Auto Sales Are In Overdrive As Detroit Goes Bankrupt

[bluesbassman]

Source: Forbes.com

My jaw dropped and I got wide-eyed looking at a chart showing automobile production this year. I simply didn’t realize that automobile plants in North America are operating at full capacity (I mean near 100% in some cases) and are on schedule to sell the 16 million cars they will produce this year. The automobile industry is booming almost more vibrantly than residential housing, and rewarding investors with solid gains this year, while still selling at low forward multiples of earnings. Ford Motor, with the robust Allan Mulally as CEO, has seen its stock rise 25%, more than the market average and still be selling at 8 times forward earnings expectations, when the broad market sells at 16 times current earnings. Warren Buffet’s Berkshire Hathaway picked up 25 million shares of GM in the first quarter on the strength of its making 15% return on equity.

Thanks to my friends at BMO Capital in Canada, I found North American automotive capacity utilization fascinating and optimistic news. When overall industrial capacity is running below 80%, Ford is running at 100%, GM at 80%, Chrysler at 90%, Honda at 103%, Nissan at 98%, Toyota at 99%, Volkswagen at 90% and an assortment of others, 98%. Their 67 vehicle plants are expected to “churn out 16.0 million units in 2013,” according to Alex Koustas, an economist with BMO. That compares with 2005 when it required 85 vehicle plants to produce 15.8 million vehicles. Moreover, America is very near approaching the record number of auto sales in a single year, which was 16.4 million. Talk about a comeback.

There are several bullish developments in place for the resurgent automobile industry. First, the average age of a vehicle on the road is 11 years, meaning that the newest models have far better technology inside, and especially are more efficient in getting mileage per gallon up to 48 miles at only a slight cost premium to older models. This doubling of mileage when gasoline is flirting with $4.00 a gallon is a powerful economic argument for ditching your rusty old bucket and borrowing at record low interest rates to get a new vehicle.

Clearly, most of these domestic and foreign producers must build new plants in the U.S., must hire more workers, both skilled and unskilled, which should translate into economic growth from the industry that powered America in the post World War decades. And here’s another stunning surprise; The Ford Focus became the best-selling passenger car in China in 2012 for the first time. Finally, a miracle was announced on July 16; Chrysler, the most troubled, but still profitable manufacturer will begin manufacturing its brand-new mid-size car at a factory in Sterling Heights, Michigan, just north of Detroit.

Read more: http://www.forbes.com/sites/robertlenzner/2013/07/24/auto-sales-are-in-over-drive-as-detroit-goes-bankrupt/?partner=yahootix

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Depressing that the town that supported the industry all those years is going down the tubes while the industry itself is flourishing.

[leveymg]

1. Much of those profits are sales in China. If it weren't for QE, we'd still be in a depression, and

it's not clear how long that Ponzi scheme by the Fed can go on. We've had negative real interest rates for five years now, and unemployment has fallen less than two points. This is the hollowest of recoveries. Detroit is only one of 100 American cities going bust.

[SunSeeker]

2. An example of how trickle down economics is a sham.

Also, an example of what happens when you vote in a Republican governor.

[Niceguy1]

3. because the plants

Aren't in Detroit. ..city leaders allowed the mfg base to go to other parts if the nation . These days cities compete with amenities, ie infrastructure and incentices. Those who don't compete ....lose out.

[warrant46]

4. Paying labor $12.50 an hour helps

Bad pensions and crummy health insurance makes it a trifecta for the corporations

[Lugal Zaggesi]

5. Most of these companies are based in other countries

Honda at 103%, Nissan at 98%, Toyota at 99%, Volkswagen at 90% and an assortment of others, 98%.

When Intel utilizes its factories in Indonesia at 103%, that doesn't necessarily help the Indonesian economy that much.

It's much better to OWN the factory, than to have a low paying job inside it.

[bloomington-lib]

6. See. Make a law to raise MPG and at some point people want to trade their clunkers in for more up-to

date, energy efficient models. That's not the sole reason for the record sales, but it contributed to it. As usual, the republicans were wrong again saying the regulations would hurt the industry.

It's hard for me to understand how they never get called out on being wrong about almost everything.

[madrchsod]

7. there`s a part supplier in my town that makes sub assemblies for the auto industry

the plant went to saturday in march and now there several dept. running on sunday.

[tomtharp]

8. Cars R Coffins !

So ... what?
Detroit is a city. Auto manufacturers are soul-less corporations whose motive is profit.

Every fluid in a car causes cancer. Cars cause climate change which well may extinguish humans. Cars kill dogs, cats, birds and humans/etc. The manufacturing of a car causes as much carbon emissions as the first 80,000 miles of driving. The more cars we build the faster we kill the planet. Millions of humans are trapped in their cars. If aliens come (came?) to earth they would think the world is ruled by cars. Every car has a human that will work endlessly to support the car. In the US o A the car has auto insurance, the human may be able to pay for human insurance after it has paid to support the car. Cars are required to have insurance, humans are not, I guess cars are more valuable than humans.

Humans who may dislike their job/wife/husband/etc are king behind the anonymity of the windshield; cars are one of the most de humanizing elements of society. If cars got 100mpg humans would just drive more and have the same carbon emissions (Jevon's paradox). I used to drive 30,0000 miles per year; I chose to live in a small town and now drive less than 10,000 miles per year, thus lowering my payments to Saudi Arabia that finances "Al Queda". My last truck lasted 18 years / 270,000 miles, I hope my newer smaller 4 cylinder lasts as long, the extra 6 mpg/lower insurance/smaller tires does save me $100's per year.

Growth in pedestrian traffic or cycling would be good news, growth in auto production is bad for our collective survival.


Cars R Coffins .