By on July 29, 2011


I made my first fortune in Chrysler. Back in 1991 I bought 250 shares of the company at a mere $10 a share. It was all I had at the time and everyone in my family thought I was plain nuts. When it got to 12 I was a bit less nuts but definitely screwy. 15 and I was a lucky guy. It wasn’t until the stock hit $25 a share when they realize that if I had a knack for anything, it was following the auto industry.

By 1996 everyone and their dog was announcing the second coming of Chrysler. I sold my shares in late May 1996 at around $60 and bought the most safe and enduring investment of that time… a house. A lot of car companies have soared to the skies and plummeted to insolvency since then. My question for all of you today is…

Who’s next!

NOTE: Kia, Hyundai, Suzuki, Mitsubishi and Saab are yesterday’s news. I want your take on tomorrow’s Midas and minus.

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42 Comments on “Hammer Time: The Eagle and the Phoenix...”


  • avatar
    Educator(of teachers)Dan

    SAIC, GMs joint venture partner in China. Eventually they’ll control the entire worldwide company outright. Maybe they can even bring GM back to glory.

    • 0 avatar
      Zackman

      I’m still kicking myself for not buying Chrysler stock when it was $3.00/share. Oh well, another beer and all will be O.K!

      • 0 avatar
        windswords

        That was in the early 80’s. And it was a bigger gain. I think the stock topped off at $72 in the mid 80’s. The early 1990’s $9+ to 60+ is good but just under $3 to 70 something is even better.

      • 0 avatar
        56BelAire

        Sigh……

        I came real close to investing 50K in Ford stock in late ’08 when it was around $2.00/share. I chickened out.

        Since ’08 my house has lost about $150K in value. Oh well, at least I have no debt.

  • avatar
    aristurtle

    Here’s my guess: One of the two of FiatChrysler and GM will succeed beyond everyone’s expectations, and the other will go into bankruptcy again without anyone saving them this time. Not sure which one, could go either way. (Yeah, right now it’s leaning towards Fiat, but what if Sergio has a heart attack, or GM’s board grows a pair and replaces Ackerson, or something? It’s still too early to call.) Oh, and if Chrysler goes down they’re probably taking Fiat with them.

    edit: Also, Ford is peaking. Their bid to save Lincoln will fail. They will continue to underspend on development for their successful models, until those models become uncompetitive again. They go through this cycle time and time again.

  • avatar
    NN

    Fiat/Chrysler may actually be a good bet…Sergio seems like Carlos Ghosn 10 years ago. Both companies have a history of developing unique, passionate products that reflect their national & historical origins rather than bland appliances. I hated the idea of a Dodge Hornet (Caliber replacement) based on an Alfa rather than an actual Alfa…but then I saw the spy pics.

    However, I still think Ford is the best bet to be selling at a multiple of it’s current value in the next few years. I trust Mulally will get to the bottom of the recent quality issues quickly. And they’ve got tremendous potential in Asia, where they’re likely to see the highest growth % over the next few years out of the bigger brands, since their footprint is now small but growing exponentially.

  • avatar
    windswords

    Mr. Lang, back in 1990-91 I was getting fitted for contact lenses and my eye doctor and I were talking investments. At the time I was an avid reader of Automobile News (I got it for free, my father-in-law was a office supply salesman and several dealerships were among his clients and he would take old copies they were going to throw away), so I told him if I had money (which I didn’t at the time – new baby) I would buy Chrysler when the stock dipped to $15 and sell when it reached 45. At the time all the news was bad for Chrysler but the stock had not hit it’s low point yet. I knew what they were doing that wasn’t covered by the mainstream media and what their future product plans were. As it was the stock bottomed out at $9 and change and topped off somewhere in the 60’s. But if he followed my advice he would have tripled his money.

  • avatar
    rnc

    My dad has 40,000 shares in a bank he inherited, and as ford spiraled below $2.00/share and the bank was in the high $20’s (after dropping from the $hundreds) I begged him to sell and buy Ford shares with all of it, he called me an idiot, he doesn’t like to discuss now. I myself, while I had some cash put away, I was terrified of the apocolypse and being a single parent (1 year old) enough cash to live for a year without working if need be was more important than a chance to get rich (hind site 20/20, my company is making money again, but it came close and I still live as if I make half of what I do and am actually thankful for that, b/c alot of people can’t)

  • avatar
    rnc

    My comment is awaiting moderation? b/c?

  • avatar
    Pch101

    The auto industry is generally too mature and slow growing to provide very many exciting investment opportunities. It’s only at the bottom of broader market crashes/ declines or on those occasions when an individual company that can be fixed hits bottom that they become interesting.

    It’s a bit late to get excited about Ford. There is still some upside left, but my guess is that the easy money has already been made.

    Toyota probably remains a good prospect as a slow grower, but that would be more as a long-term boring investment that produces a small dividend than some tremendous way to make a lot of money fast. I see it being the best of the bunch, but that doesn’t make it great. Generally speaking, I’d be looking at other industries altogether.

    • 0 avatar
      areader

      I think Toyota is a very good short term play. They have a tremendous restocking process in front of them just to get the dealer lots filled to normal. Then there is no doubt considerable pent up demand by buyers who could not get the Toyota they wanted at a normal price during the past couple of months. These two factors should give them a boost relative to the other companies, and this will be followed by the normal market for Toyotas given their perceived superior quality. They still have the power shortage issue in Japan to contend with of course that affects not only their plants but those of their suppliers as well.

      Toyota execs have indicated they will build more plants outside Japan which should increase margins, after the huge initial investment of course. They’ve suffered from the perceived quality glitch, which was mostly driver error, and then from the earthquake. They’re a more humble and focused company compared to a couple of years ago, and this means trouble for competitors and good news for their stockholders.

    • 0 avatar
      mcs

      While the some parts of the auto industry are mature, I think there are areas worth keeping an eye on. Look for companies using nano-tech to develop new materials for automotive use. Lighter weight, lower friction, and lower cost.

  • avatar
    philadlj

    Can’t decide between Hybrid Kinetic Motors, Emerald Automotive, or Coda…but they’re going to be the next Big 3 in a couple years! If they have stock, buy it up now, while it’s still cheap!

    … ;)

  • avatar
    getacargetacheck

    There are no Midases on the horizon. Growth in the big mature markets will be anemic for years, and China will continue to struggle with resource constraints, keeping a lid on growth. It’s a zero sum game now — lots of losers coming. Mazda, for example (tsunami problems, too much reliance on enthusiast market and no Ford to lean back on).

    • 0 avatar
      serothis

      I would have to partially disagree with that. Mazda (like all the japanese auto manufactures) were hurt by the tsunami but not as badly as the others, like toyota. Ford did more leeching than helping. They basically just took mazda’s mzr engine and relabeled it the duratec. To top it off mazda has their sky-activ engines coming out starting this year.

      Now where mazda is going to get hurt is the new CAFE standards. They don’t have any hybrid/super high efficiency cars. Their highest seller, the mazda3, isn’t going to be above the 54 mpg mark.

  • avatar
    aristurtle

    Oh, and here’s another one: The next big thing will be low-cost large-scale production of carbon fiber composite parts in an attempt to meet increasing fuel standards without needing to resort to hybrid powertrains.

    There’s no fundamental reason why carbon fiber needs to be expensive to produce if we get the economies of scale in order, and it doesn’t look like we’re on the verge of the kind of breakthrough in battery tech that we’d need to make electric cars cheap enough for the masses. Serious weight reduction can improve fuel economy in a far more cost-efficient way. (Should be more fun to drive, too.)

    • 0 avatar
      serothis

      I know this won’t happen but what I would love to see would be the rise of hydrogen cars. Both hydrogen fuel cell and hydrogen ICE’s. Green(ish) like electric cars but without the batteries and the subsequent charging time. And the convenience of normal gas cars but without the emissions.

      The obvious problem is the lack of an infrastructure.

      • 0 avatar
        JustPassinThru

        Equally obvious is the lack of technology behind it. It’s a wonderful concept when presented in a prospectus; but nobody has shown that it will work reliably to a price.

        All sizzle, no steak…the term is “vaporware.”

      • 0 avatar
        serothis

        not really vaporware. BMW has their hydrogen 7 car. Mazda has their hydrogen rx-8. Honda has their FCX clarity.

        Both BMW and Mazda have a small fleet running around norway and Honda has their small fleet running around California.

        The technology isn’t that complicated. It’s the refueling infrastructure. No one is going to buy a hydrogen car if they can’t refuel it. And the car manufacturers aren’t going to sell if no one is going to buy it.

      • 0 avatar
        Pch101

        The technology isn’t that complicated.

        No, it is complicated. At this point, fuel cells have a short life, which makes them commercially unviable.

        That, and they are made of costly materials, the cost of which don’t scale. There is no way that you could pay enough for a fuel cell car that would allow the automaker who sold it to you to breakeven, let alone make a profit.

        Fuel cells are experimental, and they may never work at a level that they could be used by consumers. They are not close to being ready for market.

      • 0 avatar
        charly

        Hydrogen fuel cell cars need big batteries as you can use the batteries for short bursts of power instead of a bigger expensive fuel cell and for regenerative braking. But this lead to it being a plug-in and with electricity being cheaper than hydrogen people will use mostly electricity as fuel which makes the hydrogen infrastructure to expensive.

  • avatar
    abgwin

    I truly wouldn’t be shocked to see Honda fall from grace. Acura lost its way long ago and now Honda can’t seem to innovate. The heart and soul that once marked their products has evaporated, and once the baby boomer generation is gone, Honda may well be faced with what sank GM: the rejection by the current generation of what their parents worshiped.
    Without their ‘by rote’ consumers, apparent indifference to styling, inability to innovate, and preoccupation with building appliances, what’s left for them to do but recede?

    • 0 avatar
      segfault

      Honda is kind of a Luddite car company. No keyless ignition, no six-speed automatics (in most models), no xenon headlights, etc.

      Even Acura’s models lack some features versus the competition.

    • 0 avatar
      aristurtle

      Their motorcycle business ain’t doing too great right now either, at least in the US. The CBR250R was pretty popular but the new Interceptor is a flop and the CBR1000RR is old tech compared to the new competition from BMW and Kawasaki. They can’t sell the new Hornet or CBR600F over here because they’re manufactured in Italy and the USD-EUR exchange rate would kill any profits they’d get.

      I know, it’s recession time so every bike manufacturer is hurting but Honda (and Suzuki, for that matter) are hurting more than most.

      • 0 avatar
        JuniperBug

        After crashing my ’09 VFR 800 with less than 5000 miles on it, I went shopping for its replacement. The new 1200 is ludicrously priced, doesn’t appeal to me, and with its newfound power-to-weight ratio, has fallen into Quebec’s list of blacklisted bikes which cost a fortune to register. Having been happy with how my Honda dealership treated me, I was predisposed to buying from them again, but there was nothing in the building which interested me.

        In general, I couldn’t find a sport tourer that got me excited. The closest was a leftover ’08 Triumph Sprint ST, but it gave up a few things to my 800. I wound up taking a break from bikes and buying a ’99 Miata.

  • avatar
    Hildy Johnson

    Saab.

  • avatar
    Dynamic88

    If I were foolish enough to invest in stocks, and automaker stocks at that, I’d probably buy Honda.

    The notion that Honda has lost it’s “mojo” is something enthusiasts like to kick around – it makes for something to write, and read- but it isn’t true because Honda never really had any mojo to begin with (in the car business). Honda has mostly been a maker of boring transport appliances. That’s exactly what all but a handful of their buyers want.

    As far as I know you can’t buy stock in Honda Automotive, you have to buy HMC – Honda Motor Corp. HMC makes planes (or soon will), boat motors, Motorcycles, scooters, all manner of power equipment, and small engines used by many of the worlds producers of power equipment, as well as replacement engines.

    They sell in the 4 corners of the globe and manufacture in many places.

    Despite some problems with transmissions and a few other items (no more problems than anyone else, probably fewer than most) Honda still has a world-wide rep for high quality highly reliable products.

    I wouldn’t expect any fantastic short-term gains, as this is not a company having near death experiences. But if you just want a solid company making solid products, it should be a good long term hold.

    • 0 avatar
      56BelAire

      Agree with you D’88….+1

    • 0 avatar
      Pch101

      The notion that Honda has lost its “mojo” is something enthusiasts like to kick around…

      I agree. It’s a bogus argument and one worth ignoring.

      However, Honda is heavily weighted toward North America. It also has no viable luxury brand. Luxury products help automakers to churn higher transaction prices out of their core R&D, which in turn helps their margins, so I would consider the inadequate performance of Acura in the US and its complete nonexistence outside of this market to be a glaring deficiency.

      Toyota does have a luxury brand of sorts (it’s not global enough, but at least it’s a success here), plus it has a greater toehold in Asia, which I would say are advantages. At some point down the road, Honda is going to have to grow in order to avoid being dwarfed by its competition, but the company seems culturally unwilling to do that.

      • 0 avatar
        golden2husky

        ….I agree. It’s a bogus argument and one worth ignoring….

        No, not really. First of all, Honda was never the appliance production company that Toyota was. Most Hondas offered drivers more “enthusiast” trappings than the Toyota competition. Hondas routinely had better steering, brakes, and overall feedback that Toyota seemed hell bent on engineering out of its products. Honda was also a great engine builder, and high rpm engines were its specialty.

        Today’s Honda lacks all of this. Car and Driver’s test of the new Civic had its clock cleaned by the new Focus. We here at TTAC know what these mags may or may not be worth, but the overall tone of the comparo was: We are used to Honda leading the pack with innovation and great engineering, not recycling existing engines and producing midpack cars. Sadly, Hondas are not even built to the standard they once were…let’s not even get into Acura…

  • avatar
    genuineleather

    Volvo struggled under Ford ownership, can’t imagine it’ll do better under Geely. Making an S-Class fighter sure as hell isn’t the answer.

    Mitsubishi needs to pack up and go home, if only to spare me another Galant at the rental counter.

  • avatar
    JustPassinThru

    There are too many variables, most of them political, to make a judgment. The auto industry worldwide may be mortibound, if political chaos worldwide prevents a rising affluent class large enough to support economies of scale; and/or if governments tend to inhibit private auto use with heavy taxation of product or fuels.

    But any company that rises fast today had best have worldwide exposure. The United States market is going to be in chaos for the new, fantasy-based CAFE and onerous safety regs. Only the world market will allow growth, innovation, emotional appeal and then provide said economies of scale.

    I would look to China; except that capital in China is not safe from government. But, if they continue on the course they’ve laid out, they may well crack the world markets with affordable, stylish product – and reap the rewards. American companies cannot, for their legacy costs, current-labor costs, and heavy taxation on profits. Japanese companies have much the same problems – unless they find a way to decentralize and keep their third-world divisions on separate ledgers.

    The Koreans…are on the right path; but South Korea being a small region, we’ve probably seen all the corporate startups there that we will. It’s gotten crowded there already…Daewoo didn’t make it. And, as noted, it’s yesterday’s news.

    So…sadly…I have no names; but they will be spelled with Chinese characters.

  • avatar
    boxelder

    Rising stars include BYD, Tata and Mahindra. BYD is selling an absolute megaton of Corolla-clones in developing countries. Tata is proving to be a smart owner by not messing with Jaguar’s DNA too much. Mahindra makes a mean tractor, and if they can get their importing strategy together I predict they’ll make huge strides here in the U.S. auto market.
    Failing? Let me get out my crystal ball… All the easy marks have fallen. But, I’ll venture a guess that the company that has strayed purposely farthest from its successful roots is Honda. Yep, I said it. They need to get their design priorities in order – pronto. They’re being carried by their reputation right now, not their product line. Dangerous territory. Example – no direct injection from the company that was first and foremost known as a leader in engine technology? For shame.

  • avatar
    JustPassinThru

    I don’t know much about BYD or Tata (I can’t take a car-company seriously when they name it after a woman’s attrbutes)…

    …but Mahindra has been around a long time; and not very successfully. They made Jeeps under license; and there were folks tempted to buy their CJ-3B clones…but the reliability of those was execrable. They were, literally, junk…more value in their body-panels than assembled as working units.

    The idea that after fifty-plus years they’re now able to assemble a world-class automobile, for a good price, and market it well enough to give the major players a run for their money…surpasses belief.

  • avatar
    boxelder

    That’s just what folks said about the Japanese cars before they took over the world, and the Koreans after them. Time will tell.

    • 0 avatar
      JustPassinThru

      Yes, time will tell.

      But the Japanese companies didn’t spend fifty years peddling cloned junk. They started out with British designs under license, true…but they moved forward steadily, driven by a demand to succeed.

      Mahindra seems to me, looking at its history, as a sort of glorified garage run by the Brothers Mahindra between ganja-toking sessions. For a long time, they even used the old Kaiser Jeep badge as their logo, with “Mahindra & Mahindra” crammed in in place of “Jeep.”

      I don’t see them as driven; and I can’t see them as a rising power.

  • avatar
    obbop

    Plastics

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