03 December, 2007

Markets Stumble out of the gate in December, Automaker sales Struggle

The month of giving and receiving started on a bumpy note for North American Markets as major indices were all lower. Nasdaq was the biggest loser on the day with an almost 1% drop, compared with the Dow, S&P and Canadian TSX, all losing between 0.3 and 0.6%. Today's selling was in part due to lackluster Automotive sales numbers.

General Motors (GM) reported a decline of 11% in sales numbers, while its major competitors Ford (F) and Toyota (TM) reported flat month-over-month sales. The only increases were seen in Honda (HMC) and Nissan (NSANY). It is clear that high oil prices are skewing buying towards smaller and more fuel-economic vehicles and that's putting a hefty dent in truck sales for the American brands. Punctuated by GM's 15% drop in Truck Sales.

The big story that is oil keeps rumbling around in the head of the average consumer and it is most evident in consumer spending on cars. In fact demand for smaller cars, more efficient cars, and even hybrids is remaining strong, according to Toyota. Seemingly though, what hope do big time car makers have in the United States? Their consumer is witnessing a de-valuation in home equity, gas prices that make it more than $50 to fill a tank, and a currency that worldwide is eroding faster than the Dolphins chances of winning a game this NFL season.

Truth be told, its a tough time for the car makers, and the executives are well aware of the difficulty. The trick will be, which company can provide the most incentives and the most practical products going forward into next year. From my view owning the automakers is a tough call right now but I like the path of Toyota and Honda, as those companies seem to follow consumer trends better and more nimbly than their American counterparts.

Disclosure: Author does not own any of the companies mentioned above

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