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Asian auto makers sharply lifted their USA market share last month due to a trend towards smaller vehicles under the cash-for-clunkers scheme and consumers’ continuing concern about the health of General Motors and Chrysler. Toyota reported a 6.4% sales increase from a year earlier, bringing it within 21,000 vehicles of GM, which has held the # 1 spot for decades. The cash-for-clunkers scheme pushed GM’s sales up by 30% from July, but they remained a 5th lower than August 2008. Among other Asian auto makers, Honda’s sales reached an August record, while Hyundai reported a 47% surge and Subaru posted its best month ever. Read more

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General Motors announced that it has formed a 50/50 Joint Venture with FAW Group to make light trucks in China for the 1st time, in a further sign that the US car maker has increased focus on the Chinese market in the face of weak US sales. Total investment in the JV with the Chinese vehicle maker will be US$293M GM said Sunday, under a deal that the two companies had been negotiating for several years. The partnership with FAW, called FAW-GM Light Duty Commercial Vehicle Co, will be GM’s 3rd JV with a local vehicle maker, but the first to produce trucks. GM’s other Chinese Joint Ventures produce passenger cars and mini commercial vehicles. GM passenger car sales in China rose 52% year-on-year in July, traditionally a weak month, according to figures from JD Power, the car consultancy. Total Chinese light vehicle sales in July were up a remarkable 60% year-on-year at 1.03M vehicles, the JD Power figures showed. Chinese light vehicle sales have continued to surprise vehicle market analysts since January 2009.

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Yesterday General Motors revealed that its Chevrolet Volt plug-in hybrid car would boast fuel consumption of 230 miles per gallon in city driving making it far more efficient than existing environmentally friendly cars. Fritz Henderson, GM’s chief executive, provided the estimate as part of a drive to burnish the car maker’s image and win back customers since its emergence from a court-supervised restructuring early last month. The Volt, due to go into production in late 2010, will be powered mainly by a battery pack with a 40-mile range. A small internal combustion engine will extend the range by recharging the battery while the car is in motion. The 230 mpg fuel-consumption figure is based on draft guidelines being developed by the US Environmental Protection Agency. Toyota’s Prius hatch-back, the top-selling hybrid, carries a fuel-economy rating of 48 mpg.

Popularity: 2% [?]

General Motors’ famous brand Pontiac brand may be announced to be eliminated early next week, was reported last Friday by Automotive News, citing a source familiar with the company’s plans. However, GM indicated that the closure rumor is just media’s speculation. According to the report, this announcement about Pontiac’s destiny will be made as part of an updated viability plan to the US auto task force. In the restructuring plan submitted on Feb. 17, GM had planned to keep Pontiac along with mainstream brands Buick, GMC, Chevrolet and Cadillac while Saturn, Hummer and Saab are up for sale. The US Treasury Department granted US$2B last Friday to keep GM operating. GM has been staying alive with US$13.4B in loans granted last December by the Bush administration. GM defined the report of Pontiac’s potential closure as pure “media speculation”. In a statement released Last Friday, the carmaker giant said “contrary to media speculation, General Motors has not announced any changes to its long-term viability plan or to the future status of any of its brands.” Established in 1926 and as a division of GM, Pontiac manufactures vehicle types including the sports car, sedan, crossover and sports wagon.

Popularity: 5% [?]

Cars and light trucks will be required to meet a US fuel-economy average of 27.3 mpg for 2011 models, a 2 mpg increase from the previous year’s level, the Transportation Department said. The 8% gain announced today in Washington carries out a 2007 law intended to curb emissions and fuel use. The change, being put in place as General Motors Corp. and Chrysler LLC face possible bankruptcy, isn’t as aggressive as the 27.8 mpg target that President George W. Bush proposed in April 2008. “This isn’t going to be a stretch for them to meet this,” David Kelly, former acting head of the National Highway Traffic Safety Administration under Bush, said of automakers. New-car fuel economy already averaged 31.3 mpg by 2007, NHTSA said . Cars must average 30.2 mpg, up from 27.5 currently, under the rule.

Light trucks will average 24.1, up from 23.5 mpg for 2010 models. The December 2007 law called for vehicles to meet a 35 mpg standard by 2020 models, a 40 % increase from the average in 2008. “The bad news is that the 27.3 mpg standard means that they’ll have to make up for it in future years,” said Dan Becker, director of the Safe Climate Campaign, a group in Washington that works for environmentally “clean” cars. “The goods news is that they have promised that they will.” President Barack Obama’s administration had a March 31 deadline for setting the standard, giving the industry about 18 months to prepare its 2011 models to meet the requirement. Bush never issued his proposed standard before he left office.

Popularity: 3% [?]

Yesterday the DJIA had the biggest pointgainer in 112 yrs and the fifth largest percentage gainer in its storied history after several weeks of forced and panic selling.

Many of you have e-mailed me letting me know that you are tracking the DJIA as never before, and have asked to give a brief overview of the Dow Jones Industrial Average, what it is made of, what it indicates, etc. It is clear that many folks do not know the basics, so here you go, as follows;

The DJIA index is made of 30 of the biggest U.S. companies and is set up as a calculated measure of stock market performance. Today it is the world’s most famous and watched stock market index.

The Dow, as it has come to be known (there is also Dow Transports, Dow Utilities and Dow Theory), is the oldest continuing U.S. market index; it measures the combined stock values of 30 Big U.S. companies known as the “Blue Chips.”

We do not find any Transports or Utilities in the Dow Industrials, but it is interesting to note that in 1999 the industrial’s only tradition was broken when Intel (INTC) and Microsoft (MSFT) were added. This marked the first time that a NASDAQ (non-NYSE) traded stock became a member of the DJIA.

Started on May 26, 1896 by financial reporter Charles Dow, at its inception It started with 12 companies, including now-defunct companies like U.S. Leather Co. and Tennessee Coal, Iron and Railroad Co and and was priced at $40.94  It is interesting to note that the only original component still around is General Electric Company (GE).

Today the Dow Industrials has expanded to 30 components and reflects the U.S. economy’s move from big industrial companies to  include big financial companies like Citigroup Inc., technology bellwether IBM Corp. and drug manufacturer Pfizer Inc. (Financials, Technology and Drugs: healthcare).

The Dow Industrial index today is made up of these big US companies: 3M, Alcoa, American Express, AT&T, Bank of America, Boeing, Caterpillar, Chevron, Citigroup, Coca-Cola, DuPont, ExxonMobil, General Electric, General Motors, Hewlett-Packard, Home Depot, Intel, IBM, Johnson & Johnson, JPMorgan Chase, Kraft Foods, McDonald’s, Merck, Microsoft, Pfizer, Procter & Gamble, United Technologies, Verizon Communications, Wal-Mart and Walt Disney.

In the beginning the DJIA was simple: Charles Dow, when he complied the index back in 1896, originally took the price of one share of each company’s stock, added the numbers up and divided by the number of companies.

Thus the average when the index launched was $40.94: these pale compared to today’s 1000 pt surge to close at 9,387.61, or its record closing high of 14,165.43 on Oct. 9, 2007 just a year ago.

The way the DJIA is calculated today by the Dow Jones & Co. is by a mathematical formula to adjust for things like stock splits, i.e., when a company doubles the number of stocks its shareholders have, splitting the price of each in half, or new companies being added or removed.

The formula is a way to keep the index consistent over time and to make sure today’s value can be compared in a meaningful way to what it was in years past.

This is done mathematically by changing the “divisor”, a number that is divided into the total of the 30 stock prices. That divisor today is 0.122820114.

Next, the index utilized what is termed a “price-weighted average,” meaning expensive stocks have more weight (influence) over the number than lower-priced issues. This is done because the index is based purely on the US Dollar value of the stocks in the index, i.e., a high-priced share goes up/down (move) 20% is a larger dollar increase than a cheaper share’s 20% move.

For example: when we note the drop in the price of General Motors last week, we also know that it did not have a huge effect on the Dow because the automaker’s stock is already low. The stock fell $2.15, or 31 percent, on Thursday but only lowered the Dow by 17.1 points. Therefore, GM’s drag was small on day when the index plunged 679 points.

Some of you have asked me if the DJIA is a good measure of how the US companies are doing in the market, overall.

The answer is that some folks on Wall Street downplay the importance of the average because it is not as broad a measure as the Standard & Poor’s 500 index, which measures the performance of 500 NYSE companies stocks.

But once again, the Dow is the patriarch of all U.S. market indexes, and it presents an simplified snapshot of how the market is performing up or down.

Most analysts that I know believe it is a very good tool when combined with the other market indicators, including the S&P 500 and the NAS composite, an index of shares on the tech-heavy NASDAQ stock market. You will often see these indexes go up and down together percentage wise as you saw today.

Dow
9,387.61                       +936.42                     +11.08%
Nasdaq
1,844.25                       +194.74                     +11.81%
S&P 500
1,003.35                       +104.13                     +11.58%

Popularity: 3% [?]