Ford (NYS: F) tumbled again today, dragged down after investors continued to digest last Friday's jobs report and noted increased concerns over the debt crisis in Europe.
Automakers are some of the most highly cyclical companies around, so when investors perceive any kind of weakness in the overall economy, automakers are often some of the first to get hit.
That's held true the past few days, with Ford dropping 3.5% today and other big automakers down as well. Most major automakers have declined more than the S&P 500's (INDEX: ^GSPC) slide of 2.81% in the past two days. Here's a look at how four major automakers in particular have fared since the start of the week.
Percent Change Since Monday's Open
General Motors (NYS: GM)
Honda (NYS: HMC)
Toyota (NYS: TM)
Of course, it didn't help that Ford also announced a recall of more than 140,000 Focus cars yesterday. The problem centers on the windshield wiper's electrical motor, which could cause the wiper to become inoperable on the passenger side. According to Ford, fortunately no accidents or injuries have been caused by the faulty wiper, but it's not great press for Ford and its incredibly hot-selling Focus.
European stock markets reacted negatively to Friday's U.S. jobs report, which showed that U.S. employers added 85,000 fewer jobs than expected. The Stoxx Europe 600 Index dropped 2.5% to close at a six-week low, also helped down by a disappointing Spanish bond auction. Europe is hugely important for the two big domestic automakers, GM and Ford. GM, which is suffering from an overcapacity problem in Europe, will reportedly close two European plants to cut its manufacturing capacity by around 30%. The company has lost more than $15 billion in Europe since 1999.
Unfortunately for Ford, the company isn't faring much better in Europe. The Blue Oval expects to lose between $500 million and $600 million there in 2012.
If anything, I think this pullback creates opportunity for investors looking to pick up Ford shares at a more attractive price. The average age of automobiles in the U.S. has hit an all-time high at nearly 11 years old, and that pent-up demand is starting to translate into sales for automakers. After better-than-expected sales to start the year, Ford raised its expectations for 2012 U.S. auto-industry sales up to a range of 14.5 million to 15 million. That's up from the 13.5 million to 14.5 million the company forecasted earlier.
According to Ford, one-third of its vehicle lines offer a version that gets at least 40 MPG, which is helping drive sales as consumers look for relief from high gas prices. Sales of its fuel-efficient Focus alone increased 65% last month. Combine that with a forward earnings multiple of 8 and a recently reinstated dividend, and it's safe to say that this is a cheap stock for long-term investors.
The biggest worry for Ford and GM is their struggling operations in Europe, but that doesn't mean there aren't huge opportunities for other companies abroad. There are three companies whose international growth stories we're particularly bullish on. If the trend continues, investors could be looking at internationally fueled new stock highs. Uncover them in our special free report: "3 American Companies Set to Dominate the World." The report won't be available forever, so we invite you to enjoy a free copy today.
At the time thisarticle was published Brendan Byrnes owns shares of Ford.Motley Fool newsletter serviceshave recommended buying shares of Ford and General Motors and creating a synthetic long position in Ford. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.