Q2 2012 Global Auto Earnings: four not so obvious thoughts

While everyone is laser focused on the imploding European auto industry and we ponder the sustainability of the US volume recovery, there are a few things to keep an eye on that may not be top-of-mind:

1) Latin America: The meteoric growth of the Brazilian market has slowed to standstill and surrounding markets have stalled as well.  While the industry has expected the flattening market, a steep rise in  low-cost imports has created pricing pressure.  Companies like Fiat, GM and VW who had been enjoying the tailwinds of strong double-digit margins over the past decade will feel Continue reading

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China first half auto sales: still on two tracks

China auto sales are in for the first half and they are slightly ahead of the consensus of 5% growth for the year.  Overall PV sales are up 7.1% over last year, and again we see a two-tiered level of performance.

First-half growth was driven largely by a rebound on the Japanese brands after their hit from last year’s earthquake impact, and a push from luxury brands 2012 actions to move overbuilt inventory.  Overall GM + the Japanese brands lead the increase while locals were relatively flat.  June sales were extremely strong +16%, I see this as mainly driven against the constricted J3 sales post earthquake in 2011.

The Japanese brands drove market growth with newly stocked inventory.  June sales were extremely strong for Honda in particular, up 84%.  Nissan and Toyota had more regular supply last year leading to results more in line with YTD numbers.

However, all international brands are not the same Continue reading

May US SAAR continues subdued growth

US Sales were up 16% for May 2012. SAAR comes  out at around 13.8 million for the month, which  threw some cool water on analysts expecting the 14+ million pace to continue. What is worrisome is that too many analysts took their numbers up on a strong April that clearly showed some flattening signs as did May. Whenever I see mid-month weakness in the numbers followed by an ultra-strong close, I see slowing demand. Jan – Apr tracked at a 14.5 million pace, and May has pulled that down to 14.3 million. While bulls had rushed to push some numbers up around 15 million, more experienced market watchers have held closer to 14 million forecasts. Why does it matter? Continue reading

CNH+Fiat Industrial: 1+1= 2 at best

Finally, Sergio Marchionne has pulled the trigger on fully merging CNH and Fiat Industrial, and pretty much in line with expectations. The proposal made to the BOD at CNH (which Marchionne is Chairman of) from FI (which Marchionne is chairman of) is for a merger of the two companies at “undisturbed” pricing” answer the only real question for investors: Is there any downside for CNH shareholders?  It turns out not really.

The inverse question was more important: Is there any upside?  Not really here either, and that may be a disappointment for some investors who speculated Continue reading

Europe at the quarter

After 3 months we’re down 7.7% for Europe (27) markets. A bit worse than my -5% expectations and the bifurcation of German and Latin are even wider than I expected.

Germany +1.9%
UK +0.9%
Spain -1.9%
Italy -21%
France -21.6%

Continue reading

US auto fleet sales, recovery or warning sign?

A recent article in Automotive News highlighted Ford’s fleet sales are up above 30% for the past year.  GM and Chrysler were still higher but it warrants a bit of notice.

Historically, fleet demand, has run around 20% for the industry, some makes have turned heavy to fleet to unload excess production during tough product times.  As recently as 2010 Chrysler was thought to be selling 40% of its weak car lineup to fleets, and there was a point in the last decade when Mitsubishi was said to be selling near 50% of their volume to fleet.

On the good side, fleets do give a good showcase for product if done strategically, with small allotments of new or interesting product.  But you can’t make Continue reading

Don’t cry for $ergio.

I couldn’t let this one pass by.  Ford’s Alan Mulally may take home $58.3 million and Chrysler won’t “pay” Sergio Marchionne a salary for the year.  But, don’t forget, Chrysler is just a division (per se) of Fiat, and he’s holding millions of shares in Fiat, and getting more every year.

At least this year, the company didn’t have to cover product losses like his 2007 incident with a quarter million dollar plus Ferrari 599 GTB — I think it was a RENAULT that cut him off — LOL, just a little humor with all these big pay numbers.

Enough said.  Now what about that Chrysler IPO that was imminent in 2011, no, I mean 2012, or was that 2013.  WHAT, no longer imminent?  Oh, well.

Comment: I know this is not significant to share price, but let’s be serious when discussing executive compensation.  They both deserve millions, Mulally for saving Ford preemptively and Marchionne for mastering the financial engineering to keep Fiat and Chrysler alive.  Don’t like it, don’t buy the stock.  Don’t own the stock, you shouldn’t give two hoots.  For a good summary of auto exec comp, if you care, a hat-tip here as usual to Automotive News

 

UPDATE:  Evidently “nothing” can mean: $19 million from Fiat last year.  Oh well.  I am sure the coverage of his payout (WELL DESERVED AND TRANSPARENTLY GIVEN) won’t garner the press of the “no pay“.