Mattel’s Hot Wheels race past GM

NEW YORK // Model cars have overtaken the real thing with toy maker Mattel racing past General Motors (GM) when it comes to market value. On the volatile New York Stock Exchange, GM is being lapped by Mattel, the maker of Hot Wheels and Matchbox.

The struggling American car conglomerate has seen its stock slump to the lowest level since 1954, while the world’s biggest toy company has managed to steady its share price.

GM came under pressure after an analyst report showed that the American manufacturer could face bankruptcy if the car market continues to deteriorate. GM’s US sales fell 18 per cent in June.

Even after Mattel reported its first quarterly loss in almost three years in April, the California-based company still surpassed GM.

“Hot Wheels and Matchbox are basic, low-priced toys, so they appeal to consumers, in the US and especially in less affluent countries, who may not be able to afford more expensive toys,” said Sean McGowan, a toy analyst at Needham in New York.

GM, the US’s largest car maker, ended at US$10.12 (Dh37.1) in New York exchange composite trading last Thursday after a JP Morgan & Chase analyst said the company has “tough but manageable” liquidity options. Mattel jumped eight cents to $17.22.

Mattel briefly passed the Detroit-based car manufacturer in market value for the first time on June 26 and regained its lead on July 2.

GM, which celebrates its centenary this year, reported its largest annual loss last year, $38.7 billion, after a tax accounting change, and has not had a profitable year since 2004. The company’s US market share hovers at the lowest level since 1925, and last year GM was 3,000 vehicles away from being dethroned by Toyota as the world’s largest car maker.

Mattel reported that first-quarter revenue from toy cars jumped 15 per cent, but $46.6m was lost in that period as Chinese manufacturing costs soared.

As for GM, record petrol prices and declining trade-in values for lorries and 4x4s hit the company’s large vehicle sales hard in the US. But cut-price promotions on mid-size models helped shore up sales. Mark LaNeve, the head of sales, said the month-end June promotion had cost GM an additional $400 on the average vehicle.

“It was six days long and really helped build dealer and customer momentum,” Mr LaNeve said.

An urgent question for creditors and investors has been whether the cash-strapped American car industry is headed for even weaker sales in the second half of the year. George Magliano, an analyst with Global Insight, said he sees no sign that the US, which is the largest market in the world for cars and light lorries, had hit bottom in June.

He said that although overall sales had topped the most bearish expectations, “they are still disappointing and disconcerting”.

“The bottom line is the selling rate in June is weaker than May, and May was not a good month,” he said.