Yesterday, I had the pleasure of attending press day at the New York Auto Show. I was part of a group which was hosted by Shaun Bailey of Road and Track magazine. Besides being an excellent editor and an automotive enthusiast, Shaun has a very good grasp on the inner workings of the auto industry.
Electric cars and hybrids were a main topic of discussion today. The group consisted mainly of automotive sector analysts, money managers and other Wall Street types. They were all interested in how, when and what materials will be used in the manufacture of alternatively powered vehicles. What they seemed to miss was that 95% of the new vehicles on display were conventionally powered. Now it is true that alternative power vehicles will garner a greater share of the market place, conventional power will be with us a while longer. So instead of discussing what commodities one should buy, let's discuss companies.
In the taxable fixed income arena, the discussion comes down to three companies: Ford, GM and Toyota. Yes, we could discuss parts suppliers, but since they supply parts for many different car makers, discussing them would be more of a sector call. Let's just stick to automakers.
We will start with Toyota. The world's largest automobile manufacturer has two problems. The first is the stigma over sticking throttles. Secondly Toyota doesn't have a charismatic vehicle which appeals to younger buyers marketed under its own name. Help is on the way. First: The sticking accelerator pedal problems have not been able to be duplicated in testing. Secondly: A new sporty car, which should spark youthful interest in the brand.
GM has experienced a sales rebound, but the picture Shaun Bailey paints is not pretty. He tells a tale of massive product development cutbacks and defecting engineers. In fact, the only engineering team he considers to be "passionate" about their task at hand is the Corvette team. One other bright spot at GM comes from Buick of all brands. Buick has not appealed to many people born after 1940 for quite some time. Buick is making strides in changing that. The new Regal (which has already been available in China for two years) is very sharp. There are plans to bring high-performance, turbocharged engines to Buick. Will this be new era of power and performance at Buick not seen since the 1980s with the Grand National and GNX? It is too soon to tell, but there is reason to be hopeful.
Chrysler is a mess. In fact, in order to survive, Chrysler may not sell many Chrysler vehicles. The company's nine year marriage to Daimler left it without competitive small car platforms and power plants. This is a shame since Chrysler had the best domestic small car platforms and engines in the 1990s.
The good news for Chrysler is that FIAT has competitive small and mid-size car platforms and it has Ralph Gilles at the helm here in the U.S. Mr. Gilles, who was instrumental in designing the latest Dodge Viper and Chrysler 300. He is a car enthusiast through and through, has been appointed by FIAT CEO Sergio Marchionne to oversee Chrysler. Mr. Gilles has decision making capacity and has a direct line to Mr. Marchionne. I am am cautiously optimistic that there will be a Chrysler, but it will have a pronounced Italian accent.
The real winner is Ford. Not only has Ford avoided bankruptcy, it has an engineer for a CEO in Alan Mulally. It is sourcing platforms from its European unit (the new Focus and Fiesta were very nice) and it has held onto its dedicated team of engineers. Look for big changes from Ford, including with its best selling F-150 pick up truck (think turbo 6 instead or along side V8s. I am glad I bought some Ford common on Wednesday.
All in all the technology now available is amazing. Cars of just five years ago seem primitive. If the economy can start clawing its way back, the auto sector could be a fun place to be (with the possible exception of GM).
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