The Auto Industry’s Best Bet

11/16/2011 6:30 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

On the heels of Toyota’s recent recall, MoneyShow’s Jim Jubak takes a look at the main players in the auto industry and comes up with one favorite.

Troubles at Toyota (TM) are actually pretty good for General Motors (GM) and Ford (F).

What we’re seeing is that Toyota is struggling under a yen that keeps getting more and more expensive. That makes Toyotas more and more expensive in dollar terms. That’s one problem that Toyota is having.

The second is that Toyota has some key components coming from Thailand. Thailand has been disrupted in a number of industries because of floods, and that means that Toyota has got some supply problems. These are good things if you’re General Motors or Ford.

If you’re sort of saying, "Well, you know, your competitors problems are good times," both those companies are looking at better times. GM is looking at continued market share growth, I think especially because of problems at Toyota. Ford is looking at enough profitability so that maybe it can continue to reduce debt and actually start to pay a dividend sometime in 2012, and that would pop the stock.

GM has sold off because its third-quarter earnings report didn’t show massive growth, about an 8% increase in revenues. There is a big drag from GM European operations, which haven’t made money in quite some time, and I don’t see that likely to turn around. If you look simply at the US market for GM, it looks good.

The Chinese market is slowed and slowing, so Chinese car sales aren’t really going to give it a big boost, so you’re really looking at just GM in the United States and looking for pretty good results from that part of the company right now.

Ford, which has less exposure to China and is just trying to get into that market, therefore won’t see a kind of downturn from that. Again, if you look at Ford purely as a US car company, these look like pretty good times.

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