Auto Manufacturers

[DCG]

Auto Manufacturers are looking cheap to me.

 

Most notably, Ford, GM & Fiat. Honda and Toyota look like decent values as well.

 

Anyone own or looking at these companies? I work in the auto industry (on the software & website side), so I keep somewhat up-to-date on the industry, and it seems to be slowly rebounding.

 

[txlaw]

I'm also interested in taking a look at these guys.

 

I have stayed away mostly because I have to figure out how the cost structures work and how the pension liabilities work as well.  Lots of work to understand these ones.

[Packer16]

I own some GM warrants.  Pabrai also owns some GM.  See the GM thread for some discussion about GM.

 

 

Packer

[hyten1]

i own a decent amount of GM (have been accumulating when it went down to 19/18.

 

packer is right see the gm thread, lots of stuff there.

[txlaw]

Thanks for pointing us to the GM thread.

 

Packer, at first glance, these GM warrants look crazy cheap.  Any thoughts on why they are priced the way they are?

[Packer16]

I think they are cheap because GM is a disliked stock branded as "government motors".  However, GM has reduced pension liabilities, have an overcapitalized finance sub and nice WW operations (China is dividending $1B per year).  I think the warrants are mispriced for the same reason the BAC warrants are misvalued (they are long-term and given the size of the offering the large equity players are not in the market).

 

Packer 

[DCG]

Just opened positions in FIAT (via the FIATY A.D.R.) and GM.

[Arden]

Renault. Very undervalued, trades below its holding alone, dividend on the way to being ~6% next year and about 10% the year after. No debt. Holds  a funding company, similar to a bank, which on its own is worth 50% of the current market value.

 

Car sales in europe are on a 1994 level. I dare them to stay there.

[PlanMaestro]

Sales of French cars fell 28pc in November from a year earlier, with Citroen down 26pc and state-owned Renault down 33pc. Foreign brands fell just 7.9pc.

 

French economy buckles as car sales collapse

http://www.telegraph.co.uk/finance/financialcrisis/9720053/French-economy-buckles-as-car-sales-collapse.html

[claphands22]

Any book/letter recommendations to understand the car industry better? Was Once Upon a Car insightful?

[PlanMaestro]

Any book/letter recommendations to understand the car industry better? Was Once Upon a Car insightful?

 

Once Upon a Car you get to know the characters well, but don't expect any analysis or critical thinking.

 

The classic is "The Machine that Changed the World" focused on the power of Lean Manufacturing, but is from the early 90s. The global auto manufactures have caught up with Toyota since that time. I imagine that "Overhaul" is a must read but I have not had the time to get to it.

 

There is a lot of info on the industry available in the internet.

[constructive]

Porsche (POAHY), FFP (FFP:PAR) and Toyota Industries (6201:TYO) offer holding company discounts to Volkswagen, Peugeot and Toyota. The subsidiaries can be shorted out for a stub trade if desired.

 

Porsche trades at ~68% of NAV:

http://online.barrons.com/article/SB50001424053111904706204578002262308707842.html

 

Value Investing France owns shares of FFP - by his calculation it trades at ~48% of NAV:

http://valueinvestingfrance.blogspot.com/2012/06/ffp-english-version.html

 

According to Brooklyn Investor, Toyota Industries trades at ~72% of NAV:

http://brooklyninvestor.blogspot.com/2011/10/6201-toyota-industries.html

[constructive]

Also, after resolving their legal issues in the next few years, Porsche could merge with VW and erase the discount. Now that VW owns the Porsche brand & operations, no real reason for Porsche to be a separate company.

[constructive]

Also Exor (EXOR:MIL) offers a big discount on Fiat, as suggested by rjstc, ASTA and Sportgamma in the other blog:

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/what-would-you-guys-buy-today-givei-100/50/

 

Bestinver says they are trading at 50% of NAV:

http://www.marketfolly.com/2012/05/bestinver-asset-managements.html

[PlanMaestro]

Top Blunders of 2012.

http://search.autonews.com/v/68843444/top-blunders-of-2012-12-26-12.htm?

 

2012 Marketing Moments

http://search.autonews.com/v/68936540/2012-marketing-moments-12-27-12.htm

 

2012's Movers and Shakers

http://search.autonews.com/v/69018412/2012-s-movers-and-shakers-12-28-12.htm

[PlanMaestro]

15 million in '13? You bet

http://www.autonews.com/article/20121224/RETAIL01/312249953/15-million-in-13-you-bet

 

http://farm9.staticflickr.com/8491/8335579828_8296cc0a68.jpg

Screen shot 2013-01-01 at 4.25.58 PM by PlanMaestro, on Flickr

[PlanMaestro]

2012 tally: The big stars and stumblers

http://www.autonews.com/apps/pbcs.dll/article?AID=/20130107/RETAIL01/301079965/2012-tally-the-big-stars-and-stumblers

[jay21]

Good write up on autos, specifically GM in Grant's interest rate observer:

 

http://moneyinstereo.blogspot.com/2012/12/grants-interest-rate-observer-winter.html

 

 

[PlanMaestro]

Crisis has accelerated VW’s domination

http://www.ft.com/intl/cms/s/0/10ede0a8-5a58-11e2-a02e-00144feab49a.html#axzz2HeGkstUR

 

Volkswagen is sending an unmistakable statement of intent to other volume carmakers by embarking on a three-year, €50bn plan for new products, plant and equipment. Its Europe-based competitors are incapable of such large investments over so short a spell of time. Several are deep in the red, losing market share, closing factories and laying off workers.

 

As for non-European rivals, such as Hyundai Motor , they have made impressive strides in Europe since the 2008 financial crisis. But they still trail VW by a distance. With its new investments, the German group wants to exploit its advantage so ruthlessly that its supremacy will be unassailable for many years. From 2005 to 2012 VW’s market share in Europe rose from 18 to 24 per cent. Such growth rates imply that by 2020 roughly one in three cars sold in Europe could be a VW marque.

 

Rival manufacturers are well aware this is no fantasy. In a survey issued this week by KPMG, the advisory services group, 81 per cent of car industry executives expected VW to gain world market share over the next five years. It was the third successive year that the German carmaker had headed the list.

[PlanMaestro]

VW’s Mexican Motors Lead Push to Narrow U.S. Gap With GM

http://www.bloomberg.com/news/2013-01-15/vw-s-mexican-motors-lead-push-to-narrow-u-s-gap-with-gm.html

 

The facility, which will supply VW’s two North American assembly plants with as many as 330,000 engines a year, marks the Wolfsburg-based manufacturer’s 100th production site and helps make it the most global carmaker in the world. VW this year will have 77 percent of its production capacity outside its home country, nipping past General Motors Co. (GM)’s 76 percent and ahead of Toyota Motor Corp.’s 59 percent, according to consultancy Oliver Wyman.

 

 

The fact that the plant was opened in North America underscores VW’s ambition to take on GM more directly in the Detroit-based automaker’s home market. The German manufacturer plans to spend $5 billion over the next three years to expand in the region. Growth there is critical for VW to offset a demand decline in Europe that threatens to halt its progress.

 

[…]

 

The new face of VW in North America is the pragmatic Passat. (PSAT) The mid-sized sedan, built in a new $1 billion factory in Tennessee, is bigger and cheaper than the European version. The Passat and the Mexican-made Jetta combined to account for two-thirds of VW sales in the U.S. in 2012, the first full year for the U.S.-made sedan.

 

[…]

 

VW’s push into the mass market will take another step when it rolls out a production version of the Crossblue concept, which drew a crowd of 25 TV and video crews at its Detroit debut. The seven-seater would challenge the Ford Explorer, Chrysler Group LLC’s Jeep Grand Cherokee and Toyota (7203)’s Highlander as a sportier family-car alternative to a minivan.

 

SUV sales account for 29 percent of the U.S. market, the biggest segment after sedans. VW forecasts SUV demand to grow more than 20 percent by 2018, outpacing all other niches. In addition to the Crossblue, VW premiered the Taigun compact concept at the Sao Paulo Motor Show in October. The two models would double VW’s SUV lineup, which currently consists of the upscale Touareg and the smaller Tiguan.

 

To check VW’s American growth plans, GM will introduce 13 new Chevrolet models in the U.S. this year and will refresh 70 percent of its U.S. lineup over a year and a half, including the full-sized Impala sedan and the Corvette sports car. GM intends to grow faster than competitors in the U.S. after its market share hit an 88-year low in 2012.

 

[PlanMaestro]

Automakers strain suppliers with surge in U.S. models

http://www.autonews.com/article/20130119/OEM10/301199999#ixzz2IRLRmyzJ

 

Auto parts suppliers cut thousands of workers and closed factories during the industry's collapse, and the survivors are stretched after three years of at least 10 percent U.S. vehicle-sales increases. Scarred by the recession, many are cautious about adding engineering or manufacturing capacity.

 

Adding to the pressure, new models introductions may rise to 74 next year, compared with 40 in a typical year, Schuster said.  "I get a sense that a number of companies have panicked a little a bit, and they're pushing product into the marketplace just a little bit too early," said Dennis DesRosier, president of DesRosiers Automotive Consultants in Richmond Hill, Ontario.

 

Since accelerating production can lead to defects, he called this month's Detroit auto show the "riskiest" he has seen.

[PlanMaestro]

 

 

http://finance.yahoo.com/news/ford-q4-profit-beats-street-120528336.html

 

Ford Motor Co forecast a $2 billion loss in Europe this year, hurt by a punishing recession that could drive down industry sales in the region beyond 2012's nearly 20-year low. Ford said on Tuesday its sales outlook was deteriorating in Europe and the 2013 loss would be worse than the $1.75 billion deficit in 2012. The automaker is closing plants and slashing costs.

[PlanMaestro]

Boeing article with a deceptive title. But it gives good context on Mulally.

 

How Boeing’s Dreamliner Was Grounded

http://www.thedailybeast.com/newsweek/2013/01/28/how-boeing-s-dreamliner-was-grounded.html

 

How Boeing prepared Alan Mulally for Ford

http://www.autonews.com/article/20130130/BLOG06/130139981/how-boeing-prepared-alan-mulally-for-ford#axzz2JTs9yZX7

 

 

 

 

[farnamstreet]

For more context on Mulally, I really enjoyed:

 

American Icon: Alan Mulally and the Fight to Save Ford Motor Company

 

[PlanMaestro]

Light Commercial market in Europe.

http://europe.autonews.com/apps/pbcs.dll/article?AID=/20130205/ANE/302059999/psa-fiat-opel-others-at-risk-from-shake-up-of-lcv-sector#axzz2JxdnLBv8

 

Europe's light commercial vehicle sector is headed toward a major shake-up that is likely to put added financial pressure on struggling brands such as Peugeot, Citroen, Renault, Opel and Fiat.

 

Longtime partners are considering new alliances while Asian competitors are getting ready to take a larger piece of the market, which had a double-digit sales decline last year. There is a lot at stake because the LCV sector has proved to be a gold mine. The profit margin on a van is estimated to be as high as 9 percent, which is comparable to a premium vehicle.

…

 

European brands and Ford also have had limited competition in the LCV sector from Asian rivals. Hyundai and Toyota, however, plan to put more emphasis on the market, which includes car derived vans, panel vans and pickups with a total gross weight of less than 3.5 metric tons.

 

Last year, the European sales decline for light commercial vehicles (13 percent to 1.44 million) was worse than that for passenger cars (8 percent to 12.6 million). Put another way, 2012 European LCV sales were 36 percent below a peak of 2.23 million in 2007 while passenger car sales were down 22 percent last year compared with a 16-million peak, also in 2007.

…

 

PSA and Fiat cooperate on large vans. Their 35-year-old joint venture in Italy, which is called Sevel Sud, is set to continue operating until 2019. Fiat, however, last year pulled out of its other van joint venture with PSA, which is called Sevel Nord and based in France. Fiat withdrew because it started importing U.S.-made large minivans from Chrysler. To fill the gap left by Fiat, PSA will supply vans to Toyota from Sevel Nord.

 

For years, Opel/Vauxhall has gotten large vans from Renault and medium-sized vans from Fiat, but these deals expire in mid-decade, leaving PSA as a likely replacement partner for the work.Renault is already working together with Daimler. The French automaker began supplying a rebadge of its Kangoo to Mercedes-Benz, which sells it as the Citan. Press reports suggest that VW plans to stop purchasing the Crafter large van from Daimler by 2016. This would provide another opportunity for Renault and Daimler to work together.

 

"There are certainly opportunities out there for a large shift in the alliances within the LCV sector, especially with the gradual reduction of the Sevel ventures. Key amongst this is the potential to expand the PSA and GM alliance into the LCV sector," said Michael Gartside, senior manager in charge of the Autofacts research team at PricewaterhouseCoopers.

…

 

Even after the Asians build up their LCV presence in Europe, it will be difficult to gain ground against the current leaders. PSA, Renault-Nissan, VW Group, Ford, Fiat and Daimler control 85 percent of the market today.

 

National brands such as VW, Fiat, Peugeot and Renault also are very strong in their home markets. For example, the domestic players dominate in France, which is Europe's largest LCV market (see box, below). Two out of every three LCVs sold in the country are made by either Peugeot, Citroen or Renault. Fiat controls more than half of the Italian LCV market while Ford is the largest player in the Great Britain. VW Group and Daimler are the leaders in Germany, which ranks third overall in European LCV sales.

 

 

EUROPE'S TOP LCV MARKETS

A dip in French van demand added to Renault's and PSA's troubles last year (2012 sales and % change from 2011)

1. France 384,045 -11

2. Great Britain 239,641 -8

3. Germany 215,909 -6

4. Italy 106,152 -34

5. Spain 76,999 -26

Other markets 303,209 -13

Total 1,437,192 -13

Source: JATO Dynamics