Record Low Interest Rates Sparking U.S. Automobile Market, Too

Record low interest rates have brought a much needed spark to the housing market in recent months, and some analysts are suggesting they are the reason for the uptick in another important industry: automobiles.

New car showroom photo courtesy of albertretail.blogspot.com

Automobile sales in September were made at the highest rate in four years, according to many reports including the New York Times (http://www.nytimes.com/2012/10/03/business/g-m-and-ford-post-lackluster-sales.html). The Japanese and German manufacturers, however, led the charge with the American car makers posting slightly weaker results. A total of 1.2 million automobiles were sold in September in the U.S., which works out to a 13 percent increase over 2011, according to the New York Times report. For the year, sales are up 14.5 percent over 2011.

Analysts suggest that “historically cheap loans,” new products and “better inventory management” are aiding the auto sales comeback. And fuel economy is one of the most important features sought after by customers.

The auto industry is the home of many small cap companies, many of them suppliers to the big automobile manufacturers. Most have been struggling in recent months due to fears of waning global demand and exposure to Europe, according to reports, and many are considered undervalued so the new strength in US sales has to be good news.

Here are some randomly chosen examples:

Racine, WI-based Modine Manufacturing Company (NYSE: MOD, http://www.modine.com/) develops, manufactures and markets of heat exchangers and systems for use in on-highway and off-highway original equipment manufacturer (OEM) vehicular applications, and to various building, industrial, and refrigeration markets. It offers power train cooling products, including engine cooling modules, radiators, charge-air-coolers, condensers, oil coolers, fan shrouds, and surge tanks; on-engine cooling products comprising exhaust gas recirculation coolers, engine oil coolers, fuel coolers, charge-air-coolers, and intake air coolers; oil coolers consisting of transmission oil coolers and power steering coolers; fuel coolers; and component assemblies and radiators for special applications. MOD operates mainly in the North America, Europe, South America, Africa, and the Asia/Pacific regions. Analysts writing in Investopedia and Seeking Alpha have suggested that if Modine’s current restructuring is successful, it could be poised for a turnaround. MOD’s 52-week trading range is $5.50-$11.64. It closed Oct. 3 at $7.46, down 1 cent on the day. Market cap is $351.5 million.

China-based SORL Auto Parts (Nasdaq: SORL, http://www.sorl.cn/) manufacturers and sells a wide variety automotive brake systems and other safety-related auto parts, mainly in China, although it also exports its products to 104 countries and regions. Its products are mainly used in commercial vehicles, including buses and trucks. On September 24 SORL announced a major contract win with Shaanxi Auto Group to deliver brake parts for the Deloong F3000 heavy-duty trucks. SORL stock is thinly traded, averaging about 24,000 shares a day. It’s 52-week trading range is $1.71-$3.64. It closed Oct. 3 at $1.88, down 1 cent on the day. Market cap is $30 million.

Northville, MI-based Gentherm * (Nasdaq: THRM, http://www.gentherm.com/) is a global developer and marketer of thermal management technologies for a broad range of heating and cooling and temperature control applications. It’s also developing more efficient thermoelectric devices. THRM’s Climate Control Seat system, based on its proprietary thermoelectric technology, is being offered in more than 50 vehicles made by the world’s leading automobile manufacturers including Ford, General Motors, Nissan, Toyota, Kia/Hyundai, Land Rover and Jaguar, among others. THRM’s 52-week trading range is $10.06-$17.74. It closed Oct. 3 at $13.11, up 17 cents for the day. Market cap is $388 million.

Torrance, CA-based Motor Car Parts of America (Nasdaq: MPAA, http://www.motorcarparts.com/) remanufactures alternators and starters for import and domestic cars and light trucks. Its products are sold to auto parts retail chains in the U.S. and Canada and to major automobile manufacturers for their aftermarket programs and warranty replacement programs. Its 52-week trading range is $3.96-$10.42. MPAA closed Oct. 3 at $4.55, down 12 cents for the day. Market cap is $66 million.

Pendleton, IN-based Remy International (pink sheets: RMYI, http://www.remyinc.com) is a global vehicular parts designer, manufacturer, remanufacturer and seller of aftermarket and original equipment electrical components for automobiles, trucks and other vehicles. Its products sell primarily under the Delco Remy, Remy and Worldwide Automotive brand names. Its 52-week range is $12.25-$21 and its market cap is $536 million. RMYI stock is listed at $16.83 but did not trade Oct. 3.

* Denotes client of Allen & Caron, Inc., publisher of this blog

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