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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.

AB Inbev Tiptoes Into Second Half Of 2009 – US-FOREX.US

Forex-Publisher — Thu, 13 Aug 2009 14:46:22 +0000

There’s no reason to get excited yet. Anheuser-Busch InBev, the brewer of Stella Artois and Budweiser, said on Thursday profits grew 28% in the second quarter but warned that it will come under significant pressure in the second half of the year as beer volumes drop.Shares of AB InBev
, which have more than doubled since a November low, fell 4.7%, or 1.43 euros , to 27.46 euros in Brussels during morning trading on Thursday after the company’s chief executive acknowledged “challenges” ahead.”We have strong operating momentum going into the second half of 2009, but recognize that many challenges remain. The beer industry, while resilient in most of our key markets, is not immune to economic pressures,” Chief Executive Carlos Brito said.Brewers have been badly hit by a fall in consumer spending, customers switching to other drinks such as wine, and people trading down to cheaper brands from premium ones.
The brewer of Beck’s beer said earnings before interest, tax, depreciation and amortization, or ebitda, rose 18.5% to 3.6 billion, compared with the average 3.2 billion in a Reuters poll of 15 analysts. Overall cost of sales decreased by 5.6% in the second quarter, thanks to brewery productivity enhancements, the company said.Analysts are forecasting a mixed picture for the rest of 2009. Sales in the U.S. are expected to become slightly weaker in the third quarter as Bud Light Lime added an extraordinary 2% in sales in the same quarter last year. On the other hand, sales are expected to improve in Brazil and in Western Europe as Germany and France have apparently emerged out of the recession and the rate at which other economies are shrinking has slowed.
AB InBev reiterated its goal of bringing in merger savings of 1 billion in 2009, and said the second quarter had yielded 315 million, bringing the total for the first half of 2009 to 610 million. The company became the world’s largest brewer last year when InBev took over Anheuser-Busch for 52.0 billion.
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.

InterContinentals Inhospitable Conditions – US-FOREX.US

Forex-Publisher — Tue, 11 Aug 2009 13:46:19 +0000

The green shoots appearing in the wider economy seem to be steering clear of the hotel industry. A recovery for the industry may be two years away, Andrew Cosslett, the chief executive of Intercontinental Hotels, said on Tuesday as the company posted a net loss of 56 million for the second-quarter after writing down the value of some of its recession-hit businesses.”Business travelers remain elusive,” Cosslett said. “We can’t see anything in our numbers at the moment to suggest we’ve hit the bottom. It could be a couple of years before we get back to the levels we were at.” He added that the rest of the year was going to be “very challenging.” Shares of InterContinental Hotels
, which operates the Holiday Inn, Crowne Plaza and Staybridge Suites brands on a managed and franchised basis, fell 1.4%, or 10.50 pence , to 747.50 pence in London.InterContinental’s quarterly loss follows a profit of 101 million in the same period a year ago. Impairment charges totalling 162 million and a 27% slump in revenues contributed to the loss.At the start of the recession the Buckinghamshire-based company benefited from business travelers trading down but it has recently been hit by aggressive promotions launch by luxury hotels, especially during the weekends. “[Cosslett] is being very cautious as there is very little sign of business travel recovering,” said Wyn Ellis, an analyst with Numis Securities in London. “Stock markets are getting more positive about the economic turnaround, but we will probably see a lag before the hotel industry recovers.” He added that the next twelve months would be tough going, but at least in the fourth quarter the comparisons with last year’s performance would be less striking, as it was in that period a year ago that the market really began to weaken.
The firm seems to be coping well, given the challenging circumstances. “InterContinental has done a terrific job in cutting costs,” Ellis said. InterContinental said it expected to save a total of 80 million this year, after cutting costs by 51 million in the first half.”[InterContinental] continues to do well on room openings and expanding their market share despite being hurt at the moment,” Ellis added.
The company may also benefit from its U.S. focus. In a client note, analysts at Credit Suisse said the firm remained their “preferred European large cap hotel stock” because of its U.S. exposure, “where recovery is likely to be earlier. We believe that the risk to consensus estimates is now on the upside.”
The Associated Press contributed to this article.

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.

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.