Strong emerging market sales provided a huge boost for automotive titan Toyota Motor Corp. (TM), which posted a 7.5% rise in profit for the quarter ended Dec. 31.

Quarterly operating profit – excluding joint ventures in China – rose 4.7% and revenue gained 9.2% in the company’s fiscal third quarter.

"We believe our record high financial results can be attributed to Toyota’s growth strategy of utilizing every opportunity across the full product line-up and all regions," Takeshi Suzuki, the company’s senior managing director, said in a company statement.

Suzuki has a guarded outlook for the fourth quarter because of a slowing U.S. market and strengthening yen, Reuters reported. But behind closed doors, Toyota executives are patting each other on the back.

Last week, the world’s second-biggest carmaker inched closer to the top spot, a title that General Motors Corp. (GM) has held for the past 76 years. Toyota sold 9.366 million vehicles in 2007, about 3,000 shy of GM’s 9.369 million sales total.

That momentum is evident in each company’s recent quarterly statements – Toyota’s sales grew 5.3% while GM’s grew 4.8%. If that trend carries throughout 2008, Toyota will dethrone GM, and by a much wider margin than just 3,000 vehicles.

This rivalry will continue for a long time, but North America won’t be the crucial battleground. Instead, the winner will be the one who can capture emerging markets spanning several continents where new classes of consumers haven’t yet established brand loyalty.

Behind the United States, China is GM’s second largest market. The company sold more than 1 million vehicles there for the first time in 2007.

Meanwhile, Toyota is beefing up its presence in Russia [with a new factory last year] and is adding capacity in China, Thailand, Brazil and Canada, Reuters reported.

News and Related Story Links:

• Toyota Website:
  Toyota Announces Record Third Quarter Operating Results

• Reuters:
  Toyota gains in emerging markets

• Wall Street Journal:
  GM Hangs On To Top Sales Spot Over Toyota

Despite recession fears and a temporary pullback in the price of oil, gasoline prices will likely tease record highs even before the summer driving season kicks back into gear.

The price of crude oil accounts for more than 55% of the retail price of gasoline, according to the federal Energy Information Administration. So it came as no surprise that – as oil breached the $100 a barrel mark earlier this month – gas prices soared up over the $3.00 a gallon level.

However, fears of a recession and slumping demand slowly weighed on oil prices, and gasoline followed suit. The Lundberg Survey, which tabulates the prices at about 5,000 gas stations across the country, found that average retail gas prices have fallen 9.43 cents a gallon in the past two weeks. The price of gas had risen in each of the three prior weeks.

Survey Publisher Trilby Lundberg attributed the decline to sagging oil prices and shrinking profit margins among refiners and retailers. But Lundberg doesn’t think that prices will fall much further.

"Retail gasoline prices will probably hover around this level – just under $3 per gallon – for perhaps up to a month," she predicted. And even if oil prices don’t rise during that time, "there will be big pressure on gasoline prices to go up because our spring demand will pull it up."

Even though supplies are sufficient to meet demand, "When consumers soak up that extra supply, prices will stop falling and be on the rise, possibly to a dramatic degree," Lundberg added.

While slumping consumer spending and rising unemployment will threaten demand for both oil and gasoline, it’s likely that the Organization of Petroleum Exporting Countries will scale back its production over the next few months as evidence of an economic slowdown continues to emerge. For that reason, few analysts believe gasoline will drop much further than $2.50 a gallon, from its current price around $3.00.

In the short term, fears of a slowing economy, or even an outright recession, could cause gas prices to fall and range between $2.50 and $2.80 over the next few weeks, Tom Kloza, chief oil analyst at Oil Price Information Service, told CNNMoney.

But after that, Kloza expects gas prices to surge again to reach a new record of more than  $3.22 a gallon in the Spring, whether there is a recession or not.

"The same things that make the rally every spring are still there," he said.

That includes a drop in inventories as refiners switch to summer blends, and increased demand heading into the heavier summer driving season.  Also, a lack of refining capacity is beginning to take its toll, as there hasn’t been a refinery built in the United States in roughly 30 years.

Nor is it likely that OPEC will come riding to the rescue, either. Crude oil hit $100 a barrel earlier this month, but the price has slipped significantly since, as the strength of the U.S. economy begins to wane.

And as U.S. Federal Reserve Chairman Ben S. Bernanke and central bank policymakers issued an emergency three-quarter-point rate cut a week ago (Jan. 22) and the stock markets sputtered, the price of oil dropped to a low of $86.11, before settling at $89.85 a barrel on the New York Mercantile Exchange.

OPEC doesn’t want prices to rise so high that it weighs down global growth and further erodes demand, but if it increases its output – and the world economy stalls anyway – oil prices could collapse.

The bottom line: OPEC will continue to maintain that bottlenecks in refining, a falling dollar, and speculative investing are the reason for high oil prices, not a lack of crude. An Energy Department report released today shows that U.S. crude inventories rose in the week ended Jan. 25 rose 1.8 million barrels.

Additionally, the average price OPEC charges for oil has dropped in each of the past three weeks. After hitting a record high of $93.78 a barrel Jan. 3, the price has dropped to $85.07 per barrel, according to Xinhua, the state-run China news agency.

Given that global growth is going to slow anyway – and the cartel’s profits already are destined to shrink – it’s unlikely that OPEC will open up its spigots. And given that OPEC provides the world with 40% of its oil, that will affect crude oil prices.

The leaders of OPEC-member nations are set to next meet in Vienna on Friday.

News and Related Story Links:

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Tata Motors Ltd. (TTM), India’s largest auto manufacturer by revenue, is aiming to expand – and not just by sales or geography.

The automaker that’s looking to bring the world a fully featured $2,500 car is now aiming at the other end of the price spectrum and has joined rival Mahindra & Mahindra (MAHMF) and U.S. buyout group One Equity to pursue the upscale Jaguar and Land Rover brands put up on the auction block by embattled U.S. carmaker Ford Motor Co., (F). The list of potential suitors is a long one, the Financial Times reported.

Tata is largely a domestic company that relies heavily on truck sales. It was originally founded in 1945 as Tata Engineering and Locomotive Co. Ltd., a manufacturer of locomotives and engineering products. From there, the company slowly morphed into a producer of medium-sized commercial vehicles.

Two years ago, the company caught a huge break when Indian authorities began to crack down on drivers with overloaded trucks, a regulatory nightmare for shippers that translated into a nice sales increase for Tata – especially after it introduced a bare-bones light truck with an unheard-of sticker price of only $5,100. The smallish vehicle may not have been a monster truck, but it was a certified monster hit: Tata sold 100,000 of them in only 20 months.

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Tata also has created a profitable niche for itself as a premier manufacturer of affordable compact cars for India’s middle-class.

A successful acquisition of the Jaguar and Land Rover brands would greatly bolster Tata Motors’ image and global reach. It would also be the perfect complement to the company’s current plan to build the world’s cheapest passenger vehicle – the "one-lakh car," which, at current exchange rates, would sell for about $2,500.

"If one wants a brand, which is recognized as one of the top brands in a space, one has to play in the premium end of the market," Bharti Gupta Ramola, head of financial advisory services at PricewaterhouseCoopers told the Hindustan Times. "Mergers and acquisitions are, perhaps, the only quick way to build a brand. To do so from scratch requires a lot of time and investment."

However, some analysts think Tata Motors’ may be in over its head. Both Jaguar and Land Rover have large, unionized work forces that would make the transference of design and engineering work to India difficult. Additionally, the company could face integration problems as it attempts to merge its commercial trucking and low-cost passenger vehicle segments with high-end, low-volume U.K. brands.

Worse, signs that the company is losing ground domestically are starting to emerge.  Amid growing competition from Daimler AG (DAI), AB Volvo (VOLV), and MAN AG, Tata’s heavy truck sales declined 8.9% in the quarter ended September 30. That has led some analysts to believe that such a weighty acquisition might drain the company of significant resources at a crucial time.

"This deal would be a turn of the roulette table as far as Tata Motors is concerned," a banker familiar with the group told the Financial Times. 

But Tata Motors isn’t deterred. Nor is its parent company, Tata Sons Ltd., one of India’s industrial heavyweights, and a firm that’s no novice when it comes to mergers and acquisitions. To date, the group has spent an estimated total of $15.5 billion on foreign acquisitions. That includes Tata Tea’s $407 million buyout of U.K- based Tetley tea brand in 2000 and Tata Steel Ltd.’s hefty $12 billion acquisition of Corus Group PLC earlier this year. 

Tata Motors is one of three bidders that has been short-listed by Ford and invited to meet union leaders on Nov. 20. Should Tata make a good impression and land a deal, it could be a make or break moment for the company.

News and Related Story Links:

• Money Morning:
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• Money Morning:
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• Money Morning:
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China’s enormous importing and exporting demands had a huge hand in record third-quarter profits for the world’s largest shipbuilding company, Korea-based Hyundai Heavy Industries Co.

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Profits rose to $479 million (434.7 billion won) from $232 million (210.7 billion won) a year earlier. Demand from China is fueling record earnings for several shipyards in South Korea, the world’s leading shipbuilding nation. Hyundai Heavy is growing so fast that it is backlogged with more than three years of orders, Bloomberg News reported. Increased vessel prices also helped drive earnings. 

Hyundai Heavy produced and delivered 65 vessels in the first nine months of the year, at a value of $5.03 billion, according to the company’s web site. In nine months last year, those figures were 58 and $3.82 billion, respectively.

"Earnings will continue to grow as they build vessels from orders they won when prices rose," Song Jae Hak, an analyst at Woori Investment & Securities Co. in Seoul told Bloomberg. Song has a "buy" rating on Hyundai Heavy shares.

Unfortunately, U.S. investors can’t buy Hyundai Heavy, as the company isn’t registered with the U.S. Securities and Exchange Commission. However, they can target shipping companies in a unique position to capitalize on the booming Eastern markets. Many of those companies – like Hyundai Heavy – are reporting record profits, even with the massive order backlogs.

Dry-bulk shipping is the marine transportation of significant commodities in bulk, such as gold, or metal ores. And China siphon up those commodities up any faster. Most of the ports in the busiest countries are not big enough to handle the recent heavy surge in shipping traffic caused by the global boom.

And well-heeled investors have reaped gains of over 500% on this shipping boom.

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• Bloomberg:
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In early morning trading yesterday (Wednesday), the market appears to be upset by the twin assaults of a staggering $1.6 billion loss posted by No. 1 U.S. carmaker General Motors Corp. (GM) and crude-oil prices, which are [still] rising toward that psychologically intimidating $100 a barrel price level.

Stocks went into a freefall. The Dow Jones Industrial Average yesterday plunged 360.92 points, or 2.64%, to close at 13,300.02. That 30-stock proxy for the broader market is now down 6.3% from its record high of 14,198.10. The broader Standard & Poor’s 500 Index fell 44.65 points, or 2.94%, to close at 1,475.62. The tech-laden Nasdaq Composite Index skidded 76.42 points, or 2.7%, to close at 2,748.76.

GM’s shares spun downward by $2.19 a share, or 6.06%, to close at $33.97.

And the reason for the across-the-board sell-off in stocks was clear.

First GM: Not only is this far worse than Wall Street expected, but it’s one of the largest quarterly losses of all time for any company. They’re also writing down $39 billion non-cash charge related to tax credits over the last three years.

GM is pointing the finger elsewhere, citing a soft auto market, a union strike, and all kinds of other woes.

Come on guys. This is like saying the dog ate your homework.

Toyota’s sales are sluggish too, but their profits are up 11% and it’s raising its earnings forecasts for the year.

Yet another reason to go global.

Now For Oil: We’ve been talking about this ad nauseam with Money Morning readers for the past few months. To repeat, oil is going far higher before this is done. $100 a barrel is going to be the new $70, which was once the new $30.

There was a lot of laughter when I originally predicted this at a time when oil was trading under $20 a barrel years ago. Nobody’s laughing now, but there are a lot of people who are profiting.

Speaking of which, if you’ve got the right stuff in your portfolio, your investments are going to more than take the sting you feel in your wallet.

They’re also going to reinforce a global view…they have to. Higher oil is as much of a factor as the weaker dollar and unrest in the Middle East. That’s only logical given oil is priced in dollars, forcing producers to raise their prices with each drop in Bernanke’s buck.

Traders may try to make a stand here, but let’s not hold our breath today.

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• Money Morning Investing Research Report:
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• Money Morning Investment Analysis:
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• Money Morning Investment Research Report:
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Toyota Motor Corp. (TM) will likely report a rise in net income for the ninth straight quarter when it releases its earnings statement today (Wednesday). According to estimates compiled by Bloomberg News, the company’s net income probably rose 9.4% to 444 billion yen ($3.9 billion) in the third quarter. The analysts estimate sales rose 4.6% to 6.1 trillion yen ($53.2 billion).

Toyota increased its sales in emerging economies in the quarter, offsetting declines in the United States and Japan, the company said. Sales in emerging markets, including the Middle East and South America, have risen at more than twice the pace of the North American market over the past four years. In the third quarter, sales in the United States dipped 5% from a year ago.

Meanwhile, vehicle sales in Europe gained 8% to 297,000, and sales in China climbed by 57% to 136,000. Toyota hopes to be selling a million vehicles a year in China in five to 10 years. So far this year, sales in Russia, where Toyota plans to open a factory by the end of 2007, have climbed 62%.

Three analysts polled by Thomson Financial forecasted first-half operating profit of between 1.2 trillion yen ($10.5 billion) and 1.28 trillion yen ($11.17 billion). In the same period last year, Toyota reported a record operating profit of 1.08 trillion yen ($9.43 billion) on revenue of 11.47 trillion yen ($100.17 billion) also an all-time high.

"Smaller markets have led growth for Toyota as sales in the U.S. and Japan have slumped," Koichi Ogawa of Daiwa SM Investments in Tokyo told Bloomberg. 

"Toyota may follow Honda and Denso in raising its forecast if second-quarter earnings are strong."

A weak yen provided an added cushion for Toyota’s increased sales in foreign markets. The Japanese currency dropped 1.4% against the dollar and 8.5% against the euro in the second quarter of the year. A drop of one yen against the dollar and euro increases Toyota’s operating profit by 35 billion yen ($305.65 million) and 5 billion yen ($43.664 million), respectively.

News and Related Story Links:

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• Bloomberg:
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It took a six-hour strike to get it done – with more than 31,000 members of the United Auto Workers walking out on their jobs at the newly private automaker, Chrysler LLC, at 11 a.m. yesterday (Wednesday) – but the company and the union reached agreement on a tentative four-year deal.

News of the Chrysler/UAW pact came shortly after the UAW announced that General Motors Corp. (GM) workers had ratified their own four-year deal with the No. 1 U.S. automaker.

The union will now move on to struggling Ford Motor Co. (F). But Ford, which hemorrhaged $12.6 billion last year, may end up being the toughest bargainer of the three because of its weakened financial position, experts told The Associated Press. Industry analysts believe that Ford likely will seek a different deal than Chrysler and GM, very likely with much deeper concessions. Marcey Evans, a spokesperson for Ford, said the company hadn’t heard from the union, as of last night. The company wasn’t able to say when talks might resume.

The short Chrysler strike yesterday – which follows insider leaks of more job cuts, both union and salary positions – affected 41 manufacturing plants and facilities. The only facilities not hurt by the strike were five assembly plants Chrysler had already closed due to excess inventory.

And while it’s the first UAW strike of Chrysler in 10 years, it was the UAW’s second strike in three weeks. Its walkout of GM in late September lasted two days. Negotiators there walked out with an agreement that gave UAW job-security pledges, while allowing GM to shed more than $50 billion in health-care obligations.

There were worries that negotiations with Chrysler could prove longer and more tumultuous, Erich Merkle, director of forecasting for automotive consulting firm IRN Inc., told CNN Money. After almost 10 years of ownership by Germany-based DaimlerChrysler (now Daimler AG (DAI)), 80.1% of Chrysler Group was sold to American equity firm Cerberus Capital Management L.P., in May 2007.

"The UAW is somewhat of an unknown entity to Cerberus and Cerberus is an unknown entity to the union. I don’t know if the parties understand each other that well," Merkle said . "It’s not like GM, which is an old hand in dealing with the union. I wouldn’t assume it is only going to be two days."

A person with inside knowledge of the Chrysler agreement told The AP the deal included some guarantees that vehicles will be produced at U.S. factories, a company-funded union-run trust that will pay much of Chrysler’s $18 billion in long-term retiree health care costs, and a lower wage scale for some newly hired workers. The person, who requested anonymity because the contract has not been ratified by union members, said Chrysler’s vehicle guarantees, which translate into job security for veteran union workers, are not as extensive as those given by GM. In fact, many of the Chrysler guarantees last only through the lifespan of current products. GM, by comparison, made guarantees at many factories that included the next generation of cars, trucks and even parts.

According to published reports, the proposed new lower wage scale at Chrysler is said to cover new hires who would serve as the replacements for parts-transportation workers. Buyout and early retirement offers would be made to current workers in an effort to reduce the ranks, the person said. The lower wage scale is similar to the one negotiated by GM, sources say.

UAW President Ron Gettelfinger wouldn’t outline the details of the agreement with Chrysler.

"This agreement was made possible because UAW workers made it clear to Chrysler that we needed an agreement that rewards the contributions they have made to the success of this company," Gettelfinger said in a statement.

Chrysler said the tentative agreement covers about 45,000 workers and 78,000 retirees and spouses, and noted that it does include the retiree health care trust. What’s not clear is how much money the newly private company will contribute to the trust.

The UAW said its "historic" contract with GM also includes a retiree health care trust. It was reportedly approved by 66% of production workers and 64% of skilled trades workers. The Sept. 26 agreement was reached following a two-day national strike.

The UAW’s strike at 19 of Chrysler’s 24 U.S. manufacturing plants began at 11 a.m. yesterday, but since the agreement was reached six hours later, the UAW’s Gettelfinger said the walkout would end immediately.

News and Related Story Links:

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  UAW Shuts Down Chrysler.

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  Insiders Say Chrysler LLC Will Cut Jobs in Lieu of Possible Strike.

• The Associated Press:
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From Staff Reports

In a report from the Associated Press it was revealed that

The strike against automaker General Motors Corp. (GM) could do significant damage to the economy, if the two sides can’t settle the standoff by the end of the week, The Associated Press reported yesterday (Tuesday).

If the two parties settle the dispute by the end of the week, the strike will have little impact on the overall economy. If the conflict is not resolved, however, it could exacerbate the housing downturn as well as the ailing credit market and stall economic expansion, analysts and economists say.

"If the strike lasts a month or longer, it could take 1 percentage point off the real GDP in the fourth quarter, or more, even if activity ramps back up in December," Merrill Lynch analyst David Rosenberg told The AP.

Even an impact as small as 1% could be significant for an economy facing adversity and penciled in for a mere 2.1% real gain by year’s end. The strike could also skew gauges being closely analyzed by economists and the Federal Reserve.

While striking workers do not typically qualify for jobless benefits, those driven out of work by the strike would. That means the total number of workers filing for jobless benefits could see sporadic increases over the next few weeks.