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RealMoney.com: Automakers
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Patchy Performance From Asian Automakers

By Vasu Vijayraghavan
RealMoney contributor

8/9/2007 2:00 PM EDT
Click here for more stories by Vasu Vijayraghavan
 

The surprisingly good quarter for American automakers was evidenced by the earnings results for apple pie companies Ford (F - commentary - Cramer's Take) and General Motors (GM - commentary - Cramer's Take), as well as the companies such as Michigan-based auto supplier Lear (LEA - commentary - Cramer's Take)that rely on them for results.



July North American sales of both domestic and foreign automakers, however, didn't sizzle like the heat. Hit by a double whammy of a weak housing market and higher crude, most Americans weren't taking chances, and automakers reported poor summer results, despite increases in incentive spending on the part of Japanese automakers such as Toyota Motor (TM - commentary - Cramer's Take) or even Honda Motor (HMC - commentary - Cramer's Take).

Toyota's launch of its new Tundra truck didn't seem to convince most Americans; in any case, not much action is being seen in trucks when a greater concern seems to be fuel efficiency. Insofar as some models are doing better than others, it is because they play on a particular niche market; such is the case for Nissan Motors' (NSANY - commentary - Cramer's Take) subcompact Versa (considered a "chick car," being advertised with the slogan, "lots of room for big hair").

Toyota saw its July sales decline by 3% overall, with the hardest hit models being the ubiquitous Camry, where sales fell by 29%, or the cheaper Yaris, where July sales fell by 20%. As if to show who's the boss, however, the American consumer, especially females, has been rushing to buy Toyota's Prius hybrid in record numbers, even if the jury is still out on these newfangled cars.

In other words, the typical American consumer is all over the place this summer in his or her car-purchase decisions. As the following review of Asian automakers will show, dealerships all over America are probably scratching their collective heads on where the fickle American consumer is going next.

Toyota

As the second largest automaker in the world, Toyota has had a roller coaster second quarter compared to immediate rival General Motors, which pulled ahead of Toyota during the quarter, but remained No. 2 for the first half of the year. Sales of Toyota's hybrid cars have exceeded the 1 million mark, and its North American market share has climbed to 15%. Second-quarter 2007 earnings increased by 6.9% compared to 2006, but of the $3.1 billion increase in operating income, Toyota attributed $2.47 billion to favorable exchange rate effects.

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At the time of publication, Vijayraghavan was long Mazda, Tata and Fiat.

Vasu Vijayraghavan was an academic finance professor at the University of Paris who has now turned to a new career as a financial consultant. As an academic, she wrote on corporate governance issues, especially in the European context, and she believes in a long-run and balance sheet approach to stock picking.

Currently, Vasu is working as a consultant for lawyers, doing business valuation. She is a Level II CFA candidate and enjoys writing long/short and earnings calls pieces for TheStreet.Com.

Vasu holds a Ph.D. from the University of Michigan and a B.A. from Harvard University.



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