IKEA now have 17 stores in the UK. In 2002 they had 11 and said that back then 70% of the UK population was within 60 minutes drive of a site. So what’s the minimum number of dealers a franchise needs to service the UK? Probably a lot fewer than exist at present. The average customers per employee per week at Tesco was 21,600 in 2008. The UK average car sales executive sells 159 cars a year. Given these striking discrepancies, is there the potential to create a more cost effective and productive car dealership model for the 21st Century?Read more
To create the fusion deal between VW and Porsche, VW have to buy out the Porsche sports car business. What’s it worth?
Based on numbers from August 2009, the market capitalization is €4.9BN. In other words the value of all the shares – if you could buy them. If the business just grows steadily, it’s worth double that, €7.3 – 10BN. If it grows fast, due to the Panamera and a revitalised Cayenne, it could be worth as much as €20BN. So, VW buying it for €8BN seems like a very good deal indeed.
Porsche becomes debt free by selling off their car trading business (€3.3BN) and using the money from VW (€8BN) and raise extra capital. They end up owning 35% plus of a business worth €55BN. I make them €5BN ahead.
Short selling is basically the practice of selling borrowed shares, with the intention of purchasing them back later at a lower price. It amounts to placing a bet on the share price dropping, is a favoured move of hedge funds, and has been recently blamed for much of the current economic mayhem. However, when Porsche announced that, in addition to the 44% of Volkswagen’s shares it owned, it had secured control of another 31% through cash-settled call options, the invisible market in VW shares went ballistic. Why? Since the German state of Lower Saxony holds just over 20% of VW, Porsche’s disclosure meant that, in fact, there were only 5% of VW’s shares left on the market (’the Float’), whereas hedge funds had borrowed 13% of the shares and sold them short. It meant that, the hedge funds had to buy 13% of the shares and only 5% were available.. Porsche had cornered the market. Having engineered the most vicious of “Short Squeezes”, the Porsche financial team waited three days before telling the hedge funds that they would release 5% of VW shares to get them off the hook—at a price. VW’s shares peaked at €1,005 each, not their usual €250, as traders scrambled to cut their losses. For a short period, VW was valued at €296BN, which is higher than the €275BN value of Exxon Mobil – previously the world’s most valuable company. What upset the hedge funds is that, because Porsche had not declared the proportion of VW shares it controlled, it’s likely that many of the funds that shorted VW had borrowed the shares from Porsche. It meant that traders may have been indirectly and inadvertently borrowing shares from Porsche, selling them to Porsche, buying them back from Porsche and then returning them to Porsche. The problem […]Read more
While the über-rich Porsche-Piëch family that controls Porsche and VW have long seen the business sense in a merger, they couldn’t agree on which person should be in charge.
Taking matters into his own hands, Wolfgang Porsche began building a clandestine stake in VW financing it from a brilliantly successful in-house stock trading operation. Starting with 18.65% in 2005, he had bought 51% by January 2009 and took control of VW.
But, that much VW stock doesn’t come cheap – €25BN. So even with staggering trading profits he still built up insupportable debts of at least €10BN resulting in a need for a bail-out by his target – VW!
But, whatever the final Porsche-VW structure, all is well for the family. They get to be in control of the firm run by one of their own and that firm now looks impregnable.
UK PC Registrations—Rolling 12 Months Up to the end of June 2009, UK Passenger New Car Registrations were down 574,917 units, around 24%. More importantly, June registrations showed signs of a significant reduction in the pace of decline. Since July 2008, double-digit percentage losses have been recorded. Between September 2008 and April 2009, the fall in the market was between 20% – 30% compared to the same month the year before. However, in June 2009 the decline rate abated to at around 15%. Many commentators suggest that this is The impact of the UK Scrappage Scheme – launched 18th May, which may have contributed some 10,000+ units, but the market was up 35,000 units against the rolling trend. However, June is usually 15% up on May in any case. This suggests normal seasonal factors are at work, rather than the vaunted ‘green shoots of recovery’. Let’s all watch the trend.. Russia Passenger Car Registrations In the first six months of 2009 the Russian market for Cars and Light Vans has exhibited increasing stress, as , overwhelmed by dismal economic conditions. To June YTD the market has been halved as auto-loan interest rates sky-rocketed, higher import tariffs were applied and manufacturer’s price increases too effect. In Russia commercial banks are offering car loans in US$ at 13% and in Roubles at 30%. In addition the same two factors impacting on the US and European markets – unemployment and declining expectations of wage rises are diverting disposable income to more important priorities. The outlook remains uncertain as well. The Rouble is expected to decline 40% vs. the US$ in 2009, dampening demand for foreign cars and encouraging downsizing among those who buy.Read more
Might the Russian state-controlled Sperbank backing of the Magna deal not just be a cheap way of modernizing Russia’s domestic auto-makers. I suspect that’s what GM thinks and that’s why they’re keeping their options open until someone pays a fair price.Read more