The financial crisis nearly killed Ford and GM, but now auto sales are climbing in the United States and so are their share values. Average car age is growing and finance rates are low creating a scenario where many cars will be sold.
Aug. 07, 2013 - CHUO-KU, Japan -- Sales are booming for American auto-makers Ford and General Motors. Before the 2008 financial crisis, approximately 16 to 17 million cars and trucks were sold yearly in North America. In 2009 the figure fell to 10.4 million, but last year it bounced back to 14.4 million. Analysts at Harver Group believe auto sales will reach 15.4 million this year and that this figure will reach 18 million within five years.
Harver Group Analysts have identified five key factors that indicate that auto-makers will reach the sales figure and restore profitability;
1. The average age of cars on the road is continues to increase, recently reaching a record of 10.6 years.
2. Finance rates are and will remain low for the next several years. It is unlikely that the Federal Reserve will increase rates that determine auto loans. Auto dealers have reported that obtaining credit is much easier than it was a few years ago.
3. Ford and General Motors will soon launch a number of new vehicles, which will stimulate demand and drive consumers into the showrooms.
4. As new home construction rebounds with its own demand factors, will cause a wave of pick-up truck sales.
5. In 2007 the average auto worker earned $75 an hour in wages and benefits, now this figure has decreased to $55. Assembly-line automation has become more prevalent, meaning more cars are made with fewer workers and higher profits.
The final hurtle of returning to maximum profitability for Ford and General Motors is Europe. Both companies are reworking their cost structure in Europe, which could bring break-even results by next year. Our analysts predicts auto sales to fall to 16.7 million cars this year, but bounce back in 2015 selling 17.7
Million cars returning the manufactures to profit.
"Our analysts recommended buying both stocks with target values for Ford and General Motors of $20 and $47 respectively" said Peter Anderson, Senior Vice President of Mergers and Acquisitions at Harver Group in Tokyo.