Car companies becoming values again?
It may be that the prices of car company stocks have fallen so low that some of the firms, at least the strongest ones, are starting to attract investor interest. According to the Financial Times, "Abu Dhabi-based Aabar Investments is to take a 9.1 percent stake in Daimler in a €1.95 billion (£1.84 billion) move to bolster the German premium car maker, becoming its largest shareholder as the company battles against the worst industry crisis in decades."
Toyota has asked the Japanese government for financial aid. Ford says it does not need any outside money, for now at least, claiming it has enough cash to operate through the current crisis. That probably assumes that sales do not get worse and actually rebound as the year goes by. Ford is in the midst of restructuring debt with current bond-holders. But what becomes of Ford if U.S. car sales continue to drag along at a rate of only 10 million light vehicles a year? The answer is that Ford gets pinched for capital, perhaps before the end of 2009.
Ford may end up being an attractive investment for a sovereign fund, especially if it sharply improves its balance sheet and gets a better contract with the UAW.
Large investors may finally be moving back into the car industry.
Douglas A. McIntyre is an editor at 24/7 Wall St.