A wide look at the auto industry after recent earnings reveals a diverse picture of foreign currency chaos, unsustainable debt, loose credit, a mixture of inflation and deflation, and some surprising success in China. Here is a quick overview and where stocks may be headed by next year.

Toyota

Toyota Motor Corp. (NYSE: TM) presents a confusing mix of success and failure. This past quarter’s earnings showed a record profit, with half of it due to the depreciation of the yen in U.S. dollar terms. We often hear of governments weakening their currencies to beef up exports, and Toyota is a perfect example of this actually happening. The sticky point is that these types of increases are only on paper and can easily be reversed when foreign exchange (forex) markets change course. If we look Toyota’s exports in terms of unit sales, they are down 6% globally, which shows that company fundamentals are not improving despite paper accounting gains. If the yen reverses course, Toyota could have a tough time in the coming year or two.

General Motors

General Motors Co. (NYSE: GM) has a total debt level of $53.5 billion (see page 3 here). It tries to hide it on its balance sheet through interesting terminology, but $53 billion puts its debt level higher than equity, a dangerous situation indeed. Automotive revenue is down 4.7% year over year, with unit sales down 1.8% globally. Here we see the reverse of the foreign exchange benefits as a strengthening U.S. dollar has the opposite effect on GM. Any reverse in the forex markets will give GM a bit of a boost, but not in U.S. markets.

Sales were only up in North America, though not by much, and this may very well be a reflection of extremely loose credit standards for auto loans currently in place in the United States, coupled by very low gas prices. In fact, the rejection rate for auto loan applications has never been lower, according to Bloomberg. That cannot be sustained either.

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Fiat Chrysler

Chrysler unit sales worldwide were up only 1%, but revenues were up 25%. Its strongest performance was in its Ferrari unit, which is being spun off into its own initial public offering (IPO). The stock went up when the company raised guidance but did not react much to the earnings release itself as the picture is quite unclear, especially regarding what will happen to Fiat Chrysler Automobiles N.V. (NYSE: FCAU) shares once Ferrari is spun off into its own company.

Honda

Honda Motor Co. Ltd. (NYSE: HMC) seems to have performed the best out of the big five. Its strongest automotive sales actually came out of China of all places, which seems encouraging. Unit sales are up 5% year over year, and revenue is up 15%. The closer correlation between unit sales and revenue hint that the company is doing well thanks to competitive pricing relative to the others. The question is the sustainability of these numbers. For China specifically, sales numbers were solidified before the recent downturn in the Chinese stock market, which surely will affect credit conditions there and likely bring sales back down. Honda is up for now, for good reason, but the coming quarter is uncertain.

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Ford

Ford Motor Co. (NYSE: F) continues to be a basket case of debt. Some $123 billion will not be paid off any time soon as it is almost 210% of market cap, and rising interest rates will deal a double blow to the auto giant. They will increase its debt service costs while at the same time decreasing its sales by tightening credit conditions in the United States. Ford is very dependent on very low interest rates, and this is not healthy. Substantially all of its profits come from the U.S. market, and any U.S. downturn will hit it hard.

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