Ford Motor Co., General Motors and DaimlerChrysler AG still are good bets for investors interested in auto stocks, said Stephen Girsky, managing director of Morgan Stanley & Co. Inc. in New York.
Vehicle inventories are low, sales are steady and production schedules should stay strong in the near term. Translation: The U.S. vehicle market should do well over the next six to nine months, he said.
Girsky told his Automotive News World Congress audience that he thinks that as long as the economy is healthy, the U.S. auto industry will continue its momentum. Here's why:
Auto stocks rarely underperform in declining interest rate environments.
Consumer confidence looks strong in the near term.
Strong sales combined with low inventory will lead to higher production schedules and higher profitability.
Low inventory and a weak dollar likely will limit the probability of a price war in the near term.
Improved product mix and aggressive cost reductions that are going on at all levels of the industry should aid auto earnings in the near term and lead to better stock prices.
'The U.S. consumer is in pretty good shape, and the U.S. consumer could potentially carry the world auto market for some time until the rest of the world catches up,' he said.
Also, the auto industry does not have the excess production capacity this economic cycle that it had during the previous cycle, mostly because of leasing, which has a smoothing effect on the industry, Girsky said.
There are some risks, he said. Girsky said economic problems in international markets such as Asia and Latin America could rattle U.S. consumer confidence.