by Tracy Thomas

Created on: December 05, 2008   Last Updated: December 08, 2008

The Big Three, General Motors (GM), Ford Motor Company (F) and Chrysler (DCX), are the largest automakers in the United States and were for decades the largest in the world. They still continue to hold rank in the top 10 worldwide but in recent years, all have suffered continually falling sales and loss of market share. With the economy in the toilet and midsize trucks and SUV's losing favor to the more fuel efficient and smaller foreign vehicles on the market, sales continue on a downward spiral for the U.S. manufacturers.

Is bankruptcy imminent for the Big Three auto makers? With each new earnings report it appears to be a certainty. General Motors (GM) cars alone are selling so poorly that revenue fell a startling 45% in October with a third-quarter operating loss of $4.2 billion. Ford (F) posted a staggering third-quarter $2.98 billion loss while Chrysler (DCX) fell a whopping 47% in November alone. Chrysler (DCX) also suffered a $5.0 billion loss in the first three quarters of 2008 and is left with no cash to pay their monthly bills through the end of this year. All three are currently before Congress asking for a $34 billion bailout just to keep them afloat.

So what happens if Congress says no to the bailout and the Big Three declare bankruptcy? Consumer confidence in the U.S. companies will most assuredly continue south. But, American's will still need to purchase cars. With the new consumer demand economical and reliable automobiles, it is logical to assume that they will continue to turn to foreign auto manufacturers to buy them. According to Autodata Corp., Asian and European brands dominated 54.2% of the overall vehicle sales this June alone, for the first time outselling American cars by such a large margin.

As the foreign auto makers take up the slack left behind by the bruised US auto industry, companies like Toyota (TM), Honda (HMC), and Nissan (NSANY), the Japanese Big Three, seem poised to become the strongest bets in the investment arena. True, Toyota's (TM) earnings fell off slightly in 2008 due to the slumping economy and General Motors (GM) was still able to hold the lead in the number one U.S. sales spot; however the global market presented a different story. Toyota (TM) sold more automobiles globally than General Motors (GM) and for the first time put a potential end to GM's 77-year monopoly on global car sales.

Why is it that these foreign automobile manufacturers remain in a stable position financially while the U.S. Big Three are suddenly cash poor? Unlike the U.S. Big Three, the foreign auto companies strategically avoided the financial strains of the United Auto Workers (UAW) by placing their factories in the Southern and border states and brought with them very efficient production methods. Their workers receive good but not excessive pay; they have been able to keep their healthcare and pension obligations under control and have maintained good employee morale in the process. Strong global positioning and the sound financial practices of these foreign auto manufacturers seem to scream "smart investment".

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