Sergio Marchionne is still taking questions during Chrysler’s Q1 conference call, so while you wait for the latest on Chrysler’s predicament, take a look at the product end of the turnaround plan. Chrysler will launch three new products by the end of September. Between October 1 and December 31, Chrysler is re-launching 10 new or refreshed products… that’s one new launch every ten days. In the middle of the holiday shopping season, when cars are usually crowded out by more gift-able purchases. It’s going to be a Chrysler-lanche… but will anyone notice? [Full PDF presentation from today’s call here].
Perhaps the most fundamental challenge facing bailed-out financial and auto firms is convincing consumers to leave aside their anti-bailout prejudices and start buying their products. For GM, the first step in this process was as simple as repaying a loan and airing a “Mission Accomplished” advertisement that did everything but show Ed Whitacre landing on an aircraft carrier. For GM’s former captive finance arm, GMAC, escaping the stain of the bailout is a more prosaic matter. Having already launched an online consumer-oriented banking arm by the name of “Ally Bank,” the finance company is adopting the innocuous Ally moniker for its entire business, reports the Detroit News. (Read More…)
The Treasury may be standing by GM’s “payback” claims, but the Congress hasn’t exactly been looking for ways to do the auto industry any favors. In fact, a toxic brew of political fallout from the financial crisis, auto bailout, and Toyota recall scandal has seems to have inspired a backlash against the industry that came to a head this week in the US Senate. Legislation has been introduced that would prevent NHTSA officials from taking jobs with automakers for up to three years after they leave the agency, and yet more is being drafted which could require a vast array of standard safety equipment on all cars sold in the US and could even add a federal fee to new car sales. Adding insult to injury, a much-hoped for exception to dealer financing oversight in the new financial reform bill appears to have fallen victim to Senate negotiations. Did nobody tell the old guys that they’re investors in the auto industry? (Read More…)
Anywhere there’s a gold rush, competitors have to worry about getting caught on the bust-end of a boom-bust cycle. With the growth of China’s car market projected to roll all the way to about 20m units annually, automakers hoping to cash in on booming sales have to wonder whether their investments in Chinese capacity will actually be used efficiently. And, as the European market is learning, government consumer incentives can also inflate projections, only to create a collapse in demand after they are phased out. These factors have combined to create a bit of a panic about the possibility of a Chinese-market oversupply, as financial analysts start reigning in automakers’ rampant Sino-optimism.
The Ford Motor Company released its first quarter earnings today [Full report here, Slide presentation here (both PDF)], revealing that it gained over $2b in net profit on rising revenue and improved operating margins. Sales receipts rose to over $28b, and with each of Ford’s regional units posted operating profits, Ford’s gross automotive cash rose by $400m to $25.3b (although operating cash flow was $100m in the red). North American operations earned $1.2b in pre-tax operating profit, South America earned $203m, Europe recorded $107m and Asia-Pacific-Africa brought in $23m. Ford Credit racked up $828 in pre-tax profits, as lower depreciation levels improved results. Despite these fine results, Ford finished the quarter with $34.3b in automotive debt, a $700m increase from the beginning of the year. Ford paid $492m in interest on that debt in the first quarter. (Read More…)
Building on solid financial results in the fourth quarter of last year, Hyundai has announced today that it turned a net profit of about $1.02b (as in billion) in Q1 2010. That shatters a previous record of $650m, recorded in the second quarter of last year, and eclipses last year’s $203m Q1 net profit. According to the Detroit News, Hyundai raised sales revenue by nearly 40 percent last quarter, with global gross receipts hitting $7.6b. Sales volume was up 36.6 percent, to 842,037 units. Though the Chinese and Indian markets drove growth with 48 and 34 percent volume increases respectively, the big news comes from the US, where Hyundai’s volume grew 78.3 percent and revenue gained 61.5 percent. And if Hyundai’s margins seem surprisingly attractive, consider that the dollar’s recent declines against the Korean Won bled off some of that US-market profit. Oh, and that billion-dollar profit doesn’t include results from Hyundai’s sister-firm Kia, which reports Q1 financials tomorrow. Get down with your bad self, Hyundai!
Much of the speculation in the leadup to Fiat’s five year plan announcement centered on a long-rumored spin-off of Fiat’s auto business from the rest of the industrial conglomerate. Speculators even drove up Fiat’s share price considerably yesterday on hopes that the long-awaited spin-off would be announced today. And sure enough, Fiat did announce today that it would be spinning off part of its business. The only problem, according to Automotive News [sub], is that the newly-formed unit isn’t made up of Fiat, Alfa and Lancia, but Iveco and New Case Holland. Instead of its car operations, Fiat is bundling off its heavy commercial truck and tractor business into a new entity known as Fiat Industrial S.p.A. (Fiat-branded light commercial vehicles and Fiat Powertrain will remain behind).
Given Ferrari’s pricing politics, it seems safe to assume that Ferrari/Maserati is a fairly profitable enterprise for its 85 percent owner, Fiat. Indeed, with over $2.5b in combined revenues last year and an 11.5 percent operating margin, the Italian sportscar brands aren’t exactly dying of economic downturn-related causes. But at today’s presentation of Fiat’s five year plan, CEO Sergio Marchionne revealed that his firm has big plans for Ferrari/Maserati, and gave unprecedented planning details as proof of the brands’ path towards even greater profitability.
Fiat Chairman Luca Cordero Di Montezemolo will be leaving the firm to pursue a career in Italian politics, according to Automotive News [sub]. Montezemolo will remain on Fiat’s board, and will continue to serve as chairman of Ferrari, but he will be replaced atop the Fiat empire by vice-chairman and Agnelli family heir John Elkann. Fiat’s shares rallied considerably this morning, according to Bloomberg Businessweek, but not because Montezemolo is on the way out. Rather, Fiat has finally announced the news that speculators have been waiting patiently for: the firm now confirms that it plans to spin off its auto business.
Since GM has only recently come out with GAAP-approved financials, determining the company’s value isn’t easy. Still, The Detroit Free Press‘s Tom Walsh reckons The General is worth more than Ford, despite the fact that GM recently fell out of the Fortune 500’s top ten (and below Ford) for the first time in its 100+ years of history. What gives?
Chrysler has always held a special place in TTAC’s chronicling of Detroit’s decline, enjoying a bespoke “Suicide Watch” in contrast to our Ford and GM “Deathwatches.” In the first entry in that series Frank Williams wrote of a gutted firm, dependent on incentives and flagging truck sales, seemingly doomed to drag its foreign partner into bankruptcy. Four years and countless opportunities for death with (some) dignity later, Chrysler presents much the same picture. Sure, it’s been rinsed of debts and excess capacity in bankruptcy court, but the Pentastar’s brands are still fundamentally damaged from years of self-abuse and the firm is struggling (and failing) to improve on last year’s sales numbers, which were recorded en route to said bankruptcy. Inventory may be under control, but Frank’s four-year-old assessment of an investor warning by JP Morgan could have been written yesterday [with “DCX” replaced by “Fiat”]:
JP Morgan remains convinced that management patience towards Chrysler has “worn thin and increases the likelihood that DCX will reduce exposure to Chrysler.” It’s the investment community’s equivalent of yelling “jump!” to someone standing on a ledge.
In fact, analysts from London’s Bernstein Research wrote nearly the exact same line yesterday. Chrysler has officially shuffled back onto the ledge, and once again the analysts are shouting “Jump!”
Don’t ask Chairman/CEO Ed Whitacre. His only comments so far on GM’s Q1 2010 performance comes from a memo leaked to Reuters, in which he says:
In January, I said we could earn a profit in 2010, if everything falls into place. Our first quarter financial results will show us an important milestone, and I’m pleased to say that I anticipate solid operating results when we report our first quarter financials in May
“Important milestones”? “Solid operating results?” What the hell is Whitacre trying to say? (Read More…)
GM has announced its “fresh-start” post-bankruptcy accounting results, and between July and December of last year, the bailed-out automaker lost $4.3b [press release here, full numbers here, in PDF format]. The loss comes despite $57.5b in global revenue, and $1b in “net cash provided by operating activities.” According to GM’s release:
The $4.3 billion net loss includes the pre-tax impact of a $2.6 billion settlement loss related to the UAW retiree medical plan and a $1.3 billion foreign currency re-measurement loss.
Of course, you have to dig into the numbers to find the bad news, like the $56.4b in “cost of sales,” or the $700m interest cost, or the 48 percent North American capacity utilization in 2009, or the 16.3 percent US car market share. Which is why we’ve included the consolidated statement of operations, consolidated balance sheets and more, for your no-download-necessary perusal, after the jump.
It would be impossible to blame Detroit’s decades-long decline on a single factor, but if one were to make a list, defined pension obligations to workers would be somewhere very near the top. Thanks in large part to the unionization of America’s auto industry, Detroit has groaned under the weight of crushing pension obligations since time immemorial. And, according to a new report by the Goveernment Accountability Office [full report in PDF format available here], last year’s bailout of GM and Chrysler has not eliminated the existential threat that these obligations pose to the industry. In fact, the taxpayer’s “investment” in GM and Chrysler appears only to have exposed the public to even an greater risk of catastrophic pension plan failure.
Ohio.com reports that GM will miss a March 31 deadline for filing its first GAAP-compliant financial results since emerging from bankruptcy. According to an SEC 10k filing:
General Motors Company (the “Company”) is unable to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (the “2009 Form 10-K”) by March 31, 2010, as the Company is still finalizing its fresh-start adjustments required by generally accepted accounting principles relating to the assets acquired and liabilities assumed from General Motors Corporation (“Old GM”) in connection with Old GM’s sale of assets under Section 363 of the United States Bankruptcy Code (the “363 Sale”) prior to such date. Due to the size of the Company, the global application of fresh-start reporting and the associated determination of the fair value of its assets and liabilities is a significant undertaking, which requires extra time
GM says it will be able to file within a 15 day extension period, which means there’s not too much longer to wait before we have our first “real” measure of GM’s post-bankruptcy performance. And because GM’s last results were accompanied by warnings that Q4 2009 results could be worse than November’s non-GAAP numbers (not to mention recent soft-pedaling by CFO Chris Liddell), there’s reason to believe that they won’t be particularly pretty. Either way, GM can only delay their release for so long. As 60 percent stakeholders in the artist formerly known as the world’s largest automaker, taxpayers have the right know just how their “investment” is panning out. I guess we’ll be seeing GM in line at the post office just before the midnight on the 15th.
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