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Buy Ford and GM stock and make 5%

Want to make a five-percent return when 10-year treasuries are paying around two percent? Ford (F) and General Motors (GM) have solid balance sheets, strong cash flow, solid earnings, and growing markets. By all accounts, they are smart investments. But the market is down on these stocks. Why? Some of the stupid excuses include: They are cyclical companies The Detroit 3 have lost 3.5 million in sales since 2000 The world economy is shaky GM recently filed for bankruptcy Their markets have peaked They haven't changed their ways Let's take these criticisms one by one: They Are Cyclical Companies Yes, they are cyclical. Every company is cyclical. Every industry is cyclical. Some more than others, but not every company is immune from swings in the market. Banks used to be 'non-cyclical' leader, not anymore. Airline stocks are just as cyclical as auto stocks, yet they are trading at multiples greater than the auto industry. Why? And what accounts for the irrational stock price for Tesla (TSLA)? At least Ford (F) and General Motors (GM) make money and have positive cash flows. In fact, both companies have a net positive cash position. They have more cash on hand than liabilities. Auto sales in the United States hit a record 17.5 million vehicles in 2015. During the Great Recession, Ford (F) and General Motors (GM) cut their break even points to 10 million vehicles per year. Anything above an annual U.S. volume of 10 million vehicles is profit. And what a profit they make. Sales of Ford's F-150 continues to be the best-selling vehicle in the United States for over 30 years. Detroit 3 Have Lost 3.5 million in Sales Since 2000 Automotive News reports General Motors (GM), Ford (F) and Chrysler (FCA) have lost a combined 3.5 million vehicles sales since 2000. So how can they be making more money? Two big reasons – Fleet Sales and the UAW. Fleet Sales The Detroit 3 used to own car rental companies to keep their factories running. Ford owned Hertz (HTZ), General Motors owned all of National Car Rental and 29 percent of Avis, and Chrysler, the forerunner to Fiat Chrysler (FCA), used to own Thrifty Car Rental and Dollar Rent-A-Car. The Detroit 3 owned these rental companies to have a place to sell their bad product and keep their factories running. These were low margin sales, and in many cases, were money losers for the Detroit 3. They no longer own auto rental companies.

Chrysler files for IPO

Chrysler has had a lot of owners over the past few years alone, from Daimler to Cerberus to Fiat and the federal government. But it could be poised to gain some more before long. Like, a lot more.
The automaker has just announced that it has filed with the US Securities and Exchange Commission to issue an Initial Public Offering of common stocks. Chrysler hasn't revealed how many shares will be offered and at what price, however the shares in question will not come out of Fiat's approximate 60% majority shareholding but instead out of the 40% minority stock held by the UAW's VEBA retiree healthcare trust. Reports suggest that the IPO, which is being handled by JP Morgan, could encompass approximately 16% of Chrysler stock, initially valued at approximately $100 million.
Lest you think this is all part of Sergio Marchionne's grand plan to consolidate Chrysler and Fiat, the two auto groups over which he presides, think again. The filing, which still needs to be approved by the SEC, comes at the insistence of the UAW. Negotiations between Marchionne's management team and the union over Fiat's acquisition of the VEBA shares have stalled. If they manage to come to an agreement, however, the IPO would likely be taken off the table. So don't go calling your broker just yet, but you can analyze the official announcement below.

Chrysler Airflow being redesigned and renamed for production

The Chrysler Airflow concept is dead in name and form. Motor Trend spoke to Stellantis design chief Ralph Gilles, who said brand CEO Chris Feuell "wanted a statement that had literally zero to do with anything that you have seen today, even the Airflow concept car. It is evolving in a new direction." When MT spoke to Feuell about the name, she said, "There is a group of people who love the Airflow name and just as many who beg us not to use it." The magazine believes a new-to-the-brand name will get the nod, Chrysler perhaps hoping to perform a hard reset on buyer perceptions. The redesign is far enough along to have been previewed in Los Angeles earlier this year, Feuell saying reactions tell them "we have a hit on our hands," Gilles saying "It blew the doors off." We won't see it until next year, and no one at the brand has offered a clue about how it's changed from the Airflow concept now a couple of years old. We know Feuell is plotting a remake of the entire the Chrysler experience, from shopping its products online and at dealers to after-sales care. She's said before she wants Chrysler to become Stellantis' "startup brand," offering "clean mobility, seamless technology," and affordable pricing. Affordable doesn't mean what it used to mean, so we don't know where product planners intend to slot the coming vehicles. Tesla buyers have been mentioned as one of Feuell's targets, but we're clearly still in the early days of transformation when marketing Venn diagrams encompass aspirations and projections that will be whittled out as production nears. Even for all that, the Airflow didn't scream "Chrysler transformed!" save for its battery-electric powertrain. Chrysler's tracking like Jaguar at the moment, with a lean range for dealers until the EV revolution begins in 2025. And as with Jaguar, considering how long Chrysler's plateaued, putting it kindly, it's not surprising the boss wants a more compelling wrapper. When the Pentastar's two-row crossover debuts, it will sit on the STLA Large platform, offer 400- and 800-volt electrical architectures, and pack batteries that power up to 400 miles of range. More important, it will establish the baseline for the product overhaul leading to an entirely new portfolio by 2028. We'd love to see Chrysler get it right. Related video: This content is hosted by a third party. To view it, please update your privacy preferences. Manage Settings.