The contrast in the stock prices of DaimlerChrysler AG (NYSE:DCX), Ford Motor (NYSE:F), and General Motors Corp. (NYSE:GM) could hardly be more striking (see chart below). Daimler's stock has risen from a 52-week low of $38.77 to almost $60, near its high for the period, while Ford at $7.50 and GM below $20 are both near their lows. Multi-year lows we should add.
The market capitalization story tells a more grim tale. GM has an $11.3 billion market cap against 05 revenue of $192.6 billion. Ford has a cap of $14.1 billion against revenue last year of $177 billion. At the other end of the spectrum, Daimler's market cap is $61.1 billion with revenue comparable to Ford's at $177 billion. For comparison, Toyota's (NYSE: TM) total market value is $183 billion, but it operates on a March 31 fiscal. On that basis for the last year, Toyota's revenue was $173 billion, according to Yahoo!Finance (finance.yahoo.com).
Why the huge disparity in value? For starters, Daimler is doing better at the P&L level. In Q4 05, the company had revenue of $49.1 billion, up from $44.7 billion year earlier. Net income for the period was $1.14 billion up from $623 million in the prior year. Financial services and the Chrysler Group did particularly well.
DaimlerChrysler sold a little over 4.8 million units in 2005, slightly more than 2004. And, expectations are that unit sales will not change much this year. Consequently, the company does not expect total revenue to move up much for 2006.
All of this still begs the question of why the company's stock price has done so well. DaimlerChrylsler's answer has two pieces to it. First, the company has a program to introduce 50 new models from 2005 to 2008. If these get the kind of reception that newer models like the Chrysler 300 have received, it is a solid bet that unit sales should benefit. The second part of the answer is the DaimlerChrysler drive to improve operating efficiency. The company points to a building time of 4.2 hour per vehicle improvement from 2003 to 2004, and expects to show further progress when the numbers are out for 2005.
DaimlerChrysler has said publicly that it expects much of its growth in future years to come out of Asia. But, the same could be said for GM, Ford, and Toyota, so this can hardly be considered a key differentiating factor. According to Forbes (www.forbes.com), Chrysler's costs to carry retired employees are not as great as they are at GM or Ford. This is clearly a benefit when analysts look at the total corporate cost for each car built. A review of the DaimlerChrysler balance sheet would also indicate that it is better off than Ford or GM. But, GM's drive to divest itself of assets could substantially improve its cash position.
DaimlerChryler's premium stock price is based, at least in part, on the fact that it has a hot hand in new product introductions, especially in its Chrylsler line. The Mercedes unit did poorly on the operating income line last year, but the cars are still considered among the gold standards for luxury. Wall Street clearly believes that Mercedes can be fixed. Daimler's commercial vehicle and finance units have also done well and lend a supporting financial role to the car business due to their fairly steady stream of income.
Daimler is not immune from the issues that plague the car industry. Toyota is still the juggernaut that everyone else must beat, or, at least, hold at bay.
Under the circumstances, the Daimler stock has done unusually well. But, until it breaks from the pack and is mentioned more often in the same breath as Toyota, the stock is unlikely to rise above $60.
DCX, F, GM: 1-yr Performance
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also the president of Switchboard.com when it was the 10th most visited site on the internet, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at firstname.lastname@example.org.