msft

Ford's (NYSE: F) latest PR push is based around the idea that the company can make money on smaller cars. Traditionally the big margins in the car industry have been on pick-ups and SUVs. But consumers don't want those anymore.

According to The Wall Street Journal (subscription required), "Ford Motor Co. is expressing new confidence about the auto maker's ability to sell new small cars at a profit in the U.S. market, citing new data about how Americans are beginning to value premium features and dynamic design over vehicles desired simply for their size." That assumption is based on two factors, neither of which is likely to be true.

Ford believes that it can cut its cost base low enough to make money on cars that retail for $20,000 or less. Chopping production expenses may lower overall costs, but it also cripples the company's ability to "turn on the juice" if car sales make a sharp rebound. Fewer factories with fewer workers puts some brake on the company's ability to quickly push out more vehicles in a short period of time. Cars that can't be made can't be sold.

The other challenge to Ford's assumption is that it can get a large market share in a part of the industry that is already dominated by Toyota (NYSE: TM), Honda (NYSE: HMC), and Nissan. As Ford ramps up, the Japanese car makers are moving into hybrids and improving their own small cars. Most consumer satisfaction surveys put Ford behind the Japanese in terms of the quality of their products.

Aside from those few small details, Ford's plans should work just fine.

Douglas A. McIntyre is an editor at 247wallst.com.

Ford, the U.S. auto giant facing perhaps its toughest combination of sector competition and economic headwinds in the company's history, is expected to announce it will build a new, seven-passenger luxury crossover, The Wall Street Journal reported Friday (subscription required).

The new three-row Lincoln MKT crossover is expected to go into production next year, and mirror a 'bustle back concept' displayed at the Detroit Auto Show this year, The Journal reported. Its primary competitors would be the Acura MDX, Audi Q7, and Mercedes R class.

Ford Motor Company (NYSE: F) shares were virtually unchanged on the news, up 2 cents to $5.12 in Friday afternoon trading.

Crossovers are larger cars designed to look and function like SUVs, only with better gas mileage.

Analyst takes wait-and-see approach on crossover

Stock Analyst C. Leonard Bauer said he's reserving judgment on the Lincoln MKT, pending performance, fuel economy, and safety test reviews.

In this series, we take a look at the 25 stocks on the S&P 500 Index (SPX) that have turned in the worst performance during the past decade -- what went wrong, and what happens next.

General Motors Corporation (NYSE: GM) enjoyed the title of "world's largest automaker" nearly uninterrupted since 1931, with only a few irregular years marring its perfect record. Last year, GM found itself edged out not by its cross-town rival Ford (NYSE: F), but by its Japanese foe Toyota Motors (NYSE: TM).

A slowdown in auto sales is still pressuring companies across the sector, but Toyota's fuel-friendly economy cars -- such as the Yaris, Camry, and Prius hybrid -- have heightened the brand's appeal among consumers wary of high fuel prices. By contrast, GM manufactures the Hummer, flagship vehicle of suburban Earth-haters everywhere.

What went wrong? At No. 12 on our list of SPX laggards, GM shed 79% of its value during the 10-year period that concluded on June 30, 2008. The stock peaked at $94.63 in April 2000 before embarking on a lengthy downtrend.

Apparently rock musician Sammy Hagar is not one of U.S. Sen. John Warner's (R-Virginia) constituents.

Sen. Warner has suggested that the U.S. Congress might want to consider reimposing a national speed limit to save gasoline and possibly ease fuel prices, The Associated Press reported.

However, Warner has not specifically sponsored legislation calling for a roll-back to 55 miles per hour: he has only asked U.S. Energy Secretary Samuel Bodman to research which speed limit would provide optimum gasoline efficiency given current technology, and also wants to know if the Bush Administration would support a Congressional effort to mandate a lower speed limit, The AP reported.

Last 55 mph law: 1973-74

The United States last imposed a 55 mph speed limit in 1974, as part of an effort to conserve gasoline in response to the world's first oil shock, the 1973-74 oil crisis.

It is surprising that it did not happen sooner. GM (NYSE: GM) has increased the incentives it gives on pick-ups and SUVs. High gas prices have undermined the sales of these light trucks.

According to Reuters, "General Motors Corp has raised cash rebates on some of its large sport utility vehicles and pickup trucks to a total of up to $6,000."

Will it help? The easy answer is "no," because Americans are moving to fuel-efficient cars. But the probable answer is "yes." An SUV driver who uses 30 gallons of gas at $4 per gallon will get a year of gas for free with a $6,000 incentive.

A number of pick-up customers, especially small-business owners, have waited longer than usual to replace their current vehicles to save money. For people who need a new truck, the incentives are likely to push them over the line.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

Gasoline's 4-year rise and recent pop above the dreaded $4 per gallon level is having a predictable impact on small town America.

Large areas of the upper Great Plains, the South, and Southwest are being hit hard, due to a heavy dependence on generally low-gas-mileage pickup trucks, low incomes, and those aforementioned high fuel prices, The New York Times reported Monday.

The Times reported that several social phenomena present during the U.S.'s last oil shock are on the rise: gasoline thefts, people running out of gas, and substantial reductions in consumer retail shopping to allocate more money needed to meet higher fuel costs, among other consequences.

GM (NYSE: GM), which decades ago had almost 50% of US car sales, may see its share of the domestic market drop below 20% for the first time since the company was formed. It has relied on big sedans, SUVs, and pick-ups for too long. Now, with higher gas prices and a consumer who has no money, the big car firm has to face the music.

If GM has come to this, one question worth asking is whether its was bad management or bad luck that brought the company so low? According to The Wall Street Journal, "Sales of pickup trucks and big sport-utility vehicles -- Detroit's bread-and-butter products -- have been falling for the past few years."

GM's management did not tackle its labor issues until recently. Before that, the car company was built for success but not tough times. Its UAW contracts assumed that things would go well and that the firm could support a large workforce and generous pension plan. A strategy for bad years was never really in place.

GM's other mistake is that it did not use its very broad product line and large number of brands to create and market more mid-sized cars with good fuel mileage. With dozens of different products, more should have been devoted to buyers who cared about gas and did not want vehicles that get less than 20 miles per gallon.

Bad planning has come back to haunt GM.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

The world has endured (survived?) two of them.

They led to transformations in energy use and economic activity twice in the modern era, in 1973-74 and 1979-1980.

They are oil shocks, and right now Daniel Yergin, chairman of Cambridge Energy Research Associates, argues in a Financial Times column that what is unfolding before us is the world's third oil shock. (Oil traded Thursday at $128.60 per barrel.)

Further, Yergin argues that those who say the world could take $80 per barrel oil in stride amid strong economic growth should not feel emboldened about the world's ability to continue to grow with an oil price that's $60 higher in the near future. The contraction ripples have started. In the airline sector. In the auto sector. Note the lighter traffic at your local mall. And did you notice that last food bill for the same shopping cart of items you bought?

Bad news, good news

Yergin's bad news? (And short-term, it is bad news.) Supply, short-term, will not be able to prevent the shock, in other words, lower prices to levels that would maintain (restore?) adequate global economic growth. Engineering skills and oil equipment are in short supply, drilling costs are rising, and equally damaging, selected governments are restricting access or postponing decisions that would bring more oil to the market in the shortest possible time.

Yergin's good news? Demand is already responding to record-high oil (and in the U.S., gasoline) prices, except in those countries where prices are controlled or subsidized. The oil shock is propelling changes (finally) in public policy, corporate/consumer behavior, along with technological development and implementation. Hybrid cars/vehicles, once fringe, are now in demand. The U.S. Congress increased automobile fuel efficiency requirements for the first time in 32 years. And billions of dollars have been added to speed the development of battery technology.

With oil setting yet another record high Friday of $127.43 per barrel and Goldman Sachs renewing traders concerns about inadequate oil supply growth, economists and business executives are becoming increasingly concerned about gasoline prices in the quarters ahead.

U.S. gasoline prices are already up more than 100% since 2004 to a national average of about $3.78-3.83 per gallon. (Many high-cost zones, such as New York, Boston, San Francisco, and Los Angeles, are already experiencing prices well over $4 per gallon.) By any gauge, gasoline's surge is one for the record books - - rapidly approaching percentage increases registered during the first two oil shocks, in 1973-74 and 1979-80.

Given the run-up, how much higher can gasoline prices rise?

First, some may ask, why the emphasis on gasoline prices? In a nutshell, economists obsess over gasoline prices because, unlike the rest of the developed world, the United States has out-sized per capita energy consumption. That's econospeak for 'Americans use many more gallons of fuel to commute to work, do errands, etc. than their counterparts in Europe and around the world.'

The U.S. car companies make more money on SUVs and pick-ups than they do on low-priced sedans and coupes. That is old news and hardly worth repeating, except alongside the word that inventories of these trucks is piling up.

According to the AP, "Used SUV sales in March were down 14 percent nationally compared to last year." When used cars don't sell, neither do new ones. Used car dealers will cut prices to move supplies of SUVs, which they cannot hold because they need cash-flow. An abundance of inexpensive, cheap trucks will be attractive to those who need a replacement vehicle during a recession. That leaves new car dealers and firms like General Motors (NYSE: GM) and Ford (NYSE: F), which supply them in a bind.

The price of Ford's stock moved up sharply last week when it posted better-than-expected earnings. Almost all of that gain disappeared the next day when analysts became more clear-heading about the continuing drop in Ford's sales.

That drop is about to get much worse.

Douglas A. McIntyre is an editor at 247wallst.com.

Volkswagen says that by 2010 it can produce 10 million vehicles and pass Toyota (NYSE: TM) and General Motors (NYSE: GM) as the world's largest car company. According to the Sunday Times, "To those who suggest that closing a 3m vehicle gap (Toyota produced 9.4m last year) is a very tall order, company management explains that, in 2006, the number of conventional passenger cars made by Volkswagen and Toyota was fairly similar -- 5.2m for Volkswagen and 5.5m for Toyota -- and that the difference is made up by 4x4s, 'people carriers' and light trucks."

Volkswagen only recently introduced a full range of these multi-purpose vehicles, which will play an important part in its future growth

VW may find that things don't go as planned. As a new entrant to the pick-up and SUV markets, the company will find global competition for not just Toyota and GM, but also Ford (NYSE: F), Nissan, and Honda (NYSE: HMC). Most large countries also have local car manufacturers who may not be anxious to give up a large piece of their business.

While VW may have a chance to get a reasonable piece of the auto sales in huge countries like China, it has almost no market share in the world's largest car-buying nation, the U.S. Taking away business from a desperate company like Ford and a successful company like Toyota may be nearly impossible.

Douglas A. McIntyre is an editor at 247wallst.com.

The highly improbable may be happening. U.S. gasoline consumption may be arcing downward, The Wall Street Journal reported Monday (subscription required).

Confronted with near-record gasoline prices, an anemic-growth U.S. economy, and rising food costs, among other living expense increases, U.S. gasoline consumption has fallen about 1.1% in the past six weeks, on a year-over-year basis, The Journal reported Monday, citing U.S. Government data. Further, excluding Hurricane Katrina in 2005, which destroyed energy facilities, the six-week drop in demand is the longest drop in 16 years.

If the 'mini' trend strengthens or at least holds on a year-over-year basis, experts say it will limit gasoline price increases that typically occur during the summer driving season - - a period when U.S. gasoline consumption historically increases and oil companies increase gasoline prices to take advantage of that higher demand.

Pickups and SUVs are among the most profitable vehicles that Detroit sells. They are built on truck platforms and carry relatively high margins.

The problem with pickup sales recently is that high gas prices hurt sales of cars and trucks that use a lot of gas. Sales of most light trucks fell over 15% last year, and the Big Three have not found a solution.

General Motors (NYSE: GM) thinks it may have found a way around the fuel issue -- hybrid pickups. It will offer a new Sierra, one of its larger light trucks, powered by the new technology. "GM says the 2009 GMC Sierra hybrid gets a 25 percent improvement in fuel economy without compromising performance," according to the Associated Press.

If the new truck sells well, GM may be able to step ahead of its rivals with a solution to get consumers back into the SUV market. For its profitability that would be a big deal.

Douglas A. McIntyre is an editor at 247wallst.com.

General Motors (NYSE: GM) said Thursday it will sell its mid-size truck unit, which built about 40,800 vehicles in 2006, to Navistar International. Financial terms were not disclosed.

GM's shares fell 20 cents to $26.46 in Thursday midday trading.

GM said the agreement constitutes another step in the company's plan to focus on designing, manufacturing and selling cars and light trucks around the world. GM added that the deal would leverage Navistar's strengths in commercial trucks and engines, enhance its economies of scale and lower costs.

Good decision

Analyst C. Leonard Bauer, formerly of Prudential, said he likes the sound of the Navistar deal.

"This will enable GM to allocate more resources on its core: cars and light trucks," Bauer said. "I like the sale to Navistar in that it gets GM out of a space that did not represent a big gainer. GM has seen the future, and for them it's not in manufacturing mid-size trucks."

The odds of a 2007 Energy Bill passing the Democratic Party-led U.S. Congress, with President Bush's blessing, "Are still likely," according to a Washington-based, public policy lobbyist with knowledge of the matter.

"The bill will need a few revisions, but I'd say it's a 70/30 go, in favor of the bill being signed by the president," the lobbyist told Bloggingstocks Tuesday, on condition he not be identified by name.

The lobbyist, who represents primarily Democratic Party-based constituencies, said the the bill's renewable energy component and potential tax increases remain the hangups in the bill.

Modification likely

"More than likely President Bush will get the renewable energy component modified, but the Democrats may gain extra footing with better solar/wind energy credits," he said.

The bill current would require utilities to generate more power from renewable energy. Lawmakers from the Southeast U.S. have said they're concerned that utilities in their states will not be able to meet the requirement, due to a lack of wind power, The Wall Street Journal reported.