- Summary: While speculation about a merger at GM has driven its stock price up recently, a clearer picture of investor sentiment for the U.S. auto industry can be had via the auto-parts makers who supply goods and services to GM and other big auto makers. While GM shares are up 40% since the beginning of the year, companies such as American Axle & Manufacturing (down 15%) and Lear (down 29%) are showing the 'real situation' in the industry. Bonds they issue have been hit as well, and default protection for Cooper Tire, Goodyear and ArvinMeritor has increased. With Ford reporting today, eyes will also be on the impact to these hard-hit suppliers. The slowing economy, high fuel prices, and ongoing market share loss to foreign automakers all contribute to the suppliers' problems. If things worsen, the larger vendors may begin to receive more orders, as GM and the other major automakers seek suppliers' stability and not only price. These larger vendors include Johnson Controls, BorgWarner and TRW Automotive Holdings.
- Comment on related stocks/ETFs: Catablast recently laid out the challenges facing Goodyear, and a prescient analyst recently downgraded Johnson Controls -- see his track record.
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