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Thursday, August 03, 2006

Toyota Uber Alles

Stocks: (TM)(DCS)(GM)(F)(HMC)

Not many car companies have a market cap that exceeds their sales anymore. GM trades at 9% of sales. Ford at 8%. DaimlerChrysler at 26%. Honda at 69%.

But, Toyota trades at 93% of sales. And, in May, that number was over 100% when the company's stockhit $124 on the NYSE.

Toyota now seems all but invincible, especially to the U.S. car companies. Toyota's sales rose 11.7% in America in July to nearly 242,ooo units. It is no news that sales from the Big 3 were down sharply. But, the astonishing thing about Toyota is that its light truck sales were up 1.3% in an environment that saw some U.S. light trucks and SUVs drop over 40% in units from the same month a year ago. Demand for the small SUV RAV4 rose almost 100%.

Ford has no chance to stop the Toyota juggernaut. It is bleeding profusely, bringing in a banker to look at whether some of its brands should be sold off. It may now be even money that the Ford family will still have control of the automaker at year-end.

GM still has a chance, albeit an outside one, to keep its lead in North American sales. GM still has a commanding lead having sold 406,000 vehicles in the US for the month of July. It was a drop of 22% from the same month a year earlier, but it was better than the numbers put up by Chrysler and Ford.

GM has said it will cut its annual operating costs in North America by $9 billion a year. But, without a revival of sales, who cares?

GM has said that it will stake its short-term fortunes on sales of its new Silverado and Sierra pick-ups. Although it sound like a poor idea in an age of high gas prices, it may be all that GM has to gamble with. For now.

GM must know, and investors need to watch for a slew of smaller, more fuel efficient SUVs and trucks coming out of the auto giant in the next 12 to 18 months. If they are not rolling off the assembly line by then, it is probably too late.

At $31, GM's stock is up 69% from its 52-week low and that means that hope is still priced in.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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