We’re hardly shocked by the idea that Chrysler won’t turn profit this year. After all, Auburn Hills has barely made its minimum monthly sales volumes (at best, and with rampant incentives and fleet mix) this year, and lost $50m+ in “industrial inefficiencies” on the Jeep Grand Cherokee launch alone [Q2 results analysis here]. With plans to close out the year with a non-stop barrage of product launches and attendant media spending, it would take a minor miracle for Chrysler to break even. But we’ve essentially known this all for some time… what’s truly shocking is that Chrysler’s CEO Sergio Marchionne actually admitted to the media that Chrysler won’t turn a profit.
Thanks to one of the most popular Top Gear segments ever, the Peel P50 is now well-established in the minds and imaginations of the world’s automotive cognoscenti. After all, how often does Clarkson say that “if [car X] had a reverse gear, I would describe it as the absolute ultimate in personal mobility”? But now there’s another reason to pay attention to Peel: having been bought a few years back by Gary Hillman and Faizal Khan, the British microcar maker is set for a comeback that’s being funded by Sonny Coreleone himself, actorsome British investor named James Caan (born Nazim Khan… cheers to colin42 for the British pop culture lesson, and apologies for unwittingly making the story better than it is). (Read More…)
Some of the world’s biggest automakers are relying on continued strong growth in the Chinese market in the face of sluggish US and European sales, but those plans are facing a challenge as Chinese sales have slowed this summer. Total vehicle sales grew 14.4 percent over July 2009 levels last month (sales grew 70 percent year-over-year in July 2009), the lowest rate of growth the Chinese car market has seen since March of last year. China’s government is doing its part, instituting a $443 subsidy for cars with 1.6 liters displacement or less in the beginning of July. But that doesn’t seem to be helping much, as the percentage of cars with 1.6 liter engines or smaller actually declined last month. What’s a growth-addicted automaker to do (besides slash prices)? The same thing they do in every other market: extend credit in hopes of boosting sales and upselling customers on more expensive cars.
Editor’s Note: With GM’s S-1 IPO filing hitting the web today, every IPO and auto industry analyst is weighing in on the offering, and the state of GM. Here’s a collection of some of today’s more notable comments.
It looks to me that GM should be worth no more than Ford. If that’s the case, then the taxpayers will lose about 50% on their investment.
Francis Gaskins, president of IPOdesktop.com, commenting in the WSJ [sub] on GM’s IPO. More analyst commentary on GM’s just-released S-1 filing after the jump.
The most interesting section of every S-1 filing is undoubtedly the “risks” section, in which companies are legally compelled to disclose all possible material risks associated with investing in their IPOs. Unfortunately, these risks are typically overstated, as no firm on the verge of going public wants to run into trouble with the SEC for under-reporting risk. As a result, many of the risks disclosed are fairly mundane, everyday risks in the world of business (currency, commodity price, and other economic fluctuations, etc). At the same time, companies rarely give reporters a full tour of their major risk areas the way these sections do, so they’re usually worth a read. GM’s just-released S-1 filing is no exception…
With GM’s IPO S-1 now set for a Wednesday filing, The General is announcing a joint engine development project with its Chinese partner SAIC, spurring on rumors that the Shanghai-based automaker could buy into GM’s forthcoming IPO. Reuters reports that GM and SAIC have signed an agreement to develop a new range of 1.0-1.5 liter direct-injection, turbocharged engines in the vein of Ford’s EcoBoost mills. The ground-up joint engine development is significant because, as the WSJ [sub] reports
it marks the first time when GM and SAIC – partners for more than a decade already – are going to develop “base” propulsion technology, going a step further than simply integrating existing engine and gearbox technologies into automobiles.
GM has already moved much of its advanced technology development to new Chinese R&D labs, and this attack on Ford’s EcoBoost technology is likely to become a global engine. But what does the ever-increasing cooperation between GM and SAIC (which recently bought out GM’s controlling interest in their Shanghai GM joint venture) portend for the GM IPO?
GM’s IPO filing still has yet to appear on the SEC’s EDGAR database, but while we wait for the S-1 form to clear, Reuters has some details on what to expect from the sale. The big news:
GM is mulling a plan under which sovereign wealth funds or pension funds would serve as “cornerstone investors,” a technique often used for large initial public offerings to show that key investors are supporting the deal, four people said…
Each cornerstone investor would likely be asked to commit to buying 2 percent to 10 percent of the IPO and cornerstone investors would likely account for 10 percent to 30 percent of the total IPO, one of the sources said.
On the other hand, another source says GM is targeting 15 percent of its equity towards cornerstone investors, with 20-25% is aimed at the retail investment market. Either way, Reuters points out that another recent large IPO of a government-owned business, the Agricultural Bank of China, relied heavily on cornerstone investors… but that the politics of such a strategy could be risky.
Redflex Traffic Systems of today reported to the Australian Securities Exchange that it had rebuffed the $275 million offer from toll road giant Macquarie Bank for outright control of the company. The Australian red light camera maker believes that it can spark a bidding war to drive up the purchase price and enrich shareholders.
Reuters [via ABC] reports that GM has completed its S1 filing and will file Monday, after a Friday the 13th filing was delayed in order to
add a management risk factor after Chief Executive Ed Whitacre announced on Thursday he would step down and be succeeded by Dan Akerson effective September.
And that won’t be the only “risk factor” warning to investors in GM’s S-1. Bloomberg found a number of analysts ready to support the headline
GM’s Akerson to Struggle in Proving to IPO Investors Europe Fixable
Any bets on the number of times the word “Opel” appears in tomorrow’s filing?
From the moment GM’s Chairman Ed Whitacre took over for Fritz Henderson as CEO, many wondered how long the 68-year-old Texan would stick around. Apparently GM’s board was not immune from such uncertainty either, as Bloomberg reports that it gave Whitacre an ultimatum: commit to the long haul or get out now. According to reports, several Wall Street banks asked Whitacre whether he would be leading GM long-term during pre-IPO meetings. Whitacre didn’t answer at the time, but the pressure from Wall Street clearly pressed the board’s hand. Since Whitacre ultimately didn’t want to stick around for an extended term (posibly due to the Treasury’s unwillingness to dump all of its stock during GM’s IPO), the board picked Dan Akerson to take over. But how will an unexpected handoff to an unknown executive with no industry experience affect GM’s IPO? (Read More…)
One might imagine that GM wouldn’t want to scare anyone away from its forthcoming IPO, but triskadecaphobes might just want to sit this one out. With a $5b credit line reportedly secured from a group of “at least 15” banks, Reuters [via Automotive News [sub]] reports that GM could file its S1 with the SEC as soon as tomorrow. In case that date is too pregnant with superstition, GM could wait until next Monday to file paperwork. Either way, GM is expected to go public by the Thanksgiving holiday. (Read More…)
GM has released its Q2 earnings, and it’s pulled off a $1.3b net profit on improved North American revenue, and narrower losses on GM Europe. Revenues for GM International, however, were down to about half of their Q1 level. Despite over $1b in capital expenditures last quarter, GM managed to improve free cash flow from $970m in Q1 to $2.834b in Q2. Full chart packet available in .doc format here, presentation slides available in PDF format here.
At the end of the second quarter of this year, Ford’s overall automotive debt totaled $25.8 billion. Just three months before, its debt level was at $32.6 billion. The debt reduction is all part of CEO Alan Mulally’s plant to earn an investment-grade debt rating by the end of 2011, a move that will lower Ford’s cost of borrowing as well as lowering interest payments. And though Ford’s been making a healthy profit, America’s bailout-free automaker has had more than its fair share of government help to beat the debt. According to the WSJ [sub], Ford’s extensive collection of government loan guarantees has been key to its ability to pay down more expensive debt accumulated during Ford’s 2006 restructuring.
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