981% gains. That’s how much you could make by understanding the critical differences between Detroit’s Big Three Automakers

Fair warning: I am going write about cars and carmakers again, and I am going to lay a whopping big “I told you so” on you before I am done.

First, let’s get a couple of things out of the way…

Americans are really weird about their cars. You can call their children funny looking, and kick their dog, and maybe, just maybe, they will get in your face about it. But say a single bad word about the car they are driving, and you’d better duck but quick, cause they will come at you with all they’ve got.

Loyal for Life

When it comes to cars, we tend to build very long-term brand loyalties. I’m talking generational. I’ll bet it’s easier for a kid to tell his dad he’s changed gender preferences than to admit he’d rather drive some other maker than his family has been buying since they retired the horse and sold the buggy.

I am probably as susceptible to this passion as anyone else: In 1964, my grandfather brought home a mint green Ford Mustang. I kissed my first summer girlfriend in the back of that Mustang on a dark night at a Long Island drive-in (and that’s as far as THAT tale is going!).

In the decades since, I have owned three Mustangs, two new ones, and a 1966 notchback damned near identical to Granddad’s. (Except mine had the 289, instead of the six-banger he got as a compromise with my grandmother. Gasoline had, after all had just gone up over 25 cents a gallon!)

I have also owned several Ford trucks over the years. (Including one that I bought twice. It’s a long story for some other day...)

“You Got a Problem With That?”

So when you guys who are about to get ticked off at me write in to complain, please get at least this part right: I am not an America-hating communist, or even the “Honda-Driving Spawn of Satan” as stated in a recent e-mail.

But I am a “Ford guy,” and if you have a problem with that, well, then maybe we need to step outside.

That said, let’s talk about GM now. Washington has already fired its CEO. When someone gives you $13.4 billion, I guess they can do that, and pretty much anything else they want to do.

Not Enough Money in the World

Unfortunately for poor old GM, that simply wasn’t enough, and now they are begging for another $5 billion to keep them going into summer.

Washington has given them until Friday to come up with some kind of explanation as to how they are going to avoid out-and-out collapse. Word percolating out of Detroit has GM sacrificing at least one of its heritage marques – 83-year old Pontiac – in its entirety so as to preserve other lines like Chevy, Buick and GMC.

I know that this is a sad day for all you Firebird, Bonneville and GTO drivers. Wait a minute: GM hasn’t actually made a car that deserved one of those badges in at least 20 years!

(I am going to duck now.)

They are also selling or simply closing down Hummer, Saab and Saturn. Not that it matters but so much, as virtually no one is buying any of these cars. That’s why GM is talking about shutting down virtually all production for most all of the summer.

When the Lights Go out This Summer…

For the better part of a century, it has not been unusual for an auto manufacturer to close for a couple of weeks in summer. It was just simpler to send everyone away at the same time rather than scurry about shorthanded.

As I mentioned a moment ago, virtually no one is buying what GM is making. Most automakers are satisfied with about 60 days’ worth of inventory. GM has more than double that, over 120 days’ worth of cold dead steel gathering dust on factory lots, truck trailers and showroom floors.

It’s not entirely clear if this shutdown will actually save GM nickel one, as its union contract requires that it pay off workers almost as much to sit as to work.

… It May Be for the Last Time

In point of fact, I personally wonder if the lights will ever come back on at any of GM’s plants. But then again, what do I know: I am, after all, a Ford guy.

GM is not the only member of the big three flirting with bankruptcy. In fact, Chrysler’s suitor, Fiat, is pretty much insisting that the only way it will buy Chrysler is if the hollow giant tells its lenders to go hang. (Pardon me, I know that the politically correct term is “ally with,” but if your “ally” can declare you bankrupt, then they are your owner, not your friend.)

The actual court filing is expected as soon as this week. Washington (because of course they have their thumb in this too) is kinda hoping the lenders will settle for 22 cents on the dollar and some stock in whatever strange beast comes out of all this. If they can’t pull that off, then it all ends up in the courts.

Speaking of drive-in movies, anyone ever see the movie “Reanimator?” You know, the one where the mad doctor tries to revivify dead guys? That story didn’t end well either.

The REAL Monster in Detroit

Which brings us around to Ford (F:NYSE), and that great big “I told you so” I spoke of earlier.

Last week, I wrote to you that Bill Ford and Alan Mulally were proudly rejecting government funds, choosing instead to stand on their own two feet (four feet? Whatever!) A couple of the more acerbic letters I received afterward warned me that we would see just how proud Ford was when their quarterly statement came in covered in red ink.

Good call guys: you were absolutely right. And also dead wrong.

Read the Fine Print, Guys!

Ford was forced to admit to a loss this quarter of some $1.4 billion. However, Mullaly et al. never did say that they would make money this quarter. And in point of fact they actually lost a heck of a lot less than analysts had them pegged for, by some 39%.

What they did promise was to slow the burn rate of their available cash, which they managed quite well. While that fund is down some 25% quarter over same quarter, it still stands at about $21.3 billion, enough, management assures us, to continue to allow them to thumb their nose at Washington.

Here’s where my correspondents had things completely backward: They were calling for F shares to collapse back to 2 bucks, where I had said they would see $6 sooner rather than later.

A Once-in-a-Lifetime Opportunity

Well as of Friday, Ford shares were flirting $5.45. And those options I mentioned? You know, the ones we recommended at $80 a contract? They hit $325, a gain of 306%.

So now I am going to tip my hand a bit.

I am looking right now at my master chart for Ford. Alongside that, I have the mathematical formulae that I use to calculate option gains. And I have to confess that $6 is not the top target for shares, and $325 is not the top target for options gains.

And I have to tell you: the option that chart and those formulae are recommending is positioned to pick up an additional 188% gains before the dust settles. Readers who took me up on the original recommendation stand to make as much as much as 981%.

And that, my friends, is enough money to make anyone a Ford man – for life!

Other Related Topics: Editor Adam Lass , Foreign Automakers , Market Analysis , WaveStrength Options Weekly

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