Toyota (NYSE: TM) has already said that 2008 will be a bad year. Now it has revised down its sales numbers for 2009. The cut is about 7% and takes the company's estimate to 9.7 million vehicle sales worldwide.
The news may be bad for Toyota, but the company has a good balance sheet and has maintained a low cost base for years. Europe and North America is where the Japanese company said it is sustaining the most damage. According to The Wall Street Journal,the firm is "bracing for a long slowdown as robust sales to developing markets are failing to offset huge losses in the crumbling U.S. market."
For General Motors (NYSE: GM) and Ford (NYSE: F) the news could not be worse. Both rely on the U.S. market for the lion's share of their sales. Both are counting on some recovery in 2009 to allow them to stop the bleeding out of cash that threatens their abilities to remain independent and solvent.
The two U.S. car companies were going to go to the capital markets to raise money. Whether debt or equity investors would give them money becomes more problematic as each month of poor sales goes into the record book.
The government is talking about a $50 billion bail-out for U.S. car companies. That may be the only capital they can get.
Douglas A. McIntyre is an editor at 247wallst.com.
Stock futures were flattish Thursday morning as oil prices rose due to continued concern over Gustav. However, some retailers have posted better-than-expected earnings. Still, there are several economic reports due before the open that could sway sentiment either way, including revised GDP for the second quarter. [Update: Futures turned positive after the report U.S. gross domestic product grew by 3.3% in the second quarter - much higher than previously stated.]
U.S. jeweler Tiffany & Co (NYSE: TIF) posted double the quarterly profit from a year ago on Thursday, benefiting from strong international sales and solid tourist spending at its New York flagship store. Net profit was $80.8 million, or 63 cents per share, in its fiscal second quarter, up from $40.5 million, or 29 cents per share a year earlier, and beating estimates of 55 cents per share. Revenue grew 11%. Tiffany also raised its 2008 profit outlook on strong sales in Europe and Asia and expected improvement in the U.S. TIF shares are up over 6% in premarket trading.
On the other hand, department store retailer Sears Holdings (NASDAQ: SHLD) reported a 62% plunge in second-quarter net profit to $65 million, or 50 cents per share. Excluding a gain, Sears earned 21 cents, trailing some analysts' estimates by 15 cents. Chief Executive Bruce Johnson said the results were affected by the "slowing economy." It seems some, though, still have confidence in Chairman Lampert.
Fannie Mae (NYSE: FNM), the mortgage finance giant, shook up its executive ranks Wednesday. "Its chief financial officer and two other top executives are leaving the company. Three current executives were promoted to replace them." CEO Mudd kept his job. Shares of Fannie and sibling Freddie Mac (NYSE: FRE) have been rising after concern over a government bailout lessened. In premarket trading, FNM and FRE shares are up over 6% and 5% respectively.
The auto industry is deep in the weeds right now, particularly in the United States. American manufacturers are hemorrhaging money -- General Motors (NYSE: GM) alone has lost $30 billion in the last three years -- as high gas prices and an (unofficial but very real) recession forces consumers to abandon their American-made trucks and SUVs by the millions.
Even with the pronounced shift toward smaller and more efficient cars, the overall auto market in the U.S. is shrinking thanks to the poor economy, and most manufacturers are selling fewer vehicles. But one company stands out as an exception to the rule of declining sales: Honda Motor Ltd. (NYSE: HMC). In the first seven months of 2008, Honda increased its sales by over 3%. By comparison, Chrysler lost 22%, GM fell 17%, Ford (NYSE: F) lost 14% and even mighty Toyota (NYSE: TM) saw a decline of 7%.
An interesting quote in The New York Times from Tetsuo Iwamura, the president of Honda's North American operations, sheds light on how Honda has managed this impressive feat. Honda, Iwamura said, "is a philosophy-driven company." And what is Honda's philosophy? According to Iwamura, "we want to make Honda the company that society wants to exist."
From an American perspective, this is an extraordinary statement. American automakers have followed a very different philosophy for many years, one in which fat and easy profits from poorly designed and hopelessly wasteful SUVs take precedence over the long term health of both the auto industry and society as a whole. But Detroit is suffering now for its short-term approach, while Honda is showing both consumers and investors the value of planning for the long run. And at $32 a share and a P/E of 10, Honda looks like a good long-term buy.
'Tis the election season of 2008 and any industry in a mess has exactly two months to make its case and claims to a beneficent US Congress. Who, after all, wants to harm or neglect the already struggling US auto industry.? With General Motors (NYSE: GM) and Ford (NYSE: F) having reached their lowest market valuation in more than a generation, why not ask for the bailout...ah, sorry, assistance...ah, sorry again...low interest loans to re-tool their respective factories for future fuel efficient vehicles.
What's the deal here? The energy bill from 2007 allows for low interest loans to create next generation technologies for energy efficiency. The auto makers want to press Congress hard for their share when the summer recess is over...and certainly before the election. The auto makers say they need $50 billion to be competitive again.The rub as some see it is the desire of the auto makers asking for twice the amount that has been earmarked for such projects. Why not, asking for twice the amount right now is opportunistic as politicians are running for re-election and want to hang their hats on any good issue that will save jobs and create goodwill.
The Big Three seem to think that they are troubled money center banks. They want Washington to get them out of their financial problems. According toThe Wall Street Journal, "Battered by high gasoline prices and weakened earnings, the Big Three auto makers and their suppliers are now seeking significantly more help from Washington in the form of government-backed loans than the $25 billion they had previously been authorized to receive."
While the auto companies are important to the U.S. economy, they can be "replaced." If General Motors (NYSE: GM) or Ford (NYSE: F) fail, their brands and manufacturing facilities will almost certainly be bought by an overseas car company. VW has said it would like a larger market share in the U.S. So has Nissan. Both have the balance sheet to buy assets from a failed U.S. car company.
There is a sort of cruel reality to the thought that companies considered pillars of the U.S. economy could be gone sometime soon. It is certainly an indication that manufacturing is become less and less critical to the overall GDP of America. It is also a sign the the inefficiency of Detroit's habits have finally gotten so severe that it needs to turn to the government and not the capital markets for aid.
If the car companies cannot make it and cannot raise money on their own, they should be allowed to fail. That may mean that Toyota (NYSE: TM) will become the largest seller of cars in the U.S., but there was never any rule that said bad management would continually be rewarded.
Douglas A. McIntyre is an editor at 247wallst.com.
General Motors (NYSE: GM) has just announced that it will extend warranties on may of it used cars. According to Reuters, "GM said it would begin offering a 12-month, 12,000-mile "bumper-to-bumper" warranty on all used cars and trucks certified as eligible for the repair coverage by participating GM dealers." The firm has already said it will return to the extensive use of incentives to clear out new car inventory.
GM should have a better solution than to lose more money on each new car it sells and add costs to market its used products. It turns out that is not the case. Vehicle sales in the U.S. are just too awful and Toyota (NYSE: TM) and Honda (NYSE: HMC) take more market share each month.The talk of GM doing into Chapter 11 rings a bit more true as the time passes.
GM is now out of options. It still makes money overseas, but that is overwhelmed but its North American deficit. GM says it will stick to supporting all of its brands except the Hummer. That may end up not being true. GM did say it was moving away from incentives. It did not work out terribly well.
GM has a couple of brands that still sell only a modest number of cars. Saab is one. Saturn in another. Saab could be sold. Saturn could be closed. Saturn might not even be missed.
If GM has to continue using incentives, it will get to the point where it cannot support the marketing and product development costs of all of its brands. That point is probably coming in the next quarter.
Douglas A. McIntyre is an editor at 247wallst.com.
U.S. stock futures were higher Wednesday morning, indicating markets could start on a positive note after two days of declines. Good results from Hewlett-Packard helped lift sentiment, overshadowing financial sector concerns, despite new worries over Fannie and Freddie. Oil remained steady ahead of inventory report later today.
Hewlett-Packard (NYSE: HPQ) shares are rising over 3% in premarket trading after the computer maker reported a 14% rise in fiscal third-quarter earnings and issues current-quarter earnings guidance that exceeded analyst estimates. Tech shares could get a boost from H-P.
Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) remain in focus due to concerns that a government bailout of the two firms is inevitable and would mean wiping out investors. Freddie Mac on Tuesday was forced to pay its steepest borrowing premium in 10 years, which is raising fresh concerns about its ability to withstand the housing and credit crisis without government help.
eBay Inc. (NASDAQ: EBAY) is cutting fixed-price seller listing fees. eBay will now charge 35 cents to list any number of the same types of fixed-price items. This is a dramatic change from charging fees based on item price.
One of the few hopes the U.S. car companies have had is that they have been perceived as closing the quality gap with Japanese models. Recent JP Power data shows Detroit running in a dead heat with imports in the consumer satisfaction race.
That bubble has been at least partially burst due to new information from the University of Michigan's American Customer Satisfaction Index. According to the AP, "U.S. car buyers are growing less satisfied with their purchases from domestic automakers while their Asian and European competitors continue to improve."
In the new survey, BMW and Lexus tied for the top spot followed by Honda (NYSE: HMC) and Toyota (NYSE: TM). Several brands from GM (NYSE: GM) and Ford (NYSE: F) dropped down the rankings.
At the risk of stating the obvious, Detroit is in such deep trouble that a perceived drop in the quality of its cars can only make its recovery more difficult. There are several ways around that, but none of them are very palatable.
GM yesterday introduced buyer incentives across most of its brands. That means its margins on those vehicles will be lower. It may pick up some market share, but any victory there will be costly. The U.S. car companies are cutting their marketing budgets, so they cannot "advertise" their way out of the problem.
Effectively giving cars away can certainly help hurdle the quality barrier, but losing a lot more money could sink a large U.S. auto company.
Douglas A. McIntyre is an editor at 247wallst.com.
Daimler AG (NYSE: DAI) closed at $59.55 Monday. DAI overall option implied volatility of 35 is near its 26-week average of 33 according to Track Data, suggesting non-directional price movement.
Ford (NYSE: F) closed at $4.89 Monday. F overall option implied volatility of 78 is above its 26-week average of 69 according to Track Data, suggesting larger price movement.
General Motors (NYSE: GM) closed at $10.36 Monday. GM September call option implied volatility is at 87, puts are at 103; above its 26-week average of 72, suggesting larger price fluctuations.
Honda (NYSE: HMC) closed at $33.42 Monday. HMC over all option implied volatility of 33 is near its 26-week average, suggesting non-directional risk.
Toyota Motor (NYSE: TM) closed at $90.75 Monday. TM overall option implied volatility of 29 is near its 26-week average, suggesting non-directional price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
There's an upside and a downside regarding major auto companies and the quest to develop vehicles with increased fuel-efficiency.
The upside: Auto makers are positioning themselves to carve out niches in fuel-efficient technology and design, The Wall Street Journalreported Monday (subscription required).
The downside: Auto makers appear to be exhibiting a 'herd mentality' on the current propulsion technology -- hybrid engine cars with both a modest electric power source and a mainstay internal combustion engine. An electric hybrid focus
Following up on its successful electric-gasoline Prius hybrid, Toyota (NYSE: TM) announced it will make hybrid engine systems available on all models by 2020, The Journal reported. Meanwhile, Honda said it would import new hybrid technology to the U.S. to compete with Toyota and Ford (NYSE: F) plans to double its hybrid lineup next year, and Chevrolet's (NYSE: GM) Volt hybrid that will go on sale in 2010.
Economist David H. Wang said investors and consumers should not be overly optimistic or pessimistic regarding the sector's concentration on electric-fuel hybrids.
Toyota Motor Corp. (NYSE: TM) says that a hybrid version of every one of its vehicles will be available by 2020.
According to The Wall Street Journal, "The announcement came as all of the auto makers at an industry conference this week in northern Michigan maneuvered to carve out their own niches in fuel-efficient design."
But, 12 years from now, hybrids may be useless.
Nuclear energy may drive 100% of the U.S. needs for electric power.
The massive oil reserves found off Brazil and in the Arctic may have driven up oil supplies so that gas is back to $1.25.
Wind power may have undercut the need for oil-heat in many American homes.
Solar power will probably have replaced other fuels for furnishing most homes and small businesses with energy.
The hybrid car may not be such a great idea.
Douglas A. McIntyre is an editor at 247wallst.com.
This post is one in a series on prominent company nicknames. See all 25, and share your thoughts and memories about The General below in the comments.
"The General" does not deserve its nickname any longer. Founded in 1908, General Motors (NYSE: GM) was the largest car company in the world for almost seven decades. It lost that distinction to Toyota (NYSE: TM) during the last year.
GM has 50% of the U.S. car market at one point. That is now down to 20%.
"The General" still maintains a number of the most successful brands in the world: Cadillac, Buick, Chevy, and Pontiac. Years of neglect have pushed the company into a position where it does not make competitive cars in its home market. It greatest current sales successes are in the Chinese market and Latin America.
In 1955, "The General" was the No.1 company in the Fortune 500. It held that position until 2000.
Alongside General Electric (NYSE: GE), GM is probably the most important American corporation of the last 100 years. That won't be true going forward.
Douglas A. McIntyre is an editor at 247wallst.com.
Toyota (NYSE:TM) built a great deal of its US business, especially in the 1970s and 1980s, on assembling cars inexpensively in Japan and shipping them to the US. Then the world's largest vehicle maker built plants in the US to satisfy rising demand for its products and to offset resentment that it was only an importer with no interest in employing American workers.
Toyota may now regret its decision to build big manufacturing facilities on US soil. Many of the new facilities were set up to make SUVs and pick-ups for a market that moved to these vehicles in the 1990s and the current decade. High gas prices have killed that business over the last year or so.
Toyota may have come up with a good but ironic solution. It may ship SUVs and pick-ups from its US plant to countries where there is still some demand for the vehicles. The car company, once a leading importer to the American market, is now moving into the export business.
According toThe Wall Street Journal, "The auto maker, which produces the Tundra pickup and Sequoia SUV, is looking at other markets around the world, although no decision has been made," It shows how management moves that looked good in one decade can sour in the next.
The automaker reported July sales of 197,424 vehicles, down 18.7% from last year. Monthly Lexus sales dropped 24.6% to 22,182. Passenger vehicle sales fell 5.4% despite a strong showing from its hybrids and other fuel-efficient models such as the Corolla. Not surprisingly, light truck sales slumped 34.3%.
As the Wall Street Journal noted, "The weak results are a rare setback for Toyota, whose rapid expansion in sales and profit growth this decade once appeared to be immune to hardships facing other auto makers." The Big Three automakers, though, would give their left arms for results that were as "bad" as Toyota's.
Meanwhile, Wal-Mart and other discount stores are continuing to reap the benefits of the stimulus checks. The company's flagship stores reported same-store sales, excluding fuel, rose 3%, while Sam's Club grew 3.5%. Wal-Mart, which had forecast sales growth of between 2% and 4% in July when it raised its fiscal second-quarter outlook, sees growth tapering off in August to 1% to 2%.
"With the end of the stimulus checks, we know consumers are spending more cautiously,and we continue to see a pronounced paycheck cycle at the end of the month," said Eduardo Castro-Wright, Wal-Mart US President, in a statement.
The question for policymakers is whether having a second stimulus bill will give companies such as Toyota and Wal-Mart a boost to their bottom line. I have to wonder whether a new government handout is needed given that the first one did not do as much good as many had expected.
Then, what happens next? A third stimulus bill? A fourth one?
Toyota (NYSE: TM) has already said that 2008 will be a bad year. Now it has revised down its sales numbers for 2009. The cut is about 7% and takes the company's estimate to 9.7 million vehicle sales worldwide.
Stock futures were flattish Thursday morning as oil prices rose due to continued concern over Gustav. However, some retailers have posted better-than-expected earnings. Still, there are several economic reports due before the open that could sway sentiment either way, including revised GDP for the second quarter.
The auto industry is deep in the weeds right now, particularly in the United States. American manufacturers are hemorrhaging money -- 
'Tis the election season of 2008 and any industry in a mess has exactly two months to make its case and claims to a beneficent US Congress. Who, after all, wants to harm or neglect the already struggling US auto industry.? With 
Daimler AG
This post is one in a series on prominent company nicknames. 
Here are some highlights from this past week's 
A six-pack of technology favorites
Chasing Value: Obama & Tiffany's shine on!
Apple (AAPL) iTunes loses artists - an antitrust problem?
