Detroit automakers (GM, Ford and Fiat Chrysler) are among the World’s top-tier brands. They are growing at an incredibly superfast rate, on their way to beat the sales record they set in 2006. But analysts’ suspects that growth rate on an account of recent stock performance of these firms.
Automakers executives say the industry is seeing its dream days since reframing in 2009. But analysts’ think otherwise, by reviewing the current stock metric of General Motors Company (NYSE:GM), Ford Motor Company (NYSE:F) and Fiat Chrysler Automobiles NV (NYSE:FCAU), investors aren’t as bullish as executives of these firms.
The shares value of both GM and Ford have slumped in overall market over the last year, despite precautionary moves taken by both companies by returning more capital to their shareholders. Shares of Fiat Chrysler fell last week on news of merger talks with one of its rivals.
“The party may be starting to wind down,” said Charles Chesbrough, senior principal economist for IHS Automotive. “We’re still looking at a good couple years of strong demand, but the days of big sales increases are behind us.”
Kurt Neil, head of GM’s U.S. sales operations, on Friday also posted bullish comments on automakers growth rate by elucidating that industry is about to see its best sales year for the first time in 9 years. In U.S light truck demands forecasted to reach 17 million in 2015, well above from almost 10 million in 2009.
U.S consumer confidence is on the rise, there are improvements in housing market and more importantly the price of gasoline is low in majority of the country, gallon price less than $4. All these factors are providing an upper hand to demands in big trucks and SUVs, resulting in a good profit gain for the Detroit three.
But if we thoroughly look at the performance of these companies it seems the firms are losing ground not in overseas market but also in its home market. The sales of small cars and family sedans is lagging, turnovers have declined, overseas, excluding China, profit margins fell drastically and stock value has slumped.
Detroit automakers posted dismal first quarter earnings, lagging analysts’ estimates, afterwards shares the companies were down.
U.S sales growth has slumped 6 percent in the current year. Shares of GM fainted 16.4 percent in the first quarter compared to 16.5 percent in a year earlier period.
“Over the next couple years, we expect to see the industry cycle down — not next year, but 2017,” said John Hoffecker, managing director and global vice chairman of operations at AlixPartners. Detroit automakers have had “a good strong, long run,” but “there will be a correction from where we are today.”
Matthew Stover, auto analyst at Susquehanna Financial Group said there is necessity for the companies to decrease their operations in overseas, more importantly in Europe and South America on an account of decreasing demands of vehicles in U.S and need to invest in overseas production capacities.
“GM and Ford earn terrific rates of return in North America, but they’re getting killed in Europe and South America,” Stover said.
