segment increased 5.8% to ¥151 billion ($1.6 billion) from the same period in 2008. Operating income increased 465.1% to ¥53.6 billion ($583 million) from the same period in 2008, due to decreased allowance for losses on credit and lease residual values and a decrease in funding costs.

Honda Power Product and Other segment sales declined 11.4% to 988,000 units. In Japan, sales fell 32.7% to 74,000 units. Outside Japan, sales dipped 9.1% to 914,000 units due to decreased unit sales in North America and Europe, more than offsetting increased unit sales in Asia. Revenue from sales to external customers in the segment decreased 9.1% to ¥66.7 billion ($724 million) from the same period last year due to lower unit sales of power products. The segment witnessed an operating loss of ¥2.9 billion ($32 million) in the quarter.

Financial Position

Consolidated cash and cash equivalents at December 31, 2009, increased ¥375 billion ($4.1 billion) from March 31, 2009 to ¥1.1 trillion ($11.6 billion). Long-term debt amounted to ¥3.1 trillion ($34 billion) as of that date. The long-term debt-to-capitalization ratio reduced drastically to 43% from 80% in the second quarter of the fiscal year.

In the first nine months of fiscal 2010 ended December 31, 2009, net cash flow from operating activities amounted to ¥1.2 trillion ($13.1 billion). Meanwhile, capital expenditures totaled ¥296 billion ($3.2 billion) during the same period.

Guidance Raised

For fiscal 2010 ending March 31, 2010, Honda projected a 14.8% decline (previously 15.6%) in net sales and other operating revenue to ¥8.53 trillion (previously ¥8.45 trillion) or $93 billion. Unit sales are expected to fall 117,000 vehicles to 3.4 million vehicles in the Automobile segment; 599,000 motorcycles to 9.5 million motorcycles in the Motorcycle segment; and 637,000 components to 4.5 million components in the Power Product and Other segment.

However, profit is expected to rise 93.4% (previously 13%) to ¥265 billion (previously ¥155 billion) or $3 billion. This is equivalent to earnings per share of ¥146.04 (previously ¥85.42) or $1.59.

Zacks Investment Research

(HMC) Honda Motor’s Profits Jump to $1.5 Billion

U.S. Automakers

Sales at Ford advanced 26.4% to 116,534 units with a staggering 154% rise in fleet sales. The automaker bagged a 16% market share during the month, up from 14% in January 2009.

Ford’s car sales rose 43%, crossovers 20%, SUVs 8% and trucks and vans 14%. Sales of Ford, Lincoln and Mercury branded cars rose 24.1% to 112,406 vehicles. Meanwhile, Volvo, which is up for sale, clocked a 41.9% rise in sales to 4,128 vehicles.

General Motors (“GM”) saw a 14% rise in sales to 146,825 vehicles after reporting year-over-year declines for several months in 2009. The improvement was driven by higher fleet sales (225%) and strong sales of compact crossovers — Chevrolet Equinox and GMC Terrain.

GM’s four existing core brands — Chevrolet, Buick, GMC and Cadillac — witnessed a 31% rise in sales. The company’s discontinued brands — Saturn, Hummer, Pontiac and Saab — lost 90% of volume during the month.

Sales at Chrysler sank 8% to 57,143 vehicles. This was driven by declining sales of Ram trucks and Jeeps on the back of a $1,230 cut in incentive spending to $3,061 per vehicle.

Japanese Automakers

Among the Japanese automakers, Nissan Motor was the only one to post a sales gain of 16.1% to 62,572 vehicles. This was attributable to the automaker’s boost of incentive spending by 14% to $2,455 in January. Sales at Nissan Division rose 19.4% to 55,861 units, while sales of Infiniti vehicles declined 5.7% to 6,711 units during the month.

Toyota Motors (TM) has been hit hard by its recall of 8 popular models due to faulty gas pedals, which has affected 2.3 million cars and trucks in the U.S. In fact, the automaker lost more volume than any other auto group in the industry.

Toyota’s sales fell 16% to 98,796 vehicles, which comprised all the recalled models such as Camry, Corolla and Avalon cars and the Matrix hatchback, the Tundra pickup, RAV4 crossover and SUVs including Sequoia and Highlander. It was the first time since February 1998 that Toyota’s monthly U.S. sales fell below 100,000 vehicles. Car sales decreased 10% to 60,634 units while light truck sales slashed 24% to 38,162 units.

Sales at Honda Motor (HMC) slipped 5% to 67,479 vehicles as weak truck sales offset an overall improvement in the sale of cars. The automaker’s car sales rose 2.7% to 41,638 vehicles while truck sales declined 15.3% to 25,841 units from the year-ago level.

Global Automakers Elsewhere

Korean automaker Hyundai Motor Group, which includes both the Hyundai and Kia brands, posted a combined sales gain of 24% to 30,503 units. Among its 10 U.S. car models, sales of Accent, Elantra, Santa Fe, Tucson and Genesis reported sales gain during the month.

Daimler (DAI) recorded an impressive 26.4% rise in sales to 15,436 vehicles fueled by a strong demand in both the Mercedes sedan and light-truck categories. Mercedes-Benz sales shot up 45.3% to 15,158 units. However, smart fortwo micro-car sales plummeted 84.3% to 278 units.

Barring the performance of Toyota, there are enough signs to suggest that U.S. auto industry is in the path to recovery. Automakers are now optimistic and will probably try to start the year afresh with new and innovative product launches. Recently, GM has raised its U.S. industry sales outlook to 11.5 million–12 million vehicles for 2010 from 11 million–12 million vehicles predicted last month.

Zacks Investment Research

(F) Fleet Sales Drive Autos in January

At some point in the past week, investors became concerned the Toyota Motor (TM) sudden acceleration recall was perhaps about to impact CTS Corp. (CTS). The shares, which traded as high as $10.36 in early January, traded down to $7.68 as of yesterday’s close.

CTS issued two press releases and spent a great deal of time on its quarterly conference call trying to ease investors’ concerns.

Specifically, CTS stated that since the problem of sudden unintended acceleration has been reported to have existed in some Lexus vehicles and Toyota vehicles going back to 1999 when CTS did not even make this product for any customer. CTS believes that the rare slow return pedal phenomenon, which may occur in extreme environmental conditions, should absolutely not be linked with any sudden unintended acceleration incidents.

Further, the firm went on to say it is not aware of any accidents and injuries caused by the rare slow return pedal condition, to the best of its knowledge.

Management pointed out it does not, and has never made, any accelerator pedals for Lexus vehicles and that CTS also has no accelerator pedals in Toyota vehicles prior to model year 2005.

Our View

CTS remains well positioned to achieve solid revenue growth and operating leverage as end markets turn around in the long run, given the company’s competitive advantage led by innovation and laser-like focus on expense management. The slower-growing EMS segment has been exceptionally diversified since 2004 and is a complement to the faster-growing Sensors and Actuators and Electronic Components business.

Zacks Investment Research

(TM) Buy Into CTS Corporation Post-Selloff?

Toyota has noticed sticking accelerator pedal mechanisms in certain vehicles without the presence of floor mats. The models affected in the sales suspension were RAV4 crossover (2009-2010), Corolla (2009-2010), Matrix (2009-2010), Avalon (2005-2010), Camry (2007-2010), Highlander (2010), Tundra (2007-2010) and Sequoia (2008-2010).

Toyota plans to stop producing the vehicles for the week of February 1 to assess and coordinate activities. The plants affected are Toyota Motor Manufacturing, Canada (Corolla, Matrix, and RAV4), Toyota Motor Manufacturing, Indiana (Sequoia and Highlander), Subaru of Indiana Automotive, Inc. (Camry) Toyota Motor Manufacturing, Kentucky – Line 1 (Camry and Avalon) and Toyota Motor Manufacturing, Texas (Tundra).

In September last year, Toyota recalled the largest ever U.S. batch of 3.8 million vehicles, triggered by a high-speed crash in August involving a 2009 Lexus ES350 that killed a California Highway Patrol officer and three members of his family near San Diego. Investigators with the National Highway Traffic Safety Administration have found out a rubber all-weather floor mat in the wreckage that was slightly longer than the mat and could have covered the accelerator pedal.

The U.S. recall involved vehicles such as the Toyota Camry (2007–10 model year) – the top-selling passenger car in the U.S., and the Toyota Prius (2004–09) – the best-selling gas-electric hybrid, apart from Toyota Avalon (2005–10), Toyota Tacoma (2005–10), Toyota Tundra (2007–10) and Lexus (2007–10 ES350 and 2006–10 IS250/350).

To fix the problem, Toyota has instructed dealers to shorten the length of the gas pedals as a temporary measure beginning in January next year. Meanwhile, the company will develop replacement pedals for its vehicles.

The new replacement pedals are expected to be available for some models beginning in April 2010 and will be provided even if the vehicles have already received a modified pedal under the recall. Some vehicles will have brake override systems, called a “smart brake,” installed as a precaution that will ensure that the vehicle will stop even if both the brake and the accelerator pedals are applied simultaneously.

Zacks Investment Research

(TM) Toyota Motors Suspends Sales for Recall

In the fourth quarter of the year, Ford posted a profit of $1.6 billion or 43 cents per share (excluding special items), compared to a loss of $3.3 billion or $1.40 per share a year ago. The profit was significantly higher than the Zacks Consensus Estimate of 24 cents per share.

Revenue in the fourth quarter revenue went up 22% to $35.4 billion. However, revenue declined 11% to $118.3 billion in 2009.

Ford Automotive

In the fourth quarter, Ford Automotive recorded a pre-tax operating profit of $1.1 billion compared to a loss of $3.3 billion a year ago. The improvement reflected favorable net pricing, higher volume and mix, lower material costs and structural cost reductions, offset partially by unfavorable exchange rates. In 2009, the pre-tax operating loss reduced to $1.4 billion from $6.4 billion in 2008.

Revenue in the fourth quarter rose 29% to $32.6 billion. The increase was attributable to higher volumes and favorable net pricing. In 2009, revenue was $106 billion, a decline of 13% from 2008.

In North America, revenue went up 40% to $15.8 billion. The region showed a pre-tax operating profit of $707 million compared to a loss of $1.9 billion a year ago. The improvement was attributable to higher volume and mix, favorable net pricing and lower material costs, offset partially by unfavorable exchange rates.

In South America, revenue shot up 53% to $2.1 billion. Pre-tax operating profit in the region was $369 million compared to $105 million a year ago. The increase was due to favorable net pricing and higher volume and mix, offset partially by unfavorable exchange rates.

In Europe, revenue increased 14% to $8.7 billion. Pre-tax operating profit was $305 million compared to a loss of $338 million a year ago. The improvement was attributable to lower material costs, higher volumes, favorable net pricing and structural cost reductions, offset partially by an unfavorable product mix.

In Asia-Pacific & Africa, revenue dipped 14% to $1.6 billion. Pre-tax operating profit was $19 million compared to a loss of $208 million a year ago. The improvement reflected favorable net pricing, joint venture profits in China and structural cost reductions.

Despite being up for sale, Ford’s Volvo unit reported a 18% rise in revenue to $3.9 billion. The unit showed pre-tax operating loss of $32 million compared to a loss of $736 million a year ago. The improvement was attributable to structural cost reductions, higher volume and mix, favorable net pricing and lower material costs, offset partially by unfavorable exchange.

Ford’s Other Automotive — consisting primarily of interest and financing-related costs — depicted a pre-tax loss of $298 million in the quarter.

Automotive Structural Cost Reduction

Ford reduced its Automotive structural costs by $500 million in the fourth quarter. In 2009, Ford achieved $5.1 billion in Automotive structural cost reductions, exceeding its full-year target of about $4 billion, reflecting lower manufacturing and engineering costs, a reduction in pension and retiree health care expenses, and lower advertising and sales costs as Ford completed major restructuring actions.

Financial Services

The Financial Services sector reported a pre-tax operating profit of $683 million, compared to a loss of $384 million a year ago. Ford Credit reported a pre-tax operating profit of $696 million, compared with a loss of $372 million a year ago. The increase reflected lower residual losses due to higher auction values and lower provisions for credit losses, offset partially by lower volumes.

Financial Position

Ford had cash and cash equivalents of $10.3 billion as on December 31, 2009. Automotive gross cash was $25.5 billion in 2009. The company had Automotive operating-related cash outflow of $300 million in the year, an improvement of $19.2 billion from year-ago level. Capital expenditures were $4.5 billion in the year.

Looking Ahead

Ford expects full-year industry sales in the U.S. to be in the range of 11.5 million units to 12.5 million units, including medium and heavy trucks. For the 19 markets in Europe that Ford tracks, full-year industry sales is expected in the range of 13.5 million units to 14.5 million units, including medium and heavy trucks. Capital spending is expected in the range of $4.5 billion to $5 billion as the company continues to focus on its product plan.

Although we are duly impressed by Ford’s overwhelming results, we cannot ignore its exposure to high costs due to incentives and product launches as well as risks emanating from labor contract negotiations. This has led us to keep our Neutral recommendation for the stock.

Zacks Investment Research

(F) Ford Reports First Yearly Profit Since 2005

This report is one where digging through the details is especially important, and just going with the headline total number can be highly misleading. Total new orders for durable goods rose by 0.3% in December, only partially reversing a 0.4% decline in November and a 0.1% decline in October.

The increase was also far short of the 2.0% rise that was expected. However, most of the miss was due to the always volatile non-defense aircraft segment. A few orders for 777s from Boeing can really make the overall numbers swing. Non-defense aircraft orders plunged 38.2%, and that comes on top of a 40.0% drop in November. However in October they rose 47.8%. Did I mention that that segment of durable goods orders are volatile?

All is not lost for the Aerospace industry, though, since defense aircraft orders rose by 14.7%, but that comes on top of back-to-back declines of 10.4% and 6.5% in November and October, respectively. New orders excluding transportation rose by 0.9% on top of a 2.1% increase in November, and were well above the 0.5% increase expected. New orders excluding defense were up 0.3%, the third straight rise.

Perhaps the most important of the “deep in the seeds” numbers in this report is non-defense capital goods orders, excluding aircraft, also known as core capital goods orders. That is a very good measure of how much companies are investing in equipment and software, which are two of the direct inputs into GDP. These rose by 1.3% following a 3.1% rise in November.

In another optimistic sign, orders for motor vehicles rose by 3.6% — the third increase in a row — and a big acceleration from the 0.7% rise in November. Unfortunately, the report does not break out how much of that is coming from automakers like Ford (F) and how much is coming from heavy trucks makers like Paccar (PCAR).

Year-Over-Year Numbers

The December report also provides the full-year differences in new orders for all of 2009 relative to 2008, and reminds us of just how nasty this downturn has been (and remember that 2008 was not exactly a banner year). Total new orders were down 20.2%, excluding transportation orders were down 17.7%, and excluding Defense orders were down 21.4%.

The non-defense aircraft industry saw a stunning 51.6% full-year decline. That area not only includes jumbo jets from Boeing (BA), but also light aircraft from places like Textron’s (TXT) Cessna division.

Many businesses have decided the impression that buying a new corporate jet gives is not that great when so many people are hurting. Total non-defense capital goods orders were down 24.6% for the year, and even with aircraft excluded they are down 18.4%.

If there is a bright spot, it is defense capital goods orders, which are down just 3.3% — but keep in mind this is in the context of two ongoing wars. Those are also orders that come from the Federal government and add to the deficit. While they might be needed from a National Defense point of view, they are not really all that good for the economy in the long run.

Still, despite the depths of the hole we are in, on balance we are working our way out of it, but at a very slow pace. As the graph below shows, both total new orders and core capital goods orders are still well below year-ago levels, the the rate of decline has slowed significantly.

The continuing decline in Aircraft orders is probably not good for areas of the country like Seattle that are centers for the aerospace industry. There is some comfort even there as full-year defense aircraft is just about the only area to show a gain. The pickup in core capital goods indicates that businesses are a little bit more willing to invest in their businesses overall. Perhaps soon they will start to invest in hiring people to run the tools they have started to buy again.

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service.

Zacks Investment Research

(F) New Orders for Durable Goods Orders Rise a Bit

In December last year, Ford has announced that it will restore some benefits to white-collar workers, which include merit raises. In the third quarter, the automaker restored tuition reimbursement and 401-K retirement savings plan for employees, both of which had been withdrawn when the company was in the midst of a financial crisis.

An increasing tension between Ford and the UAW members came to the fore when some members of the union declined to ratify the modifications to their 2007 labor contract. Gary Walkowicz, a member of the bargaining committee at the Dearborn Truck Plant in Michigan, and six other plant leaders had signed a letter to employees urging them to vote against the agreement as it would require too many concessions and would limit the workers’ right to strike.

In November, Ford workers had again voted down a concessions contract negotiated by Vice President Bob King by a margin of 70%. It was the first rejection of a national auto contract recommended by the UAW since 1982 and at Ford since 1976.

UAW has stated that 70% of its membership in production and 75% in skilled trades voted against the agreement. The opposing members belonged to three of Ford’s largest plants in the U.S. – the Dearborn Truck Plant, Romeo Engine Plant and UAW Local 862 representing the Louisville Assembly Plant and the Kentucky Truck Plant.

Zacks Investment Research

($F) Ford-United Auto Workers Dispute Continues

In a year that saw two of America’s biggest companies – and the heart and soul of Detroit’s auto industry – tumble into bankruptcy, one firm stood out.

While General Motors and Chrysler unashamedly begged for the government’s help before filing their Chapter 11s, Ford Motor Co. (NYSE: F) stood out, first by relying largely on its own resources (not American taxpayers’) and also by remaining out of bankruptcy court.

And while critics can cite a number of failures and recalls to justify their negative opinions, Ford CEO Alan Mulally believes his company can succeed. At the Detroit Motor Show last week, he confidently reminded one concerned audience member that:

“World-class companies profitably grow. They go through cycles, but they profitably grow for the long term. We have turned the corner. We have increased market share. We have a product line that we continued to invest in during the worst of times. And now we’re going to serve all those customers around the world. We are going to globalize our products, increase the quality and the productivity every year forever.”

I’m not as convinced as Mr. Mulally about his company “turning the corner” just yet – not with continuing problems in North America and Europe.

Western World Obstacles

With both the American and European economies still hurting and high unemployment putting the brakes on consumer spending, Ford shouldn’t expect great results.

Many Americans already bought new cars last year, taking advantage of the government’s “cash for clunkers” program. This promised $4,500 for anybody who traded in their old cars for more fuel-efficient vehicles.

And while that certainly boosted auto sales, it was a temporary stimulant that resulted in a glut of new car buying, rather than naturally over time.

Europe faces a similar problem this year, as its economic stimulus projects are winding down, too. The Wall Street Journal summed it up last week when it reported that, “Auto makers are bracing for a brutal 2010 in Europe, as economic troubles and the end of government scrappage programs threaten to drag down sales.”

Fortunately, Ford has a long term to answer those problems… which is why I expect the firm to enjoy some good fortune over the long-term…

Ford Focusing on Asian Expansion

Like many other companies, Ford is focusing more efforts on Asia in hopes of capitalizing on higher growth there.

And according to Financial Times, Ford has already invested $500 million into expanding its business in India, with the target of creating 250,000 engines and 200,000 cars.

The firm has a range of economical small and mid-sized cars it intends to push especially hard in China and India in the next few years. This marks a different direction for Ford, which has struggled to compete in Asia, in part because the vast majority of consumers buy their cars for $7,500 or less. But now, Mulally is stepping up the company’s game to create the Figo, a smaller vehicle built off of the Festiva platform, which will sell for under $8,000.

Meanwhile, the company is already working on a new plant in China, which is scheduled to open in 2012.

Ford’s Electric Shift

In all, Mulally promises as many as 10 brand new Ford models by 2012.

And having been criticized (along with others) for focusing too strongly on SUVs, Ford is shifting its strategy by offering consumers more fuel-efficient options.

The 2011 Ford Focus compact sedan and hatchback won votes for the Detroit Motor Show’s best green car. And Mulally has already said the firm will hire 1,000 people to work specifically on electric cars.

But in order for this initiative to truly take off and be profitable, the next step is to offer better resources – like plug-in stations in cities and parking lots. And that’s not something that Ford can do all by itself.

That said, Ford made it through the last century on innovation and understanding consumer trends. And it’s well-placed to do so again, which makes the stock a solid long-term buy right now.

Good investing,

Jeannette Di Louie

View original at: Investment U

($F) Built Ford Tough – Why This Resilient Automaker Is a Good Long-Term Buy

Ford returned to profitability in the third quarter of the year by posting a net income of $873 million or 26 cents per share, easily clearing the Zacks Consensus Estimate loss of 15 cents per share as well as the year-ago loss of 6 cents per share.

This was, in fact, Ford’s first operating profit since the first quarter of 2008. The company, which was on the verge of bankruptcy in the middle of the year, accredited its rebound to an improved product line, inviolable structural cost reduction efforts and improved results at Ford Credit.

Although revenue was down 2.5% to $30.9 billion, Ford’s Automotive revenue rose $100 million to $27.9 billion from the year-ago level. This was attributable to favorable net pricing and higher volumes, primarily in North America, offset partially by an unfavorable exchange. Total wholesale vehicles advanced 5% to 1,232,000 units.

Ford’s Automotive gross cash increased to $23.8 billion at the quarter-end from $21 billion at the end of the last quarter. Automotive operating-related cash flow improved by $2.3 billion to $1.3 billion compared to the prior quarter.

Ford was able to reduce its Automotive structural costs by $1 billion during the quarter, thanks to lower manufacturing and engineering costs that included benefits from improved productivity, personnel reduction actions (primarily in North America and Europe), and progress on implementing its common global platforms and product development processes. The company expects to achieve Automotive structural cost reduction of $5 billion for 2009.

December proved to be Ford’s best month since May 2008, with a sales gain of 33% to 184,655 cars and trucks. This was attributable to a surge in sales to corporate customers and a huge customer enthusiasm received for vehicles including the redesigned Taurus, Fusion and Escape.

Zacks Investment Research

(F) Ford Motor Company’s Rating Upgraded by Fitch Ratings

With so much focus on saving the earth’s resources these days, scientists have proposed one alternative after another to take the place of polluting gas turbines, power plants, gasoline engines and standard batteries… and they might have finally found a viable solution in fuel cell technology.

According to HowStuffWorks.com: “Combustion engines like the turbine and the gasoline engine burn fuels and use the pressure created by the expansion of the gases to do mechanical work. Batteries convert chemical energy back into electrical energy when needed.”

However, the site goes on to explain: “Fuel cells should do both tasks more efficiently… [providing] a DC (direct current) voltage that can be used to power motors, lights or any number of electrical appliances.”

Though the technology still has to prove itself in the larger consumer market, businesses have already jumped on the fuel cell bandwagon, pouring significant amounts of money into researching the best ways to utilize it.

That kind of backing – along with enthusiastic endorsements from the media – has created a tantalizingly hot market for investors to delve into.

Fuel Cells Generate Excitement From Asia To The U.S.

Of all the areas of the world actually working to develop fuel cells, Asia easily stands out the most. More than one of its nations has expressed a desire to increase renewable energy dependence by 8% – 20%, and they are literally banking on the new technology working.

So while Asia only spent an estimated $1 million on the technology in 2008, analysts expect the continental region to spend twelve times as much by 2015.

As Asian academics experiment with buildings, treatment plants and automobiles that run off of fuel cells, U.S. companies happily provide the funding. General Motors and Honda Motor Co. ADR (NYSE: HMC) are among the bigger names investing in the trend, and both of them expect to launch cars exploiting the technology just as soon as they can.

Meanwhile, CONSISTEL, the joint venture between Intel Capital and JAFCO Asia, won a contract to supply hydrogen fuel cells to PT Telkomsel, Indonesia’s leading operator of cellular telecommunications services.

Judging by the number of interested parties so far, fuel cells have a very bright future.

A Responsible And Profitable Alternative

Like all new technologies, fuel cells have their share of pitfalls, including how developers still haven’t penetrated the general consumer market and therefore don’t know exactly how it will react to their product. In addition, it costs a lot to obtain the necessary equipment to produce, store and transport viable fuel cells.

Fortunately, nanotechnologies – which control matter on an atomic or molecular level – represent the key to overcoming those problems.

And right now, more than 2,180 organizations are directly working on advancing nanotechnology relating to fuel cells and hydrogen energy. This year alone, they’ll spend $4.7 billion on improving both power sources… practically guaranteeing further breakthroughs and lowered costs for fuel cell operations.

Investors who want to cash in on their genius have several choices, including Allianz Global Eco Trends Fund (MUTF: AECOX) and the Windslow Green Growth Fund (MUTF: WGGFX). Both have followed upward trends over the last month, with no signs of slowing down now.

Similarly, The New Alternatives Fund (MUTF: NALFX), with its stockpile of environmentally-minded companies continues to produce positive returns. And investment researcher, Morningstar, recommends Ceramic Fuel Cells Ltd. (ASX: CFU), a leading developer of high efficiency and low emission electricity generation units for homes and other buildings.

Ceramic Fuel Cells was founded in 1992, and many of its competitors are equally well-established, well-funded corporations… not small, blundering startup companies to take for granted.

If we can take their maturity as proof, the fuel cell technology is here to stay and the profits it generates can only go up.

Good investing,

Louise Harris

View original at: Investment U

(HMC) Plug Your Portfolio Into The Growing Fuel Cell Market

The new Focus replaces the original Focus, introduced in 1998. Ford will begin manufacturing the car in the same way at plants in Europe, Chongqing, China and Wayne, Michigan later this year, with 80% parts commonality. The car will be identical in all markets except variations in powertrains and color. It will hit the European and North American showrooms next year followed by Asian, African and South American ones.

The new Focus will be equipped with a new two-liter, four-cylinder engine and six-speed automatic transmission. It will also be lighter and quieter than the current U.S. version. It will have the same electronic-controlled suspension as the European Focus, generally known for better handling compared to the U.S. version.

Although Ford has not disclosed the gas mileage of the new Focus, it has assured a better mileage than the existing U.S. version, which gets up to 35 mpg on the highway. Ford also plans to introduce Focus as its first battery operated electric passenger car in North America. The electric Focus will be built in the Wayne plant, where the company is spending $550 million for retooling.

The existing Focus has also attracted the attention of U.S. consumers as the most fuel-efficient car from the company. Last year, the car ranked 4th in the top-10 buy list in the $3 billion U.S. cash incentive program Car Allowance Rebate System (CARS), or “Cash for Clunkers.”

Zacks Investment Research

(F) Ford Motor Company Has Global Focus

The third generation 4-door compact hybrid, Toyota Prius 2010, debuted in Japan on May 18, 2009, and has been the top-selling model every month since then. Soon after the launch, Toyota received an order of 180,000 units, exceeding the company’s target of 10,000 units in monthly sales.

Prius also overtook Honda’s (HMC) new hybrid model Insight, introduced in February 2009. Insight has become the second ranked hybrid, selling 93,283 units in 2009.

The first generation Prius was introduced in 1997. In the third generation, Toyota has upgraded the 2010 model with a 1.8-liter 4-cylinder engine and mileage of 50 miles per gallon (mpg) in the city and 49 mpg on the highway. This compares with the 46 mpg of the old generation model.

Hybrid sales in Japan are on the rise since the government announced several tax breaks and incentives to spur industry growth. It constitutes about 10% of new vehicle sales in Japan. Hybrids are now tax-free in Japan, delivering savings of 150,000 yen ($1,500) for a Prius buyer. This can be another factor behind the popularity of the new Prius.

Demand for Prius has also been strong in the U.S. In the U.S. government’s $3 billion cash incentive program, Car Allowance Rebate System (CARS) – aka “Cash for Clunkers” – Prius ranked seventh in the top-10 buy list, followed by Honda Accord and Honda Fit.

Zacks Investment Research

(TM) Toyota Motor’s Prius is Top Selling Vehicle in Japan

Construction was particularly hard hit again, with a loss of 53,000 jobs. Construction employment peaked earlier than did total employment, in January 2007, at 7.737 million jobs; now construction employment is down to 5.907, a decline of 1.83 million, or 23.7% from the peak. The last time that construction employment was this low was in November of 1997.

Manufacturing, the other big part of the goods producing sector, lost 27,000 more jobs in December. Manufacturing employment never really increased during the last economic expansion, so it is hard to get a good starting point for its decline. Since the overall peak in employment in December 2007, though, we have lost a total of 2.147 million factory jobs, or 15.6% off the 12/07 level. The last time we had anything that looked like a peak in manufacturing employment was back in August of 1998, when there were 17.563 million factory jobs, but even that was a pretty feeble peak. The true historic peak in factory employment came all the way back in June of 1979, more than 30 years ago, at 19.509 million jobs.

The first graph (blue) shows the history of construction and manufacturing employment since 1950, along with total private sector employment (right scale, green line). Clearly manufacturing has been hurting, at least in terms of employment, for a long time now. Total manufacturing output, though, has continued to increase over the years as it has been generally easier to automate factories than other parts of the economy.

Ford (F) and General Motors may have lost market share to Toyota (TM). They are, however, making almost the same number of cars and trucks as they were back in 1982. The UAW, on the other hand, is only a small fraction of the size it was back then. Automation has probably resulted in more jobs lost in manufacturing than has outsourcing to China and the rest of the developing world, although clearly both forces have been at work behind the long-term secular decline in U.S. factory jobs.

The service side of the economy has fared much better over the years, and that was true this month as well, with only 4,000 jobs lost. Private service sector employment actually increased as the number of government jobs declined by 21,000. Most of those job losses came at the state and local level, which cannot run deficits and are experiencing severe budget constraints, even after the ARRA (Stimulus Act) has provided massive amounts of aid to the states (about one-third of the whole stimulus program).

The one area that has shown growth throughout this recession is education and health services. While the data lumps them together, most of that growth has come from the health care side. As the second (peach) graph shows, total service sector employment (right scale, blue line) has been growing steadily since 1950. Declining government employment is highly unusual.

Despite the loss of 85,000 more jobs overall, the unemployment rate remained at 10.0%. The reason for that steadiness is not good news, though, as the third (pink graph) shows. The green line (right hand scale) shows the unemployment rate since 1950. This is the employment measure that people are most familiar with, but it really does not tell the whole story:

Back in the 1950’s and 1960’s it was much easier to have a low unemployment rate, since a far larger part of the population was not in the workforce. Part of that was due to the timing of the Baby Boom. In this country, we no longer expect 8-year-olds to go to work each day. Back then, if you read an article and it mentioned women and labor in the same paragraph, the odds were that it was about childbirth, not employment.

That changed in the 1970’s and 1980’s, just as the Baby Boomers were entering the workforce. The percentage of people in the workforce, both employed and unemployed, was on a secular increase from the early 1960’s through just before the end of the century, peaking out at 67.3% in April of 2000.

As the blue line on the graph shows, the participation rate did tend to flatten out or fall a little bit during recessions, but would resume its rise thereafter. This is the “discouraged worker” effect. The participation rate never really recovered after the 2001 recession.  This allowed the unemployment rate to fall despite a very anemic performance in terms of job creation in the last expansion (see previous post). In December, the participation rate fell to 64.6%, down from 64.9% in November and 65.8% a year ago.

The unemployment rate is best understood as the ratio of people in the workforce to the percentage of them who are employed. But it is the employment rate, or the employed-to-population ratio, that has really taken a big hit.

Like the participation rate, the employment rate was in a secular uptrend from the mid-1960’s through the end of the century. It was, of course, much more choppy than the participation rate, falling during recessions but then rebounding to new highs with each economic expansion.

The big exception was in the last expansion. The all-time peak of the employment rate was in April of 2000 when it hit 64.7%. However, its peak in the last expansion was just 63.4% in March of 2007. Since then, it has fallen off a cliff, and now stands at 58.2%, down from 58.5% in November and 60.9% a year ago.

I think that the employment rate is a better overall gauge than is the unemployment rate, and this number is just plain downright depressing. The last time the percentage of the population that was working was this low was back in August of 1982. We also hit these levels in March of 1974 and are just a tick above where we were back in August 1969. We are still below the post-war unemployment rate record, which was set in December of 1982 at 10.8%. The participation rate is still higher than back then, but not by much — 64.6% versus 64.1% — while the employment rate is a full point higher at 58.2% rather than 57.2%.

Recessions are generally the cruelest to those at the bottom of the economic ladder. This can be seen in the breakdown of unemployment by level of education. The unemployment rate for high school dropouts was 15.3% in December, up from 15.0% in November and from 11.2% a year ago. The rate drops to 10.5% for those who graduated from high school but did not go on to college. That is up from 10.4% in November and from 7.8% a year ago.

People who got an associates degree, or didn’t complete four years of college had an unemployment rate of 9.0% in December, unchanged from last month but up from 5.9% a year ago. The unemployment rate for college graduates ticked up to 5.0% from 4.9% in November, and is up from 3.7% a year ago, but is still only half the nationwide total.

Men have been hit particularly hard in this recession (which goes counter to the trend of the people at the bottom of the ladder getting hurt the most, but the goods-producing sector has a higher percentage of male employees than does the service sector). The male unemployment rate, though, did tick down to 10.2% in December from 10.4% in November and 10.6% in October, but it is up from 7.4% a year ago. The unemployment rate for women is “only” 8.2%, up from 8.0% in November and 6.0% a year ago.

Those are the numbers for adults. The group that has been hit the hardest is teens, regardless of gender.  The teen unemployment rate rose to 27.1% in December from 26.8% in November and 20.8% a year ago.

Blacks tend to have higher unemployment rates than whites regardless of the overall economic climate, but they get hit the hardest in recessions. The overall black adult unemployment rate was 16.2% in December, up from 15.6% in November — a huge one-month increase. A year ago, the unemployment rate among blacks was 12.1%. Hispanic unemployment rose to 12.9% in December from 12.7% in November and 9.4% a year ago. Whites have fared better, with an unemployment rate of 9.0% in December, down from 9.3% in November but up from 6.7% a year ago.

If we break it down further by race gender and age, adult white women are faring the best as far as employment is concerned, with a rate of 7.4%, unchanged from November but up from 5.7% a year ago. White men saw the most improvement this month, with their unemployment rate falling to 9.3% from 9.8% in November, though up from 6.6% a year ago. White teens had an unemployment rate of 23.6% in December, up from 23.0% November and 18.9% a year ago.

The unemployment rate for black men improved a bit in December, to a still very high 16.6% from 16.8% in November, but up from 13.8% a year ago. Black women suffered a massive increase to 13.1% in December from 11.7% in November and 8.9% a year ago. I am not sure why Black women fared so poorly in the last month in particular.

If you really want to find a group that is hurting for jobs, it is black teens, although there was a little bit of improvement this month. The rate for black teens fell to 48.4% from 49.8% in November and is up from 33.3% a year ago. When you consider that almost one in two unemployment rate, also keep in mind that the participation rate among black teens in the workforce is also extremely low. The participation rate for black teens is just 27.5%, and only 14.2% of all black teens are employed. Those are rates one associates with Africa, not with African Americans.

The participation rate for white teens is 38.4%, and 29.4% of all white teens have jobs. Teen employment is important, not because it is keeping the family going (although it sometimes plays a role there) but because it provides the basic job skills that are going to be needed later in life.

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service.

Zacks Investment Research

(F) Unemployment: Sectors & Demographics

After another brutal year, the auto industry summoned up some end-of-year strength in 2009, with analysts projecting annualized sales of cars and trucks to top 11 million in December.

If that number holds true, it would mark the second-best month of 2009 behind August’s government-assisted sales burst. It would also beat the December 2008 sales figure of 10.3 million, plus a month-to-month increase over the 10.9 million sales seen in November 2009.

BMW, Ford, Honda, Toyota’s Lexus and General Motors’ soon-to-be-gone Saturn and Pontiac brands all experienced higher-than-expected returns in December, as customers were willing to buy without government rebates. Incentive programs from dealers also enticed customers.

But can one month really indicate an improved market for the year ahead?

The Auto Industry: 2010… And Beyond

Bargain prices for used cars, lower interest rates and improved economic data have pushed consumers back to dealerships. But confidence is key – and it’s still lacking, due to factors like the continuing housing market woes and high unemployment.

And while December’s auto sales numbers are certainly positive, they pale in comparison to the trend a year ago when the popularity of SUVs led to sales topping 17 million in the 1990s.

Nevertheless, there is cause for auto optimism in 2010. Estimates call for sales to hit 11.4 million this year, rising as high as 13 million in 2011, despite consumer hesitation on large purchases.

And if the U.S. economy gets back on track in a more definitive way, that should help the healing process in the auto industry.

Good investing,

Sheena Martin

View original at: Investment U

Can The Battered Auto Sector Mount a Real Recovery In 2010?

Most of the prominent automakers, except General Motors and Chrysler, reported a sales gain during the month. Among the domestic automakers, Ford Motor (F) recorded the best sales gain. Meanwhile, Hyundai Motor Group ruled in terms of U.S. sales gain among all automakers.

Ford’s sales were up 33% to 184,655 cars and trucks in December, making it the company’s best month since May 2008. This was attributable to a surge in sales to corporate customers and a huge customer response received for vehicles including the redesigned Taurus, Fusion and Escape.

Sales of Ford, Lincoln and Mercury branded cars rose 42% to 61,195 vehicles. Meanwhile, Volvo, which is in the process of being sold, clocked a 13.8% rise in sales to 5,638 vehicles. F-Series pickup sales were up 29% to 117,822 vehicles.

General Motors (GM) reported a 6% decline in sales to 208,511 vehicles. The decrease was driven by a 55% plunge in sales based on the company’s discontinued brands – Saturn, Hummer, Pontiac and Saab. However, the company’s existing four core brands – Chevrolet, Buick, GMC and Cadillac – witnessed a 2% rise in sales.

Among the Japanese automakers, Toyota Motor (TM) reported the best sales gain of 32% to 187,860 vehicles, primarily driven by its highly sought after model, Prius (39% increase to 11,775 units).

Sales at Honda Motor (HMC) escalated 24.5% to 107,143 vehicles. Sales of Civics shot up 29% to 22,319 units while sales of Accord coupes and sedans rose 26% to 28,238 units.

Sales at Nissan Motor were up 18% to 73,404 units. Many Nissan models clocked double-digit sales growth during the month. They include Versa (32.5%), Maxima (59.5%), Z (63%), Xterra (15%), Pathfinder (49%) and Armada (76%).

Korean automaker Hyundai Motor Group, which includes both the Hyundai and Kia brands, posted a combined sales gain of 42% to 33,797 vehicles. Sales of Sonata sedans surged 59% to 10,485 units while sales of Santa Fe SUV shot up 47% to 9,264 units.

Daimler (DAI) recorded a marginal 0.2% rise in sales to 20,889 vehicles. Mercedes-Benz sales went up 8% to 20,025 units. However, smart fortwo micro-car sales plummeted 63% to 864 units.

Full Year Sales

The full year sales were not able to pick up despite impressive sales in December. Sales in 2009 dipped 21% to 10.4 million, which is a 27-year low. All the major automakers recorded a fall in sales during the year, except Hyundai Motor.

Sales at Ford dropped 15% to 1.62 million vehicles. Sales at GM plunged 30% to 2,084,492 vehicles. Chrysler’s full-year sales plunged 36% to 931,402 vehicles. Sales fell 19% at both Honda and Nissan to 1,150,784 vehicles and 770,103 vehicles, respectively. Meanwhile, sales at Toyota decreased 20% to 1,770,149 vehicles.

The only major automaker that reported an increase in sales is Hyundai Motor Group. Its sales rose 9% to 735,127 vehicles.

Outlook

Overall, automakers are expecting 2010 sales to be less turbulent than 2009. They are anticipating some momentum in sales, driven by strong sales in December. However, sales are expected to improve modestly.

GM projected industry sales of 11 million–12 million vehicles in the U.S. for 2010, while Ford furnished a slightly more optimistic forecast of 11.5 million–12.5 million vehicles.

Zacks Investment Research

(F) U.S. Auto Industry Stands Up

Geographically, the Asia-Pacific region is witnessing higher production and consumption of metals, especially China and India. This is due to the per capita consumption in these two counties approaching the U.S./European levels, which could ? theoretically at least ? double metal demand in the longer term.

Historically, the automotive and construction markets have been the largest drivers of metal consumption, more than 50% of the total demand. Other metal consuming industries include energy, electrical equipment, agricultural, domestic and commercial equipment and industrial machinery. Large automakers such as General Motors, Ford Motor Company (F), Toyota Motor Corporation (TM) and Honda Motor Company (HMC) are big consumers of metals including steel and aluminum.

The steel industry, with companies engaged in the extraction of iron ore and coke coal for the processing of iron and steel, is a case in point. This industry includes metal ore exploration and mining services, iron and steel foundries for smelting, rolling, forging, spinning, recycling, stamping, polishing and plating of iron and steel products such as pipes, tubes, wire, spring, rolls and bars. ArcelorMittal (MT) is the world’s largest steel company with production of 103.3 million tons in 2008.

The precious metals and minerals industry consists of companies engaged in the extraction and primary processing of gold, silver, platinum, diamond, semiprecious stones, uranium and other rare minerals and ores, along with the cultivation of pearls. The gold industry is dominated by Anglo American Plc., the largest gold producer by market capitalization. Demand for gold has been improving sequentially; however, it is significantly lower year over year, distorted by the exceptionally strong demand in 2008.

The outlook for jewelry demand continues to remain weak. While the US economy has shown tentative signs of a recovery, a high degree of uncertainty continues to dampen any improvement in discretionary spending. Total supply of gold worldwide contracted slightly in the last three months of 2009. The key factors weighing on the supply were an increase in producer de-hedging and a negative contribution from the official sector, in addition to lower levels of scrap than previous quarters.

OPPORTUNITIES

We expect the global metal demand to improve in the long term with the recovery of the user industries. China is expected to remain the largest consumer of metals in the coming years. Despite the current slowdown in consolidation within the global metal industry, mergers and acquisitions (M&A) activity remains a critically important growth strategy for companies. While the economic downturn is a significant factor in short-term decisions regarding M&A activity, mining companies expect to make acquisitions over the next three years.

There has been an upward movement in copper prices in recent months, primarily due to stockpiling in China. Market conditions are expected to be favorable for copper in the next couple of years due to higher consumption of the metal in the developing nations. Companies like Freeport-McMoRan Copper & Gold Inc. (FCX) which have a high leverage to copper prices will benefit immensely from the potential demand for copper in the developing markets.

We also expect aluminum demand to increase over the next three years, outstripping supply growth. As a result, the aluminum market is likely to see deficit for a prolonged period. This provides a backdrop supportive of high alumina and aluminum prices. Leading aluminum producers such as Alcoa Inc. (AA) should benefit from the improving outlook for aluminum and alumina prices.

The World Steel Association is forecasting an 8.6% year-over-year decline in steel production, better than the previous forecast of a 14.1% decline, driven by a strong growth in Chinese steel demand. With signs of recovery across the world in the second half of 2009, the association is anticipating global steel demand in 2010 to grow by 9.2% to 1,206 million tons, which is similar to the level in 2008.

With steel demand picking up in the last couple of months, steel producers are restarting facilities. Recently, U.S. Steel Corp. (X) ? the eighth largest steel producer in the world, the largest integrated steel producer headquartered in North America and one of the largest integrated flat-rolled producers in Central Europe, has restarted its blast furnace at its Hamilton, Ontario plant after a nine-month shutdown.

The current surge in steel demand narrowed losses for the third largest steel maker in the U.S. as well as for Steel Dynamics Inc. (STLD) and the largest recycler of steel scrap in the U.S. ? Nucor Corporation (NUE) ? in the third quarter of 2009.

Gold’s value and wealth preservation attributes continued to attract investors and consumers. According to the World Gold Council (WGC), total demand for the metal in the third quarter of 2009 reached 800.3 tons, or $24.7 billion — up 15% from the second quarter. Jewelry and investment demand in non-western markets rebounded from the very low levels seen in the first quarter, while industrial demand started to recover in response to an improvement in economic conditions.

The outlook for investment is positive overall, with absolute levels of demand likely to remain well supported by continued economic and currency uncertainty, inflation concerns and the search for diversification. We expect to see a continuing trend among central banks diversifying away from their dollar exposure in their reserves in favor of the proven store of value represented by gold. Barrick Gold Corporation (ABX) and Newmont Mining (NEM) are showing strong levels of production.

WEAKNESSES

The global metal industry is cyclical, highly competitive and has historically been characterized by overcapacity (excess of supply over demand). Overcapacity in the industry could increase the level of metal imports and squeeze metal prices. In the recent years, capacity growth in China has significantly exceeded the growth in Chinese market demand. A continuation of this unbalanced growth trend or a significant decrease in China’s rate of economic expansion could result in China increasing metal exports.

Key metal consuming industries such as auto, shipbuilding and construction have been experiencing weak demand in the last few quarters, forcing global metal producers to slacken production levels. U.S. Steel slashed production by almost 62% during the second quarter of 2009, while Korean steel maker POSCO (PKX) had to shrink its output by about 15% in December last year. This was the first time in its history that POSCO was forced to take such a measure, proof of the unhealthy operating environment.

As a whole, the steel industry posted weak results in the third quarter of 2009. U.S. Steel recorded its third sequential loss ? $3.03 billion, or $2.11 per share ? in the third quarter of 2009, in contrast to a net income of $9.19 billion or $7.79 per share in the third quarter of 2008. Commercial metals company AK Steel (AKS) posted a negligible income of $6.2 million compared to $188.3 million in the same quarter of 2008.

Despite its relatively higher growth rate compared to the developed world, the outlook for the Indian economy is for lower growth rates compared to the last few years. Nearly 45?50% of the world gold production is consumed in India. Gold is a luxury item in this economy, and the demand downtrend is most visible in large cities where gold is consumed. A slow growth, low inflation and low interest-rate environment is a nightmare for the gold market.

Foreign currency is one of the major risks for gold producers, as they usually have their mining operations outside their countries. Revenues and costs for gold producers are primarily incurred in foreign currency. Kinross Gold (KGC) is one of the top 10 gold producers, which has facilities in the U.S., Canada, Brazil, Chile, Russia and Africa. Although it has a diversified clientele, the operations are vulnerable to foreign currency risks. Hence, any adverse movement will affect cash flows and the profitability of the gold producer.

Despite a sharp rise in recent metal prices, future pricing remains uncertain, and we believe continued demand weakness, production resumption by some mills and lower iron ore and coking coal prices in the second half of 2009 may drive monthly prices down again. The recent significant reduction in global metal production in late 2008 and into 2009 has resulted in decreases in many raw material prices. We expect that such prices will rebound only when global metal production returns to more customary levels.

Zacks Investment Research

(F) Metals & Mining Stock Review – January 2010 – Industry Outlook

General Motors’ joint venture with Shanghai Automotive Industries Corp. (SAIC) has also shown an impressive rise of 63.3% in sales to 727,620 vehicles. Further, the automaker’s joint venture with SAIC and Wuling became China’s first enterprise to exceed 1 million units in annual sales in 2009. Sales in the SAIC–GM–Wuling joint venture rose 63.9%to 1.06 million vehicles.

The Chinese auto industry has been developing incentives for car owners to shift to more environment-friendly and fuel-efficient cars. While the domestic automakers (especially small-car manufacturers) received most of the incentives, foreign automakers benefited from them as well.

The collapse in the U.S. auto industry in 2009 was somewhat offset by the surging sales in China, marking a stark shift in global vehicle sales volumes that was much quicker than anyone had expected. All these have led several global automakers, including GM and Ford, to strengthen their foothold in China’s fast-growing market in order to drive sales amid slack demand elsewhere.

Zacks Investment Research

($F) Ford Motor’s Chinese Joint Venture Surges Sales

Geely is eager to tap China’s high-growth auto market by acquiring modern, innovative technologies from the Swedish brand to upgrade its car lineup. The automaker expects robust growth for China’s auto industry in 2010. In this situation, upgrading the product lineup would no doubt land the automaker in a favorable market position.

Geely is seeking about $1 billion in loans to finance the $1.8 billion deal. Three major Chinese banks, including Bank of China, China Construction Bank and Export-Import Bank of China have agreed to extend loans to the Chinese automaker for the deal.

Beside the financial support for the deal, Geely would also benefit from the Chinese Government’s subsidies policy, which will continue in 2010. Earlier this month, the Chinese Government revealed that it would subsidize sales of “green vehicles” in some cities in an effort to promote environmentally friendly transport to lower fuel emissions and boost domestic consumption. The Government will also offer rebates to Chinese private car buyers for the first time.

In 1999, Ford had acquired the Volvo Car Corporation from Sweden-based Volvo Group for $6.45 billion. However, the company had put up the unit for sale in December last year in an effort to cut costs and raise cash amid plunging industry-wide auto sales.

Zacks Investment Research

(F) Geely Holding Corporation Optimistic About Volvo from Ford Motor

According to a contract talk with Canadian Auto Workers (CAW) in October, Ford will employ 200 workers in one shift at the plant to make the V-8. However, Ken Lewenza – president of the CAW – is not happy with the decision.

Lewenza has asked Ford to add more shifts to install the engine in other vehicles as well. With this, the union will be able to recall more workers; about 1,000 Ford workers had been laid off at Windsor . Lewenza has revealed that V-8 engine could be used in Ford’s F-150 pickup truck, one of the best-selling vehicles in North America.

In October, Ford reached a new agreement with CAW members that expires on Sep 17, 2012 and covers about 7,000 Ford workers. Under the deal, Ford has promised to invest $2 billion in its Oakville plant in Ontario, where it has committed to build two more vehicles, and the Windsor plant in Ontario , where it has promised to produce a new engine. The automaker also vowed to keep 10% of its North American production within the country.

In exchange, the CAW workers have agreed to give up concessions, similar to those made by their counterparts at the bankrupt Chrysler and General Motors (GM), which saw labor costs fall by $19 an hour. The concessions include reductions in time-off, bonus payouts, and other benefits, as well as a commitment that new members will contribute $1 for every hour worked to the employees’ pension plan.

The new agreement would also allow Ford to close the St. Thomas assembly plant in Ontario during 2011, eliminating 1,400 jobs. Workers at the plant manufacture the Ford Crown Victoria, Mercury Grand Marquis and Lincoln Town Car.

Zacks Investment Research

(F) Ford Motor Restarts Engine Production at Windsor Plant

The recent economic crisis has provided an impetus to a massive structural change in the auto industry, setting the stage for growth over the next decade. Given the high barriers to entry and need for scale economies (in operations, supply chain and marketing), the global auto industry landscape is expected to be ruled by global automakers and suppliers based in the six major auto markets of China, India, Japan, Korea, Western Europe and the U.S.

OPPORTUNITIES

To remain competitive, automakers will need to design vehicles that will meet the requirements of consumers in both mature and emerging markets. Automakers will focus on more user-friendly and low-cost vehicles that are also the most advanced technologically.

The automakers will continue to shift their production facilities from high-cost regions such as North America and the European Union to lower-cost regions such as China, India and South America. For example, Greater China and South America is projected to represent more than 50% of growth in global light vehicle production in the auto industry from 2008 to 2015.

There are two underlying factors behind this location shift in the auto industry. The first is the cost factor. The cost of labor in emerging auto markets continues to be a fraction of that in the developed world. The second is the demand factor. Many low cost regions, including the emerging auto markets, have high potential for growth. Thus, the shift in auto industry production facilities will lead to a localization of the manufacturing base that will bring down transportation costs. The emergence of trading blocs is also giving this process a push in the auto market. It is likely that over time there will be fewer car imports from outside a trade zone.

Further, automakers have started to reduce the number of technological platforms with a greater diversity of models produced from each platform in order to remain cost competitive in the auto industry. For example, Honda, with its flexible common platform, has developed three dimensionally distinct versions of the Accord, allowing for designs where 60% of the components are common. Ford aims to build 680,000 vehicles per core global platform within five years, up from current levels of 345,000 units. After emerging from its bankruptcy, General Motors has started focusing solely on four core brands – Chevrolet, Cadillac, Buick and GMC.

Higher fuel prices and concerns over global warming have pooled attention on the auto industry that either rely less on traditional fossil fuels or use renewable sources of less expensive energy. Thus, “green” alternatives such as fuel-efficient electric vehicles (EVs) and hybrids will attract consumers in the wealthier countries while flex-fuels such as ethanol and natural gas will be highly sought-after in the emerging auto markets where the local climate or resource base favors their usage by automakers over petroleum.

Consequently, there will be a variety of powertrain technologies in the auto industry by the next decade. It is likely that “green” cars will represent up to a third of total global sales in developed auto markets and up to 20% in urban areas of emerging auto markets by 2020. Some of the “green” cars have already generated a huge response in the auto industry. These include the Ford Focus, GM Volt, Daimler (DAI) Smart, Nissan Leaf and Toyota Prius.

The role of governments must not be overlooked. Governments in all major countries have become active auto industry players. Their investments through emergency loans and incentive packages, such as “Cash for Clunkers” in the U.S., are a good example of this. Moreover, governments’ energy and environmental policies will be highly responsible in molding the auto industry in the coming years.

WEAKNESSES

Although automakers continue to focus on shifting their production facilities to new regions driven by cost and demand factors, developing the supplier networks remains one of the greatest challenges they face in the auto industry. Existing suppliers to automakers often lack the financial background to expand capacity in new markets. On the other hand, auto market suppliers are sensitive to technology transfers to local third parties, which may result in new and lower-cost competitors.

The financial condition of the majority of auto market suppliers continues to deteriorate, resulting from historically weak demand and higher dependence on automakers. According to the Original Equipment Suppliers Association (OESA), 13 major U.S. direct auto market suppliers and 2 indirect auto industry suppliers have filed for Chapter 11 bankruptcy or have had their assets foreclosed on, while many others in the auto industry have simply liquidated in the first half of 2009. They include prominent components auto market suppliers such as Visteon and Lear , who cater to General Motors and Ford.

According to OESA, 12% of the auto industry suppliers do not have sufficient working capital to support a 10%–25% expansion in production. Thus, despite the government’s sizable investment in the automakers, it is likely that there will be auto market suppliers who are unable to restart operations as automaker production resumes due to working capital shortfalls.

Higher dependence on automakers makes the auto market suppliers vulnerable to several maladies, primarily pricing pressure and production cuts. Pricing pressure from automakers is constricting auto market suppliers’ margins. On the other hand, production cuts by automakers driven by frequent market adjustments are negatively affecting their operations. Some of the auto industry suppliers who have a high reliance on a few automakers such as General Motors, Ford, Chrysler and Volkswagen include American Axle and Manufacturing (AXL), ArvinMeritor (ARM), Goodyear Tire and Rubber (GT), Magna International (MGA), Superior Industries (SUP), Tenneco (TEN) and TRW Automotive (TRW).

The shift in auto market consumer preferences towards hi-tech, fuel-efficient, environment-friendly vehicles, such as small cars/hybrids/EVs, is another issue. Auto market suppliers are expected to quickly adapt to the new technologies by investing in research and development, putting heavy capital burdens on them.

The automakers also face significant challenges in transforming the existing powertrain technologies into the new versions as far as marketability is concerned. As the number of technology applications increases, automakers and suppliers will need to be selective. Their criteria for choosing what to include and what not to will depend entirely on what the customers are willing to pay for.

Zacks Investment Research

(TM) Auto Industry Outlook for 2010 – Industry Outlook

The recent economic crisis has provided an impetus to a massive structural change in the auto industry, setting the stage for growth over the next decade. Given the high barriers to entry and need for scale economies (in operations, supply chain and marketing), the global auto industry landscape is expected to be ruled by global automakers and suppliers based in the six major auto markets of China, India, Japan, Korea, Western Europe and the U.S.

OPPORTUNITIES

To remain competitive, automakers will need to design vehicles that will meet the requirements of consumers in both mature and emerging markets. Automakers will focus on more user-friendly and low-cost vehicles that are also the most advanced technologically.

The automakers will continue to shift their production facilities from high-cost regions such as North America and the European Union to lower-cost regions such as China, India and South America. For example, Greater China and South America is projected to represent more than 50% of growth in global light vehicle production in the auto industry from 2008 to 2015.

There are two underlying factors behind this location shift in the auto industry. The first is the cost factor. The cost of labor in emerging auto markets continues to be a fraction of that in the developed world. The second is the demand factor. Many low cost regions, including the emerging auto markets, have high potential for growth. Thus, the shift in auto industry production facilities will lead to a localization of the manufacturing base that will bring down transportation costs. The emergence of trading blocs is also giving this process a push in the auto market. It is likely that over time there will be fewer car imports from outside a trade zone.

Further, automakers have started to reduce the number of technological platforms with a greater diversity of models produced from each platform in order to remain cost competitive in the auto industry. For example, Honda, with its flexible common platform, has developed three dimensionally distinct versions of the Accord, allowing for designs where 60% of the components are common. Ford aims to build 680,000 vehicles per core global platform within five years, up from current levels of 345,000 units. After emerging from its bankruptcy, General Motors has started focusing solely on four core brands – Chevrolet, Cadillac, Buick and GMC.

Higher fuel prices and concerns over global warming have pooled attention on the auto industry that either rely less on traditional fossil fuels or use renewable sources of less expensive energy. Thus, “green” alternatives such as fuel-efficient electric vehicles (EVs) and hybrids will attract consumers in the wealthier countries while flex-fuels such as ethanol and natural gas will be highly sought-after in the emerging auto markets where the local climate or resource base favors their usage by automakers over petroleum.

Consequently, there will be a variety of powertrain technologies in the auto industry by the next decade. It is likely that “green” cars will represent up to a third of total global sales in developed auto markets and up to 20% in urban areas of emerging auto markets by 2020. Some of the “green” cars have already generated a huge response in the auto industry. These include the Ford Focus, GM Volt, Daimler (DAI) Smart, Nissan Leaf and Toyota Prius.

The role of governments must not be overlooked. Governments in all major countries have become active auto industry players. Their investments through emergency loans and incentive packages, such as “Cash for Clunkers” in the U.S., are a good example of this. Moreover, governments’ energy and environmental policies will be highly responsible in molding the auto industry in the coming years.

WEAKNESSES

Although automakers continue to focus on shifting their production facilities to new regions driven by cost and demand factors, developing the supplier networks remains one of the greatest challenges they face in the auto industry. Existing suppliers to automakers often lack the financial background to expand capacity in new markets. On the other hand, auto market suppliers are sensitive to technology transfers to local third parties, which may result in new and lower-cost competitors.

The financial condition of the majority of auto market suppliers continues to deteriorate, resulting from historically weak demand and higher dependence on automakers. According to the Original Equipment Suppliers Association (OESA), 13 major U.S. direct auto market suppliers and 2 indirect auto industry suppliers have filed for Chapter 11 bankruptcy or have had their assets foreclosed on, while many others in the auto industry have simply liquidated in the first half of 2009. They include prominent components auto market suppliers such as Visteon and Lear , who cater to General Motors and Ford.

According to OESA, 12% of the auto industry suppliers do not have sufficient working capital to support a 10%–25% expansion in production. Thus, despite the government’s sizable investment in the automakers, it is likely that there will be auto market suppliers who are unable to restart operations as automaker production resumes due to working capital shortfalls.

Higher dependence on automakers makes the auto market suppliers vulnerable to several maladies, primarily pricing pressure and production cuts. Pricing pressure from automakers is constricting auto market suppliers’ margins. On the other hand, production cuts by automakers driven by frequent market adjustments are negatively affecting their operations. Some of the auto industry suppliers who have a high reliance on a few automakers such as General Motors, Ford, Chrysler and Volkswagen include American Axle and Manufacturing (AXL), ArvinMeritor (ARM), Goodyear Tire and Rubber (GT), Magna International (MGA), Superior Industries (SUP), Tenneco (TEN) and TRW Automotive (TRW).

The shift in auto market consumer preferences towards hi-tech, fuel-efficient, environment-friendly vehicles, such as small cars/hybrids/EVs, is another issue. Auto market suppliers are expected to quickly adapt to the new technologies by investing in research and development, putting heavy capital burdens on them.

The automakers also face significant challenges in transforming the existing powertrain technologies into the new versions as far as marketability is concerned. As the number of technology applications increases, automakers and suppliers will need to be selective. Their criteria for choosing what to include and what not to will depend entirely on what the customers are willing to pay for.

Zacks Investment Research

(TM) Auto Industry Outlook – Dec. 09 – Industry Outlook

In late September, Toyota recalled the largest ever U.S. batch of 3.8 million vehicles, triggered by a high-speed crash in August involving a 2009 Lexus ES350 that killed a California Highway Patrol officer and three members of his family near San Diego. Investigators with the National Highway Traffic Safety Administration have found out a rubber all-weather floor mat in the wreckage that was slightly longer than the mat and could have covered the accelerator pedal.

The U.S. recall involved popular vehicles such as the Toyota Camry (2007–10 model year) – the top-selling passenger car in the U.S., and the Toyota Prius (2004–09) – the best-selling gas-electric hybrid, apart from Toyota Avalon (2005–10), Toyota Tacoma (2005–10), Toyota Tundra (2007–10) and Lexus (2007–10 ES350 and 2006–10 IS250/350).

To fix the problem, Toyota has instructed dealers to shorten the length of the gas pedals as a temporary measure beginning in January next year. Meanwhile, the company will develop replacement pedals for its vehicles.

The new replacement pedals are expected to be available for some models beginning in April 2010 and will be provided even if the vehicles have already received a modified pedal under the recall. Some vehicles will have brake override systems, called a “smart brake”, installed as a precaution that will ensure that the vehicle will stop even if both the brake and the accelerator pedals are applied simultaneously.

Zacks Investment Research

(TM) Toyota Motor Makes Chinese Recall

Ford had discussions with many automakers to sell Volvo, including Renault SA, China’s third-largest automaker, Dongfeng Motor Group and fifth-largest automaker Beijing Automotive Industry Holding Corp. In October, Ford revealed that the preferred bidder is Geely, who has submitted a concrete bid for the unit. Media reports had disclosed that Geely valued the unit at close to $2 billion.

Geely’s bid is backed by the Beijing Government. Three major Chinese banks, including Bank of China, China Construction Bank and Export-Import Bank of China have agreed to extend loans to the Chinese automaker for the deal.

In 1999, Ford had acquired Volvo Car Corporation from Sweden-based Volvo Group for $6.45 billion. However, the company had put up the unit for sale in December last year in an effort to cut costs and raise cash amidst plunging industry-wide auto sales.

In the first half of 2008, Ford sold its U.K.-based Jaguar and Land Rover brands to the Indian auto giant Tata Motors (TTM). The company sold the unit for $2.3 billion, about half the price at which it was purchased from BMW in 2000.

In the latter half of 2008, Ford shrugged off its 20% stake in the Japanese automaker, Mazda Motor, for $540.3 million. The company reduced its stake in Mazda to 13.4%, which it had rescued from bankruptcy in 1979.

Zacks Investment Research

(F) Ford Motor May Sell Volvo to Geely Holding Group

Toyota has intensified its cost-saving efforts this year due to the global economic slump. Last month, the company decided to cut winter bonus payments for its managers and union workers in Japan. The company has announced that it will slash bonus payments for 8,700 managers in Japan by 20% and for union workers by 18% on a year-over-year basis.

Toyota returned to profitability in the second quarter of fiscal 2010 ended Sep 30, 2009, after reporting losses since the third quarter of fiscal 2009. The company posted a profit of ¥21.8 billion ($232 million) or ¥6.96 (7 cents) per share.

This was attributable to government incentive programs across the world – such as the U.S. “Cash for Clunkers” – that helped the company recoup its market share. Toyota revised its consolidated vehicle sales for the fiscal ending Mar 31, 2010 from 6.6 million to 7.03 million units, an increase of 430,000 units. This figure reflects the increase in sales due to the success of various incentive programs launched by governments across the world to stimulate demand in the industry as well as sales of the company’s own hybrids and other environment-friendly vehicles.

Consequently, the consolidated net revenue forecast was upgraded to ¥18 trillion ($191 billion). However, the company anticipates an operating loss of ¥350 billion ($3.72 billion) and a net loss of ¥200 billion ($2.13 billion) for fiscal 2010.

Zacks Investment Research

(TM) Toyota Motor Asks for Supplier Discount

Earlier this week, Tata Motors revealed that it expects to expand its market share in utility-vehicle space by 3% with the introduction of its Grande MKII utility vehicle. According to Dow Jones, the MKII could raise Tata’s utility-vehicle sales by about 30%. The company also expects to deliver 100,000 Nano cars, known as the peoples’ car for its affordability, to customers by the end of next year.

In the second quarter of its fiscal ended Sep 30, 2009, Tata Motors returned to profitability helped by aggressive cost reduction measures and recovery of sales for its Jaguar and Land Rover brands in the U.K. The company posted a net income of Rs.217.8 million ($4.7 million) in sharp contrast to a loss of Rs.9.4 billion ($201.7 million) during the second quarter of last year. Sales volume (including exports) for the quarter grew 17.4% to 158,575 vehicles.

Jaguar and Land Rover – acquired by Tata from Ford Motor (F) last year – went through massive restructuring programs after its acquisition. Last year, the company had cut about 2,500 jobs in the division. It has also frozen pay and canceled bonuses.

These have led Jaguar and Land Rover to post an operating profit of £41.29 million ($68 million) supported by a 23% growth of wholesale volumes over the previous quarter and aggressive cost reduction efforts.

Zacks Investment Research

(TTM) Tata Motor’s Shares Hit Year High

This is a recovery from a historic low of $1.50 in March this year, helped by the company’s aggressive restructuring plan, which also helped it bypass bankruptcy unlike its cross town rivals General Motors (MTLQQ) and Chrysler Group.

According to Autodata, Ford’s market share has climbed 1 percentage point to nearly 20% during the first 11 months of the year. In November, the automaker succeeded in sustaining a strong position in the U.S. market by posting flat sales at 122,846 vehicles. The automaker’s sales of crossovers grew 26% while its car sales rose 14%, driven by a fuel-efficient product line.

Ford’s sales in Europe’s 19 core markets have leapt 19.8% to 113,100 vehicles in November. This resulted in a year-to-date market share of 9.1% for the company, the highest since 1999.

The European sales included a registration of 99,800 Ford cars, the highest since November 1999. The automaker’s market share in the month went up in 14 out of 19 European markets.

Recently, a report suggested that the projected resale value of 2010 Ford vehicles (Ford, Lincoln and Mercury) after 36 months in service has gone up by an average of $1,310 per vehicle compared to the 2009 model year. This is the largest increase compared to other automakers based in the U.S.

With this, some of Ford’s vehicles have also succeeded in defeating Asian automakers including Toyota (TM), based on residual value after 36 months in service. For example, the 2010 Ford Fusion midsized sedan has been expected to be worth more than the 2010 Toyota Camry by $687. The residual value of the 2010 Ford Flex full-sized crossover also commands a $1,800 premium over Toyota Highlander.

In the third quarter of the year, Ford reverted to profitability by posting a net income of $873 million or 26 cents per share, overriding the Zacks Consensus Estimate loss of 15 cents per share as well as the year ago loss of 6 cents per share. The company also boasted an operating profit of $873 million in the third quarter or 26 cents per share compared with a loss of $3 billion or $1.32 per share a year ago.

Zacks Investment Research

(F) Ford Motor’s Shares Hit 4-Year High

Ford accredited its improved quality and design as well as fuel economy in vehicles for the increase in residual value. For example, the redesigned 2010 Ford Taurus’ projected average resale value after 36 months in service exceeded the 2009 Taurus by $4,862.

Further, some of Ford’s vehicles have succeeded in defeating Asian automakers, including Toyota (TM), based on residual value after 36 months in service. For example, the 2010 Ford Fusion midsized sedan has been expected to be worth more than the 2010 Toyota Camry by $687. The residual value of the 2010 Ford Flex full-sized crossover also commands a $1,800 premium over the Toyota Highlander.

Last month, Ford succeeded in sustaining its strong position in the U.S. by posting flat sales at 122,846 vehicles. The automaker’s sale of crossovers, which imitates SUVs but with a higher fuel-efficiency, grew 26%. Its car sales rose 14%, driven by a fuel-efficient product line.

Ford’s auto sales in Europe’s 19 core markets have leapt 19.8% to 113,100 vehicles in November. This resulted in a year-to-date market share of 9.1% for the company, the highest since 1999.

Zacks Investment Research

(F) Ford Tops in Vehicle Residual Value