May Auto Sales Fall, but Makers Remain Bullish for Year

Posted On June 2, 2011 | by AllenCaron

News from automakers was not particularly good in May: After what the New York Times suggests has been a “steady recovery” in the industry, auto sales slumped in May. The Times offered a variety of reasons for the slowdown including parts shortages related to Japan, a pullback of sales incentives and higher prices (http://www.nytimes.com/2011/06/02/business/02auto.html?_r=1&scp=3&sq=Bill%20vlasic&st=Search). The Times‘ story added several interesting tidbits:

  • For the first time since 2006 American automakers ranked 1-3 in sales in May (GM, Ford and Chrysler, respectively with the Chevrolet Malibu the top selling car overall) over their Japanese counterparts;
  • In what might be considered good news for forward looking investors, automakers still are predicting a surge later this year, sometime in the fall.
  • While the traditional giants Toyota and Honda were hardest hit by the shortages, the Korean leader Kia/Hyundai “bucked the trend” and actually did very well in May, as did Volkswagen. In fact, Kia sales rose 53 percent to a monthly record of 48,212, according to the Times report.
  • Ford announced its third price increase of the year in May, particularly for the models offering the best fuel economy.
  • The preference for smaller, fuel efficient vehiches has caused Ford and GM to adjust production and build more small cars and fewer SUVs and pick-ups.
  • Eight of the top 10 vehicles sold in May were built by American carmakers.
  • The Ford F-series pick-ups were once again the top selling vehicle model overall.
  • The Hyundai Elantra was the biggest gainer in sales, up 104.5 percent; the Honda Accord the biggest loser, down 38.9 percent.

The prediction that sales will surge later in the year is not particularly suprising since the third and fourth quarters are traditionally the best for the auto industry. But that should be good news for investors. Here are some of the smallcap auto industry stocks we have been following:

Charlotte, MI-based Spartan Motors (Nasdaq: SPAR, http://www.spartanmotors.com/) makes motor vehicle chassis and bodies for OEMs. Its stock was trading at about $5.50 last fall but dropped to $4.62 mid-day on June 2. For what it is worth, the Wall Street Cheat Sheet this month picked SPAR as a company “to watch” based on the GM results and the general automotive industry.

Milton, GA-based Exide Technologies (Nasdaq: XIDE, http://www.exide.com/) manufactures lead-acid batteries for transportation and industrial energy applications. Its stock price dropped to $4.14 last August, rebounded to $7.40 late last year and ran up as high as $12.68 as the industry came alive in February. But the company, which reports on a fiscal year, missed analysts’  composite June 1 and management predicted a slow first quarter. The result: investors sold off heavily, pushing the stock down more than $2 on June 2 to $7.52.

Northville, MI-based Amerigon * (Nasdaq: ARGN, http://www.amerigon.com/) makes a heated and cooled seat system now featured in 54 vehicle models manufactured by Ford, GM, Hyundai, Toyota, Nissan, Land Rover and Jaguar, as well as a cupholder for Chrysler.  Amerigon, which recently announced the acquisition of its main competitor, W.E.T. Automotive Systems of Germany, dropped as low as $6 in 2010 and was trading at $11.55 when we last looked last winter. It’s run up as high as $17.64 since then and at mid-day June 2 was trading at $15.84.

Racine, WI-based Modine Manufacturing Company (NYSE: MOD, http://www.modine.com/) manufactures a variety of thermal management products including radiators, engine and transmission oil coolers for the auto industry. This is the stock that Seeking Alpha last November listed as one of “10 Stocks on the Upswing” after noting that its stock price has grown by more than 54.5 percent in the previous year. It was trading at $14.96 late in the day June 2, down from its 52-week high of $17.94 but way above the low of $7.10.

Oak Park, MI-based * Azure Dynamics (AZD.TO, http://www.azuredynamics.com/) supplies electric and hybrid drivetrain systems for commercial vehicles, most notably the drivetrain in the highly watched all-electric Ford Transit Connect. Azure announced in late May an order for 27 of the electric Transit Connects by FedEx, among others. The stock is languishing however. It traded for $0.27 last November and, while it has been as high as $0.41 in the past year it was still stuck at $0.27 on June 2.

* Denotes client of Allen & Caron (publisher of this blog)

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