The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK ( MagicDiligence) -- It comes as no great surprise that investors would be wary about investing into the automotive sector: 2008-09 are fresh in people's minds, during which American automakers General Motors (GM) and Chrysler filed for bankruptcy, and Ford (F) barely survived. Auto suppliers such as Delphi and Lear (LEA) trudged into bankruptcy court. To put it simply, the industry was decimated by the "Great Recession."
Even in the best of times, this is a difficult business. Auto sales are highly correlated to the general economic cycle. Capital costs for production equipment are high. Labor disputes and rising commodity costs are ever-present dangers. Consumer tastes can change quickly, wreaking havoc on model design plans that take years to come to fruition. Tight credit markets make it difficult for many buyers (consumers and businesses) to finance new vehicle purchases. And, historically, both automakers and suppliers have carried poor balance sheets with large debt burdens, "living on the edge" in a very unpredictable industry.
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