Where will the US auto industry go and where will the profits be made? There are economic recovery stocks that you can trade in the options market but where do the “big three” fit in? Or is that the “big two” or “big one?”.
Ford Motor Company appears to be the lone US auto industry “big three” survivor. Yes, General Motors is still there, sort of, and Chrysler will sell out again to a foreign buyer for a cash infusion. And, there are still lots of foreign car makers, Toyota preeminent, selling cars in the USA.
The USA will still be buying cars, more once the recession improves. So, who will be selling, who will be buying, and who will the auto industry suppliers be for the reconfigured US auto makers?
Someone will rise from the ashes of the US auto industry. This may happen a little late to call them economic recovery stocks. However, no matter who’s selling cars they will need auto industry suppliers for everything from windshields to batteries.
Since Ford has survived more or less intact, those trading the auto industry should probably look at Ford stock and options. Also, one should look at the auto industry suppliers who make selected parts that go into Ford cars and trucks. Someone is going to be picking up the slack and selling a lot more vehicles, windshields, batteries, bumpers, etc.
General Motors might be more complicated as it sells assets, restructures, and deals with a complicated board/management situation. Still what was once the world’s largest corporation and largest company in the US auto industry still has the capacity to come back if it refocuses on the auto industry markets of the future and not the past.
The challenge with General Motors, as with the rest of the US auto industry, will be to pick the clues that will tell when to pay attention, buy or sell options, and be ready for an afternoon of scalping as the stock flies up or sinks farther down.
Auto industry suppliers may be where the trader should look as long term contract arrangements are reshuffled. Who will be able to respond to the change in players in the US auto industry? Who will be able to find contracts with new foreign car makers assembling on US soil? Who will land big contracts as the US auto industry reinvigorates itself when the recession starts to lift?
Auto industry suppliers who still have contacts and business can be seen as economic recovery stocks and will likely go up with good economic news and down with bad news. As the industry reinvents itself, auto industry suppliers may need to work with new materials and new technologies. Those who are lighter on their feet will prosper. A little homework regarding how Detroit will be making cars in the coming years will likely provide the trader with insight into the best stocks to be trading among the auto industry suppliers.
If the US ever has a “big three” again, or if the next “big three” includes Toyota, the US will be still be making cars and someone will be making profits trading the auto industry.
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