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3 pts

Opinion on  Southwest Airlines Co. (LUV)     Sector: Transportation  >  Industry: Airline
Autos & Airlines: Next in Line for Government Aid

Sep 14, 2008 05:34 PM UTC
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Autos & Airlines: Next in Line for Government Aid

Top 5 Auto Makers by Market Cap
Top 5 Airlines by Market Cap


The U.S. auto industry is poised to begin lobbying Congress for up to $50 billion in low interest loans to help them better compete in the global market by upgrading manufacturing facilities and paving the way for the production of vehicles with better fuel efficiency. Last year, Congress authorized $25 billion as part of an energy bill aimed at producing electric and hybrid vehicles, but auto makers are looking to expand the total to $50 billion over three years. Since companies such as Ford (F) and General Motors (GM) are below investment grade, company officials argue they cannot access capital at reasonable rates which hampers their ability to compete with global giants such as Toyota (TM) and Honda (HMC).

The accompanying tables contain an overview of a Global Auto Index, which declined by over 26% on an equal-weight basis and 13.5% on a market cap-weight basis over the past year (all stats are through 8/8/08) for the 39 eligible companies with market caps over $200 million. Of the top companies by largest market cap, only Volkswagen showed a gain over the past year with an industry-best stock price increase of 45% as industry leader Toyota lost nearly one-fourth of its market value. Truck maker Navistar (NAV) was the only domestic company in the index which posted a stock price gain over the past year, increasing by 3.6%.

Meanwhile, the Global Airline Index of 51 companies with market caps over $200 million is down by over 30% over the past year on both an equal-weight and market cap-weight basis. Shares of UAL (UAUA) are among the biggest stock price decliners over the past year, losing nearly three-fourths of their market value, which is second only to US Airways (LCC). Airline industry leader Southwest (LUV) has fared much better than its peers over the past year with gain of about 6% through today and appears to be one of the few viable investments in the entire group.

Global Auto Industry Index Stats
Global Airline Industry Stats


LUV:  This call was made on 09/14/08 @ $15.75
Rating:   Positive   $15.75 (09/14/08)
Closed:   09/16/2008 @ $15.78 (+0.19% in 2 days)


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