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Car Earnings At Risk As Incentives Dry Out – US-FOREX.US

Forex-Publisher — Thu, 06 Aug 2009 15:46:13 +0000

Don’t be fooled. Car sales in the U.K. rose for the first time since April 2008, thanks to the positive push given by scrapping incentives following similar initiatives elsewhere in Europe. But the impact is likely to be short-lived.Analysts at Credit Suisse said on Thursday they still preferred premium car markets, which haven’t been benefited by the government incentives. “Post a cash-rich second-quarter reporting season, and amidst booming scrapping demand, we struggle to see how auto sector sentiment can improve materially from here,” Credit Suisse
said in a note to investors. Scrapping schemes, or the European version of the U.S. “cash for clunkers” program, have been introduced continent-wide, slowing losses within the auto sector in France while boosting sales in Germany. Thanks to the boost, carmakers like German automaker Volkswagen
managed to post an actual profit with a hefty 12.3-billion-euro cash reserve, while France’s Renault
posted a loss but managed to generate positive free cash flow of 848 million euros . But that increase won’t last until 2010. “For mass makers we are cautious on 2010 earnings potential given risks to volume, but particularly price, as scrapping schemes expire. We reiterate our preference for premium makers, who should benefit from improving fleet demand and U.S. exposure in 2010,” Credit Suisse added.
Luxury car sales have seen an improvement in recent months and demand seems to be stabilizing without a looming threat of incentives drying out like in the mass sector.On Thursday, luxury carmaker Audi, a unit of Volkswagen, said its worldwide sales rose by 2.1% from a year ago, reinforcing the idea of a recovery in the premium sector. The Ingolstadt-based company, said the growth in July was strong in Europe and Asia, both key markets.Shares of Daimler
rose 0.7% while shares of BMW
fell 0.3% in Frankfurt on Thursday. Renault
rose 1.1%, and shares of PSA Peugeot Citroën
rose 2.0% in Paris.The European automotive industry is the leading manufacturing region in the world, with 34% of vehicles being manufactured here. Europe has a share of 7.6% in the manufacturing sector. The industry employs around 2 million people directly and 10 million through indirect employment, according to the European Commission.

Sirius Sales In The Fast Lane – US-FOREX.US

Forex-Publisher — Wed, 05 Aug 2009 20:46:12 +0000

Investors are hoping that Sirius XM Radio sales will hitch a ride from the U.S. auto sector, which is accelerating thanks to the U.S. government’s cash-for-clunkers program.Shares of Sirius XM Radio
have been climbing-up nearly 30% for the week-as automakers have been crediting the Car Allowance Rebate System for recent sales surges. Sirius shareholders have reason to cheer since most of the company’s new subscribers are new car owners who vouch to continue using satellite radio after the free trial period. In other words, the more cars sold with built-in satellite radio units, the more opportunities for Sirius to grow its subscriber base. When tightened credit conditions made it difficult for consumers to buy new cars, Sirius saw a major source of sales dry up and began looking for new ways to get to consumers. Sirius targeted Apple
iPhone users with a software download allowing for Sirius programming on the device, and programs can also be streamed over the Internet. The market is awaiting data on both new services to get an early read on how successful Sirius may be at developing an off-road audience. Unfortunately, promising trends are too recent to be meaningfully reflected in the company’s second-quarter results, which will be released on Thursday. Market expectations are for continued declines in subscription rates and weak sales. Analysts polled by Thomson Reuters are projecting a loss of 1 cent a share and sales of 607.8 million, which is based on three estimates. Sirius shares were trading 1.5% higher at 55 cents during afternoon trading on Wednesday.
Thomson Reuters contributed to this article.

Volkswagens Balancing Act – US-FOREX.US

Forex-Publisher — Thu, 30 Jul 2009 23:45:14 +0000

It might not be selling as many cars as it wants, but it does have plenty of cash. Europe’s largest car maker, Volkswagen managed to beat expectations with second quarter profits as it gathered seemingly more than enough cash to buy Porsche ahead of its tie up with the sports car maker. Stuttgart, Germany-based Volkswagen said that operating profit had fallen by 56% to 928 million euros , which comfortably exceeded average analyst expectations for a profit of 628 million euros . Volkswagen meanwhile posted an increase in free cash flow of 4.3 billion euros during the first half, leaving its net cash at 12.3 billion euros by the end of June, and enabling it to acquire sports car maker Porsche.Volkswagen numbers should be seen as a combination of better profits and an improvement in cash flow, said Tim Schuldt, an analyst with Equinet. “Carmakers in Europe have had a constant battle between posting good free cash flow as well as maintaining profitability. Volkswagen has managed to achieve both,” he said, adding that Volkswagen might not need to raise cash at all to buy Porsche.”Volkswagen doesn’t really need to raise more cash as it is likely to pay between 8 billion euros to 9 billion euros [for Porsche], but Volkswagen might decide that it wants to have more cash on hand,” Schuldt said.Last week, Porsche Chief Executive Wendelin Wiedeking was ousted after the carmaker’s controlling Piech and Porsche families ended a longtime struggle over the future of the debt-laden German sports car maker. Now analysts say the new management looks better positioned to smooth the path to a merger. Rating agencies have reportedly held doubts about a combination of Porsche and VW, over 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 Volkswagen
fell 3.0%, or 1.63 euros , to 53.07 euros ; while shares of Porsche
rose 3.5%, or 1.55 euros , to 45.75 euros in afternoon trading in Frankfurt.Separately, French carmaker Renault swung to a first-half loss but said it would increase production as its outlook for demand had improved. Renault
posted a first-half net loss of 2.7 billion euros , against a net profit for the same period in 2008 of 1.5 billion euros . The company has also upped its outlook for the industry: it now expects sales for the global automotive market to fall 12%, year-on-year in 2009, whereas it had previously forecast of a 15% contraction.A slide in consumer spending has put the world’s carmakers under extreme pressure. On Wednesday PSA Peugeot Citroen swung to a loss of 962 million euros for the first half of the year while Nissan posted a quarterly loss of 16.5 billion yen . Honda has avoided a quarterly loss, but it posted a 96% fall in profits on Wednesday. German carmaker Daimler also posted an operating loss of 1.1 billion for the second quarter.
Thomson Reuters contributed to this article.

PSA Turns Red- US-FOREX.US

Forex-Publisher — Wed, 29 Jul 2009 17:46:04 +0000

The glass is half full for PSA. France’s biggest carmaker, PSA Peugeot Citroen, swung to a loss on Wednesday, highlighting tough market conditions until 2010. Yet investors remained positive on the stock based on a higher-than expected debt reduction and positive cash flow, a sign the company is managing its finances well.The carmaker posted a net loss of 962 million euros for the first half of the year, compared with a profit of 733 million euros a year ago. On top of its net loss, PSA also said it expects its car market in Europe to fall by around 12% in 2009 and to start seeing an improvement by the end of 2010.In February, PSA Peugeot Citroen and compatriot rival Renault each received 3.0 billion euros in credit lines from the French government. And Paris launched a scrapping incentive program to get drivers to trade their old cars for new models. But the company said these initiatives have had only a mild positive effect on the business. Gaetan Toutlemonde said, however, a higher-than expected debt reduction overshadowed the bad news. PSA managed to reduce debt by 900 million euros and it will now find it easier to retain its debt at 1 billion euros by the end of the year and not at 2.0 to 2.5 billion euros as some expected, Toutlemonde said.”PSA Peugeot Citroen’s first-half results reflect the impact of adverse markets, which were only partially mitigated by the benefits from performance action plans and new model launches,” said Chief Executive Philippe Varin. “Our priority has been to ease our financial constraints by strengthening the group’s liquidity.”The company got rid of its Chief Executive in March and it has been cutting jobs in a bid to tackle the dramatic fall in demand. It has also been cutting production and inventories sharply to be in line with consumer demand.
Shares of PSA Peugeot Citroen
rose 9.8%, or 1.81 euros , to 20.22 euros in Paris partly aided by a rally in the automotive sector triggered by Daimler’s surprisingly good outlook and also after Morgan Stanley said PSA’s net financial position is “significantly better” than forecast.”PSA generated 470 million euros of positive free cash flow in the half versus our estimate of more than 700 million euros of cash burn. Free cash flow was driven by a 2.1 billion euro reduction in inventory. They cut far more inventory than we expected – making the auto loss shortfall more palatable, in our view,” said a note by Morgan Stanley analysts. “PSA’s long-term challenges to improve its business remain, and current profits remain depressed – but financial distress is evaporating rapidly,” the investment bank added.PSA is not the only carmaker under stress. Other carmakers have posted hefty losses this week. Nissan posted a quarterly loss of 16.5 billion yen ; while Honda avoided a quarterly loss, it posted a 96% fall in profits on Wednesday. German carmaker Daimler also posted an operating loss of 1.1 billion for the second quarter. Shares of BMW
rose 3.8%; while Volkswagen was up 0.7% in Frankfurt on Wednesday. Renault
rose 6.2% in Paris.
Thomson Reuters contributed to this article.

Fiats Issue Is Debt Not Profit – US-FOREX.US

Forex-Publisher — Mon, 20 Jul 2009 17:46:11 +0000

There is a chance that Italian carmaker Fiat will surprise the market with a return to profitability on Wednesday. However, the market will be more concerned about the firm’s progress in lightening its cumbersome debt load.
Fiat
could post a net profit of between 31 million euros to 40 million euros according to some analysts who spoke to Forbes, despite a market consensus of a net loss of around 110 million euros . However, the firm’s debt load will be the real market mover. “For Fiat the issue is debt and is key to understanding the company’s behavior,” said Gabriele Gambarova, an analyst with Banca Akros in Milan. “If the debt reduction meets consensus expectations, then shares will fall. But if debt reduction is better than consensus, the stock may recover more than expected.” Debt rose to 6.6 billion euros at the end of March from 5.9 billion euros at the end of 2008, but consensus estimates suggest Fiat may be able to bring that debt down by around 650 million euros to 6.0 billion euros . Gambarova believes debt could even fall by 1.1 billion euros , to 5.5 billion euros .Fiat shares have gained 2 euros in the past 10 days and were down 0.5%, to 7.69 euros in Monday afternoon trading in Milan.”The rally is already happening but expect to see some positive reaction on Wednesday,” said MedioBanca analyst Massimo Vechio, who expects the company to post a 40 million euro net profit for the quarter.
Opinion is divided on Fiat’s performance in the second quarter, even though the firm has benefitted from scrapping scheme incentives in place in Italy. This is partly because of differing assumptions on tax charges. Centrosim analyst Carlo Drago expects Fiat to post a net loss of 89 million euros . So-called “cash for clunkers” programs have been introduced across Europe, slowing losses within the auto sector in France while boosting sales in Germany. .Citigroup is positive on Fiat, predicting the carmaker will “lighten the gloom” in the industry, while broker Cheuvreux expects the Italian carmaker to be the only mass-market company to post a profit in the first half of 2009. JP Morgan, however, told investors to expect negative surprises from Fiat: “We think investors will increasingly focus on 2010, when the post-[scrapping] hangover is likely to result in a volume decline in Western Europe.” UBS also said there were fresh debt concerns affecting the company’s bonds.Analysts will be also expecting fresh details from the car maker’s ouspoken Chief Executive Sergio Marchionne about Chrysler, after Fiat acquired a controlling stake last June.

All Eyes On Fiats Debt – US-FOREX.US

Forex-Publisher — Mon, 20 Jul 2009 12:46:10 +0000

Could Italian carmaker Fiat surprise the market with a return to profitability when it posts its second quarter results on Wednesday? It may well do, but the market will be more concerned about the firm’s progress in lightening its cumbersome debt load.
Fiat
could post a net profit of between 31 million euros to 40 million euros according to some analysts who spoke to Forbes, despite a market consensus of a net loss of around 110 million euros . However, the firm’s debt load will be the real market mover.
“For Fiat the issue is debt and is key to understanding the company’s behavior,” said Gabriele Gambarova, an analyst with Banca Akros in Milan. “If the debt reduction meets consensus expectations, then shares will fall. But if debt reduction is better than consensus, the stock may recover more than expected.”
Debt rose to 6.6 billion euros at the end of March from 5.9 billion euros at the end of 2008, but consensus estimates suggest Fiat may be able to bring that debt down by around 650 million euros to 6.0 billion euros . Gambarova believes debt could even fall by 1.1 billion euros , to 5.5 billion euros . Fiat shares have gained 2 euros in the past 10 days and were up 0.9%, to 7.80 euros in Monday morning trading.
“The rally is already happening but expect to see some positive reaction on Wednesday,” said MedioBanca analyst Massimo Vechio, who expects the company to post a 40 million euro net profit for the quarter.Opinion is divided on Fiat’s performance in the second quarter, even though the firm has benefitted from scrapping scheme incentives in place in Italy. This is partly because of differing assumptions on tax charges. Centrosim analyst Carlo Drago expects Fiat to post a net loss of 89 million euros .
Citigroup is more positive on Fiat, predicting carmaker will “lighten the gloom” in the industry, while JP Morgan told investors to expect negative surprises from Fiat: “We think investors will increasingly focus on 2010, when the post-[scrapping] hangover is likely to result in a volume decline in Western Europe.”

BMW Out Of The Woods – US-FOREX.US

Forex-Publisher — Tue, 14 Jul 2009 15:46:04 +0000

Demand for cars in Europe has dropped drastically but there are signs the luxury market is starting to pick up. That’s the latest hint given by luxury carmaker Bayerische Motoren Werke after one of its top executives said in a newspaper interview that the company was ready to increase production in the next six months.Shares of BMW
rose 3.9%, or 1.03 euros , to 27.71 euros in afternoon trading in Frankfurt. His comments were seen as a signal of a stabilization in the luxury car market.But don’t expect a recovery for the rest of the market – figures released on Tuesday by the European Automobile Manufacturers’ Association showed that car production in the first quarter of 2009 fell by 35%. There is already an overcapacity of 3 million cars every year with demand expected to fall rapidly by the start of 2010 for carmakers like Renault
and Peugeot
as government incentives expire later this year. “Most markets are still benefiting from scrap schemes but demand will see a significant drop next year especially in the mass markets, which have benefited the most from such incentives,” said Robert Heberger, an analyst with Merck Finck in Germany. So-called “cash for clunkers” programs have been introduced across Europe. The incentive programs have slowed losses in countries like France and have boosted sales in Germany. A similar American program is gearing up and should boost hopes for Ford Motor
, the Fiat
-controlled Chrysler and General Motors
, which will shortly emerge from bankruptcy.”The scrap scheme is a temporary incentive and it will fade out in the next few months,” Heberger noted.
In the first half, sales of BMW brand luxury cars fell over 19% to 513,591 vehicles, while demand for Volkswagen’s brands rose 26% in the same period.
Thomson Reuters contributed to this article.

Germanys Auto Smackdown – US-FOREX.US

Forex-Publisher — Mon, 29 Jun 2009 16:46:21 +0000

Things between Porsche and Volkswagen are getting messier and this could undermine both companies in the long run. On Monday Volkswagen denied reports that it had presented Porsche an ultimatum to accept its proposal for a merger of the two companies, after Porsche management had accused its rival of “extortion.”"Ultimatums do not belong in the 21st century,” Wolfgang Porsche
, Porsche’s chairman said. “We hope very much in the interest of the common goals that its authors regain their calm and will pursue their proposals in internal talks and not via headlines.” Though Volkswagen
denied the reports of an ultimatum, analysts said a long-time animosity between the two companies could affect them both.”Both companies need to find a solution quickly in order to continue on the good operating track,” said Christian Aust, an analyst with Unicredit Research. “If this situation remains the same, it will impair management’s ability to turn to the operating business, the nucleus of both companies.” Analysts said that Volkswagen’s claim that there is no ultimatum is at least consistent with the company’s story so far: Volkswagen has always mainatined that it doesn’t want to merge with Porsche before it has reduced its debt and has offered more transparency about its exposure to the options market.Of the two, Porsche has much more to lose. While Volkswagen boasted 10.5 billion in cash reserves at the end of last year, Porsche is struggling under a debt burden of 15.5 billion as a result of its ambitious plan to build up an additional indirect stake of around 25% in Volkswagen, which it revealed late last year. Tensions between the two surfaced after Der Spiegel magazine’s website claimed over the weekend that Volkswagen had set Porsche a deadline of Monday to agree to a merger plan, or otherwise pay back a 596 million loan.
The plan put to Porsche would see Volkswagen take a 49.9% stake in the luxury carmaker before the Qatar Investment Authority, a third investor, acquired Porsche’s Volkswagen shares, according to Der Spiegel. The combined entity would be 40% owned by the Porsche and Piech families, with the Qataris taking 15% and another sovereign wealth fund picking up 5%. Some 20% would be held by the state of Lower Saxony, a key investor in Volkswagen.This is not the first time tension takes over the relationship between the two companies. The two carmakers are chaired by cousins Ferdinand Piech and Wolfgang Porsche and have been beset with managerial in-fighting and family tensions for years. Both companies trace their origins to Ferdinand Porsche, the creator of the Volkswagen Beetle. Both men are grandsons of Ferdinand Porsche.