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Germanys Electric Car P.R. Stunt – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:36 +0000

European carmakers are struggling to reinvent themselves in an effort to fight falls in sales; on Wednesday Berlin predicted 1 million electric cars on Germany’s roads by 2020, as Europe’s largest economy tries to create a positive impact on the ailing automotive sector. But adding electric cars to the mix won’t do the trick, say analysts.“The program is aimed at having a positive impact on investment decisions, give producers security and support the sale of electric cars,” according to a copy of the plan obtained by the Associated Press.According to press reports, specifics on the finances are still to be discussed among the country’s legislators, but the idea has already faced criticism from industry analysts. “At a first glance this sounds rather like a nice p.r. story,” said Gregor Claussen, an analyst with Commerzbank. “But more will have to follow. Without the help and the right framework from the politics, it will not work,” the analyst said. Analysts also believe the push for the market will be too small to even be noticed. “This plan envisions 1 million electric cars in 2020 on Germany’s roads, which means that from now until 2020 only 1 million electric cars will be sold in sum in Germany. Keeping in mind that this year alone about 3.7 million cars will be sold in Germany, the 1 million additional sales will have only a minor effect,” said Heiko Moehringer, an analyst with LBBW. Contrary to foreseeing a substantial increase in sales, analysts have been expressing their concerns about a looming drop in demand as scrapping schemes-which have artificially boosted demand-expire in Germany and across Europe. LBBW estimates sales in Germany will fall from 3.7 million cars to 2.8 million units sold next year.
Yet carmakers in Germany are still going ahead with their plans to produce electric cars. Volkswagen
hopes to introduce its first electric cars on the market in 2013, while Daimler AG is working with California electric car maker Tesla Motors on developing better battery and electric drive systems for vehicles destined for the consumer market.
The Associated Press contributed to this article.

En Route VW And Porsche – US-FOREX.US

Forex-Publisher — Fri, 14 Aug 2009 23:50:45 +0000

Europe’s biggest carmaker, Volkswagen, is finally taking over Porsche after agreeing on Thursday to buy a 42% stake in the sports car unit of debt-ridden Porsche, ending months of fractious relations between the two companies. Volkswagen expects the deal to be completed by 2011 and provide a total of 700 million euros in savings from synergies. The carmaker will launch a capital increase in its preference shares in the first half of 2010to protect its credit after the merger and to fund the acquisition, it added. Analysts said VW is getting a good deal. Nomura said VW is acquiring “a strong asset” for a “good price”.Last month, Porsche Chief Executive Wendelin Wiedeking agreed to step down after the Piech and Porsche families ended a longtime struggle over the future of the debt-laden German sports car maker they are part owners of. The logic was that new management would be better placed to smooth the path to a merger. Initially, Porsche’s plan had been for the takeover to work the other way around. But in its efforts to raise its 51% stake in Volkswagen to 75%, Porsche built up huge debts as its plans coincided with the global credit crisis and falling demand for cars. Porsche also said on Thursday that its board had appointed Martin Winterkorn as chief executive of the new company with effect from Sept. 15. Winterkorn said the deal marked “a new era” for both companies. “Porsche is a real enrichment for our company’s portfolio,” he said.Winterkorn also said the Porsche and Piech families would be the largest shareholders in the merged firm. The German state of Lower Saxony, which owns a 20.1% minority stake in Volkswagen, will retain its blocking vote.
The integrated company will have 10 brands, adding the Porsche brand to a portfolio that already includes Audi, Bentley, Bugatti, Skoda, Seat and Lamborghini. VW has pledged it will give Porsche “independence” and it said it would preserve its “solid financial base.”Nomura analysts, however, said that Volkswagen investors might be put off by the capital increase announced by the company for the first half of next year. Others share their concern: “The plan could curb the share price development of VW preference shares,’ said analysts at LBBW in a note to clients. UBS questioned the need for a capital increase and the timetable for raising the cash. “The capital increase in the first half next year is obviously a massive dilution for VW preference shareholders,” said Gregor Claussen, an analyst with Commerzbank.Shares of Volkswagen
fell 2.2%, to 58.80 euros , while Porsche
rose 11.3%, to 49.64 euros in morning trading in Frankfurt.
Thomson Reuters contributed to this article.

VW And Porsche United- US-FOREX.US

Forex-Publisher — Fri, 14 Aug 2009 23:50:40 +0000

Europe’s biggest carmaker, Volkswagen, is finally taking over Porsche after agreeing on Thursday to buy a 42% stake in the sports car unit of debt-ridden Porsche, ending months of fractious relations between the two companies. Volkswagen expects the deal to be completed by 2011 and provide a total of 700 million euros in savings from synergies. The carmaker will launch a capital increase in its preference shares in the first half of 2010to protect its credit after the merger and to fund the acquisition, it added. Analysts said VW is getting a good deal. Nomura said VW is acquiring “a strong asset” for a “good price”.Last month, Porsche Chief Executive Wendelin Wiedeking agreed to step down after the Piech and Porsche families ended a longtime struggle over the future of the debt-laden German sports car maker they are part owners of. The logic was that new management would be better placed to smooth the path to a merger. Initially, Porsche’s plan had been for the takeover to work the other way around. But in its efforts to raise its 51% stake in Volkswagen to 75%, Porsche built up huge debts as its plans coincided with the global credit crisis and falling demand for cars. Porsche also said on Thursday that its board had appointed Martin Winterkorn as chief executive of the new company with effect from Sept. 15. Winterkorn said the deal marked “a new era” for both companies. “Porsche is a real enrichment for our company’s portfolio,” he said.VW’s Chief Financial Officer Hans Dieter Poetsch said the Porsche controlling families expect to take a share of between 35% to 39% in the new firm, while the Qatar Investment Authority “would become the third biggest shareholder” at Volkswagen with a “substantial stake”. Qatar made an offer to invest in Porsche and to purchase options in Volkswagen last June. The German State of Lower Saxony, which owns a 20.1% minority stake in Volkswagen, will retain its blocking vote. A new name for the company is yet to be decided.
The integrated company will have 10 brands, adding the Porsche brand to a portfolio that already includes Audi, Bentley, Bugatti, Skoda, Seat and Lamborghini. VW has pledged it will give Porsche “independence” and it said it would preserve its “solid financial base.”Nomura analysts, however, said that Volkswagen investors might be put off by the capital increase announced by the company for the first half of next year. Others share their concern: “The plan could curb the share price development of VW preference shares,’ said analysts at LBBW in a note to clients. UBS questioned the need for a capital increase and the timetable for raising the cash. “The capital increase in the first half next year is obviously a massive dilution for VW preference shareholders,” said Gregor Claussen, an analyst with Commerzbank.Michael Tyndall, an analyst with Nomura International in London, said the rights issue is likely to have a negative effect on the share price but synergies could provide relief to the stock in the long term.Shares of Volkswagen
fell 5.4%, to 56.91 euros , while Porsche
rose 10.8%, to 49.43 euros in afternoon trading in Frankfurt.
Thomson Reuters contributed to this article.

The Opel Saga Continues – US-FOREX.US

Forex-Publisher — Fri, 14 Aug 2009 23:50:36 +0000

It had seemed like a done deal. Canadian auto parts supplier Magna said it had reached an agreement in principle with General Motors’ management over a contract to buy a stake in GM’s European unit Adam Opel. But on Friday, Opel’s other bidder, Belgium-listed holding RHJ International, said it is still “very much” in the race to buy the struggling carmaker. “We are working on the offer all the time and want to optimize the offer. So it is still work in progress,” said Arnaud Denis, a spokesman with RHJ International in Belgium, adding the company is constantly talking to both GM and the German government. Denis said his company has an “extremely compelling” offer for all parties. “It is simple to implement,” he said. “We are not closing any plants in Germany nor in the U.K. and there will be less head count reduction.” The spokesman also said RHJ’s bid required less tax payer’s money. On Thursday a source told Reuters the private equity firm is prepared to seek less than 3 billion euros in state aid for the deal, over 800 million euros less than it originally sought.Denis added RHJ International was “puzzled” as to why Germany’s Chancellor Angela Merkel was so keen to back Magna if the Belgian offer was much better. It emerged on Friday that Merkel would be discussing the bid by Magna and Russia’s Sberbank to buy Opel, after receiving an invitation Russian President Dmitry Medvedev.
GM has denied having reached an agreement with Magna
. “Yesterday was a pretty busy day in the media, with many outlets reporting that Magna/Sberbank and General Motors had reached an agreement regarding Opel. At the risk of repeating myself, that’s just not the case,” wrote GM’s Vice President John Smith in his blog.
Smith also added that GM will compare the latest Magna proposal with the offer it has on the table from RHJ. Publicly, however, the lack of details disclosed on the Magna and RHJ offers had made it difficult to judge which bidder has the best offer. Opel has been a hot political topic, as it employs a total of 54,500 workers across Europe, with 25,000 in Germany. Berlin has played an increasingly central role in the negotiations and Merkel backed Magna publicly several times. But GM
has expressed its reservations about a deal with Magna on the grounds that its proprietary technology in Opel is protected in any partnership.

Magna Closing In On Opel- US-FOREX.US

Forex-Publisher — Thu, 13 Aug 2009 17:46:21 +0000

The Adam Opel saga is finally coming to an end. Canadian auto parts supplier Magna has reached an agreement in principle with General Motors’ management over a contract to buy a stake in General Motors’ European unit Opel, according to reports.The news follows weeks of constant bickering between the bidders – including Italy’s Fiat and private equity fund RHJ International – as they tried to strike a deal with the struggling carmaker. Fiat
was swiftly ruled out as it was proposing to cut more jobs than the rest. On Thursday Magna
Co-Chief Executive Siegfried Wolf told Reuters the last sticking points in a potential deal had been resolved and that Magna and GM need to approve the deal before trustees formerly in control of a 65% stake in Opel can give their final consent. At the time of writing, Magna was unreachable for comment. The lack of details disclosed on the Magna and RHJ offers had made it difficult to judge the outcome. However, both bidders had to improve their offers, and according to Gregor Claussen, an analyst with Commerzbank, GM had favored RHJ while German politicians – Chancellor Angela Merkel included – had favored Magna. “[This is] probably because Magna’s bid allowed for less dismissals in German factories,” said Claussen. Opel has been a hot political topic, as it employs a total of 54,500 workers across Europe, with 25,000 in Germany. Berlin has played an increasingly central role in the negotiations and Merkel backed Magna publicly several times. In July, Merkel’s spokesman Ulrich Wilhelm even said that the German government had a preference for the Canadian company’s plan, which is also backed by the four German states where Opel has plants and by the carmaker’s unions.”At first glance a deal with Magna smells a bit like a political solution. But we will have to see what the offerings from Magna and RHJ looked like,” said Claussen.
However, a deal with the Canadian firm could rile GM
,which has expressed its reservations about a deal with Magna on the grounds that its proprietary technology in Opel is protected in any partnership. GM has also said that the Opel sale was not expected to be reopened to any party beyond Magna and RHJ.Of course the deal that Magna – and its Russian partner Sberbank – has struck does not necessarily mean that competing Opel bidder RHJ International is out of the race entirely. According to some media reports, RHJ might be ready to sweeten its offer for Opel.
One source told Reuters the private equity firm is prepared to seek less than 3 billion euros in state aid for the deal, over 800 million euros less than it originally sought.
Thomson Reuters contributed to this article.

Rocky Road For Russian Auto Sales – US-FOREX.US

Forex-Publisher — Tue, 11 Aug 2009 18:46:31 +0000

European carmakers which had been pinning their hopes on tasty opportunities in the Russian car market will have to look elsewhere in the short term. “We do not expect any substantial improvements in the sales figures in the coming months while the government doesn’t plan to implement any additional incentive measures for car buyers,” analysts at Merrill Lynch-Bank of America warned in a note on the Russian car industry. The evidence points to a dismal picture of the Russian car market. July sales of new cars dropped 58% year-on-year, to 1.24 million compared with 2.8 million cars sold in 2008, according to the Association of European Businesses. The decline actually accelerated in July, after a 56% year-on-year decrease in June.The share of cars purchased on credit is currently between 25% to 30% compared with between 10% to 15% at the start of the year, according to business daily Vedomosti. But the figure is still below the 50% enjoyed before the financial crisis.“Sales on credit have improved because of subsidizing car loan programs but not enough to boost the total car market,” Merrill Lynch-Bank of America added.An ailing Russian economy isn’t making things easier for the sector. On Tuesday, the Federal Statistics Service said Russia’s gross domestic product shrank 9.8% in the second quarter – the highest drop on record. The collapse of oil prices from 147 a barrel a year ago to 32 in January has had a damaging effect for oil-dependent Russia, undermining consumer confidence and forcing the government to dip into the massive reserves it built up during the commodities boom years.
“For the sector to turn around, the market needs to see clear signals of recovery in the Russian economy as a result of successful rescue measures by the government and/or increasing oil prices,” Merrill Lynch-Bank of America said.Still, despite the current drop in demand, some analysts have said that Volkswagen
, the only European manufacturer known to have plans to develop production in Russia, should stick to its plans as demand is bound to pick up in the long term. “The plants will have an output of between 100,000 to 150,000 per year and although demand has dropped sharply, Russia offers a great long-term growth in the future. But it is hard to give a precise figure,” said Gregor Claussen, an analyst with Commerzbank Corporates and Markets.

Jaguar Land Rover Steers Clear Of Bailout – US-FOREX.US

Forex-Publisher — Tue, 11 Aug 2009 17:46:24 +0000

Tata Motors, the Indian owner of Jaguar Land Rover, told the U.K. government on Tuesday it no longer needs support after securing private funding, the latest sign that credit markets have eased.Tata has secured some direct bank loans, as well as guarantees that would allow it access to a 340-million-pound European Investment Bank loan, the company said in a statement.Jaguar Land Rover, which was bought for 1.0 billion pounds over a year ago by India’s Tata, had been in discussions since late last year about the possibility of securing government help, given the tough credit market conditions. The British government had offered funding, but that didn’t materialize, as both parties disagreed on the terms of the cash injection. The luxury brand has been cutting production at its three main factories in the U.K., where it employs 14,500 people. “The fact that the banks and commercial capital markets are meeting Jaguar Land Rover’s funding is a clear sign of confidence in the company, its products and the automotive sector,” said U.K. Business Secretary Lord Mandelson, who played a key role in the negotiations with Jaguar Land Rover. A spokesman at the luxury brand said the new funding is a sign that credit markets are improving for the ailing industry. “There is certainly a change in the credit situation that has allowed banks enough freedom to provide the loans that we have been seeking,” said Don Hume, director of corporate and government affairs at Jaguar Land Rover. There has been recent evidence that credit markets are opening up for carmakers in Europe. Last month, Renault
said it had had easier access to credit markets, while PSA Peugeot Citroen
said it had enjoyed a substantial liquidity position in the first half of the year after its financial arm raised 1.5 billion euros in bond issues and 700 million euros from the European Central Bank.
But European carmakers will remain under pressure next year as government incentives, which have pushed demand over the last months, dry up, though easier access to credit makes their situation less stressful. “Cash flow is likely to be very negative in the second half, especially for volume producers like Renault,” said Michael Tyndall, an analyst at Nomura International in London.
Tata Motors
, which bought Jaguar Land Rover for 1.7 billion pounds in June 2008 from Ford, rose 6.6% in morning trading in New York.

BHP Takes On Jack The Knife- US-FOREX.US

Forex-Publisher — Tue, 04 Aug 2009 11:46:10 +0000

HONG KONG -
“Jack the Knife” is back. Jacques Nasser, the former Ford supremo, who acquired the nickname for his controversial cost-cutting efforts at the car maker, is going to chair BHP Billiton as it completes the merger of its Australian iron-ore business with Rio Tinto and continues with its price dispute with Chinese steel mills.Nasser was named by BHP Billiton
board on Tuesday as the successor of present chairman Don Argus and will take over in early 2010.Nasser joined the BHP Billiton board as a non-executive director in 2006 and is a member of the board’s risk and audit committee. BHP said the decision to appoint Nasser was made after a rigorous 18 month selection process. International recruitment firm Heidrick & Struggles was appointed as an independent adviser to assist BHP in evaluating both internal and external candidates. Nasser will make an excellent successor to Argus as Chairman, said John Buchanan, a senior independent director of BHP Billiton, who oversaw the entire chairman succession process. “He combines deep international business knowledge along with outstanding financial, senior management and board experiences,” the BHP statement said.According to widespread reports in the Australian media, Nasser beat another BHP director, John Schubert, also the chairman of Commonwealth Bank, in the final round of assessment.Schubert, who has a doctorate degree in chemical engineering and is the former chairman and managing director of Esso Australia, may seem to be more suited to chairing the world’s biggest miner on paper. Yet, present chairman Argus backed Nasser, Australia’s The Age reported late last month.
BHP paid special tribute to the immense contribution Argus had made to BHP Billiton over his thirteen years on the board of BHP, ten of which were as chairman. The 70-year old Argus is mostly regarded as a hero inside BHP as he led the miner climbed out from financial trauma and over-expansion after a spate of merger and acquisitions in the 90’s.With the blessing of Argus, 61-year-old Nasser is now once in the international spotlight after his dramatic reign as chairman and CEO of Ford between 1999 and 2001.Nasser, who was born in Lebanon but brought up in Australia, received a business degree from the Royal Melbourne Institute of Technology and at the age of 20 joined Ford’s Australian unit as a cost accountant. Over three decades at Ford he became the most well-known Australian on the international business stage and climbed up to the top role in Detroit in January 1999.His huge multi-million remuneration annual package made him a controversial figure within Ford, and particularly with its labor union. As soon as he took over, Nasser kicked off sharp cost-cutting measures, both with component suppliers and through job cuts, in an attempt to maximize profits and shareholder’s dividends.He also made the decision to buy Swedish-based Volvo for 6.5 billion in early 1999. The transaction price was almost as much as Ford’s net profit of 6.6 billion in 1998.His bold expansion policy came at a price. Ford sank from the world’s most profitable carmaker before Nasser’s reign to an ailing auto company now. Ford still had to write-down 2.4 billion in 2008 for its Volvo investment.Nasser left Ford in 2001 and later joined One Equity Partners, the private equity arm of JP Morgan, as a senior partner. Nasser is also a director of British Sky Broadcasting
and sits on the international advisory board of German insurer Allianz
for the time being.

European Automakers In Danger Zone – US-FOREX.US

Forex-Publisher — Fri, 31 Jul 2009 16:46:17 +0000

Some of Europe’s biggest automakers surprised the market after posting substantial positive free cash flows during a busy earnings week for the sector.German automaker Volkswagen
on Thursday posted an actual profit with a hefty 12.3 billion euro cash reserve, while France’s Renault
posted a loss it managed to generate positive free cash flow of 848 million euros . PSA Peugeot Citroen
also surprised investors with 470 million euros of positive free cash flow. “The cash-flow improvement in the second quarter clearly comes from lower inventory levels,” said Heiko Moehringer, an analyst with LBBW in Germany. Car and truck makers as well as suppliers to the industry, like tire maker Michelin, are saving cash by running down inventories and cutting everything from travel to staff.Yet they were cautious about their immediate future as most of the recent push in demand is driven by so-called “scrapping schemes,” an incentive program that pays car owners to get rid of vehicles that are at least nine years old, so long as they buy a new model from an automaker. It has so far proven very popular in Germany, France, Italy and Spain, among other countries. “The scrapping schemes across Europe have helped the mass producers like Volkswagen, Renault and PSA pick up the pace of their sales in the last month,” Moehringer said. “But there is still the risk that the positive impact of those incentives will reverse in 2010 as scrapping schemes expire and we will see falling car sales especially in Europe.”Analysts have said that though the drop in demand has been exacerbated by the recession, there is an issue of overcapacity in the industry and some have called on carmakers to bring capacity down.
According to investment bank Nomura, there is an overcapacity of 3 million cars every year, in a market under normal conditions. In 2007, 14.8 units were sold in Western Europe but demand has quickly dropped. Nomura estimates sales will hit only 12.5 million units this year in the same region.”Carmakers are enjoying a scrapping scheme bonanza but companies still remain cautious as there is no immediate recovery in sight,” said Marc-Rene Tonn, an analyst with M.M. Warburg Research.
The Associated Press contributed to this article.

VW Raising Cash No Way – US-FOREX.US

Forex-Publisher — Mon, 27 Jul 2009 17:46:52 +0000

Europe’s biggest carmaker, Volkswagen, is reportedly considering a capital increase of up to 4 billion euros to protect its credit rating after a merger with Porsche Last Thursday Porsche Chief Executive Wendelin Wiedeking was ousted after the Piëch and Porsche families ended a longtime struggle over the future of the debt-laden German sports car maker, as a new management was seen as better positioned to smooth the path to a merger. But some analysts thought the idea of a capital increase by Volkswagen was nonsense. “It is difficult to understand,” said Michael Tyndall, an auto analyst with Nomura International in London. “Six weeks ago, at the company’s most recent Annual General Meeting, VW tried to get a vote to issue preferred shares and they failed to do so. And issuing ordinary shares is not a realistic option.”Tyndall also said that issuing ordinary shares would dilute the 20.1% minority blocking stake held by the German state of Lower Saxony. “It doesn’t take a lot of new shares to dilute Lower Saxony’s controlling stake to below 20.1%,” Tyndall said. “I can’t see Lower Saxony voting in favor of this.” Gregor Claussen, an analyst with Commerzbank, agreed. “A capital increase would dilute [Lower Saxony's] shareholdings, but it seems to be quite sure that Lower Saxony will keep its blocking minority.”Lower Saxony has long been against a takeover of VW. Thanks to a German law known as the “Volkswagen law,” it is exceptionally allowed a blocking minority in voting rights regardless of whether the European Commission again contests the law.Nomura Analyst Tyndall also said VW has cash reserves of 11 billion euros and can therefore afford to pay Porsche. “They have done well through the second quarter and I would expect these cash reserves to have gone up,” he said.
Yet a capital increase might seem logical from a credit ratings point of view. “A capital increase would make perfect sense for VW and would enable it to maintain its low-A ratings on S&P and Moody’s despite the planned full takeover of Porsche AG over a period of two years,” Sven Kreitmair, a debt analyst with Unicredit wrote in a note to investors on Monday, upgrading VW bonds to “overweight” from “marketweight.”Rating agencies have their doubts about a combination of Porsche and VW, raising concerns that Porsche’s high debt load could undermine VW’s credit profile. Porsche’s debt has reportedly increased to 14 billion euros as a result of the purchase of Volkswagen shares and the downturn in the European auto sector.Shares of Porsche
fell 11%, to 45.68 euros , in Frankfurt, reacting mainly to news of the capital increase. Volkswagen
dropped 2.2%, to 255.80 euros .Neither Volkswagen nor Porsche were available for comment.
Thomson Reuters contributed to this article.