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Big Three: Revving Up For a Better 2012


As automakers geared up for the start of the week-long 2012 North American Auto Show in the Motor City, the “Detroit Three” were firing on all cylinders. Industry experts predict a promising year for the U.S. auto market, and investors seem encouraged.

2011 sales figures released from GM, Ford, and Chrysler last week, revealed stronger-than-expected numbers.

General Motors Co. (NYSE: GM) “posted a 13 percent U.S. sales increase last year, to 2.5 million vehicles, gaining market share for the first time since 2002,” according to Automotive News. Sales climbed in part due to the 8.3 percent increase in the Chinese market from 2010.

Ford Motor Co. (NYSE: F) “said its Ford brand sales were up 17 percent in 2011. Overall, the automaker’s total U.S. sales added up to more than 2.1 million vehicles in 2011, a year-over-year gain of 11 percent. In December, Ford’s sales were up 10 percent,” said the Detroit News.

“For the year, Chrysler Group sales rose 26 percent to 1.37 million units. All four of its core brands posted double-digit increase.  Chrysler has now gained U.S. market share in two consecutive years.  Chrysler Group’s 2011 U.S. market share increased to 10.7 percent from 9.4 percent in 2010,” according to Automotive News.

Auto industry analysts and executives have stated that projections of US auto sales for 2012 “to grow 4 percent to 9 percent, the 3rd consecutive yearly gain.” Although the US market will not reach its “former profitability levels of 17 million annual sales for some time,” the potential for growth is quite significant considering the government bailout from whence they came.  However, “the main reason that automakers are not more confident is the threat that the European debt crisis may set off a global slowdown,” as noted by Reuters.

In the same report by the Detroit News, “Automakers have reasons for optimism in 2012. The nation’s auto fleet is now the oldest it has ever been — with the average vehicle being 10.7 years old — and affordable credit and low interest rates has made financing a new vehicle easier.”

GM projects its international market share to gain further in both China and South Korea along with sales reaching double-digit status in South Korea in 2012.

As for Ford, its redesigned 2013 Fusion will challenge the best-selling midsize sedan Toyota Camry, and, if according to Jean Jennings of Automobile Magazine who stated to Detroit’s NBC-affiliate, WDIV-TV, “Ford will stick a knife in the neck of a Camry,” Toyota’s livelihood is on the line; still recovering from the March 11earthquake.

Chrysler, on the other hand, announced yesterday that production on a Maserati sport utility vehicle- tentatively named the Kubang- will begin in 2013.  “The [luxury] vehicle will be built at the Jefferson North assembly plant in Detroit alongside the Jeep Grand Cherokee and Dodge Durango,” according to the WSJ.

Analyst outlooks for the major US automakers are positive and I couldn’t agree more.  Despite two years of tough setbacks- plunging car sales, credit-depleted customers, and bankruptcy- the auto industry is bound for full recovery.  For this very reason, investors will begin to notice that – with the exception of Daimler- General Motors and Ford are undervalued and will come to outpace the market as speculators move out of the way and GM regains the helm as the “Number #1 Automaker in the World”.

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