Items Tagged With Automobiles

Nine months ago, Popular Mechanics wondered aloud why the automotive industry couldn't develop a car that could get 100 miles to the gallon.  While progressive-minded individuals have reached triple digits on occasion by mixing solar energy with a traditional powertrain, no automaker has taken the initiative to mass produce an eco-friendly and reliable model.  The Honda (HMC) Civic compact came the closest of any 2006 gas-powered model with 40 mpg on the highway while the diesel-powered Audi (NSU) A2 and Volkswagen (VOW) Lupo 3L have reached 80 mpg, albeit with emissions that wouldn't measure up to EPA standards.  With new EPA testing methods knocking down mpg figures even more for the 2008 model year, the future doesn't look too bright for anyone looking to reach the 100 mpg milestone in the near future.

Unless you've turned off your TV or sworn off the Internet for the past couple of weeks, you probably know about the recent Don Imus controversy.  If you haven't heard about it, the long-time radio shock jock made an off-hand comment on the air about the Rutgers women's basketball team, referring to the predominantly African-American players as "nappy-headed hos."  CBS (CBS) initially suspended Imus for two weeks, then fired him in the wake of serious public backlash led by Al Sharpton and Jesse Jackson.  The uproar over the incident reminded all of us about the thin line between free speech and unwarranted verbal venom.

Welcome to April.

On Sunday night, 3/30, Al Gore announced his new $300 million public service ad campaign on "60 Minutes." The hopefulness of the moment was undercut by the Toyota (TM - $102.90) dealer ad that preceded the segment.

The Toyota spot featured good deals on the Sequoia and the FJ Cruiser. The existence of the FJ Cruiser, in particular, can tell you more about the entire global warming conundrum than Al Gore can, because what's interesting about the FJ -- a toy S.U.V. gas guzzler that gets 16-18 mpg -- is that it was designed by Toyota years after the Prius.

The Toyota spot, the types of vehicles on sale, and Gore's new strategy, all combine to underline a theme: not much is happening, not much progress is made.

This is like a dream where your feet are stuck in mud.

Photo: hobbes8calvin, Creative Commons, Flickr

A wise man once said that there's a first time for everything. Apparently the old adage holds true in the automotive industry as Toyota edged out General Motors in first quarter car sales for the first time in history. Industry analysts saw it coming as early as 2005, so the announcement didn't come as much of a surprise to those who had already watched the Japanese automaker pass Ford on its rapid ascent to the top. For now, Toyota (TM) holds a slim lead over GM (GM) in 2007 with 2.35 million units sold versus 2.26 million units for the declining domestic giant. Toyota's global sales figures increased 9% from the previous quarter.

At this point, marketwatchers have come to the consensus that Toyota's steady progression past the Big 3 means it will likely hold the pole position for more than just one quarter. The recent developments reflect more than just the major domestic automakers' inability to produce a top notch hybrid like the Toyota Prius. The Big 3 need to develop a streamlined design process, treat suppliers and retail customers more like people and less like variables that affect the profit margin, assign well-defined duties to their employees, and focus their energy on a couple of key brands instead of stretching themselves too thin.

Of course, GM CEO Rick Wagoner and others tell us that the #1 spot doesn't really matter and that the market has room for many winners. GM did pick up 3% in first quarter global sales and performed especially well overseas with a 17% sales increase in Latin America, the Middle East, and Africa. Analysts tell us that the key battleground will shift from America and Japan to highly-populated countries with growing economies such as China and India. In fact, the automotive industry spent $1.9 billion on advertising in China in 2006. Look for that number to increase as urban residents in those areas earn more income to spend on better transportation. Whoever gains the upper hand in Asia may very well have a distinct advantage for the foreseeable future.

So which automaker has the better outlook? Toyota has the edge for now. High growth and proximity to Asian markets add to the strong momentum that the Japanese automaker has built over the last few years. While GM has certainly made some positive strides, its stock presents a classic case where speculative investors can buy low and hope the brass will do what it takes to reward their faith. Unfortunately, analysts say that high debt and low sales may have GM on the ropes longer than it wants to admit.

Disclosure: I do own a mutual fund that may contain one or more of the stocks mentioned in this post. However, any interest that I may own is subject to the discretion of my mutual fund manager.

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