Seven Global Car Maker’s KPI’s Part 4: Liquidity and Debt

click on an image or table to enlarge.   Financial management in a global carmaker is more complex than most. Carmakers commonly manage both global industrial businesses and global finance companies at the same time. They make vehicles and most finance vehicle purchase and leasing as well. As a result, managing large flows of cash and debt, and the risks associated with them, is their daily activity. How do we know if they are sound? The financial resilience of a business stems from a combination of the risks linked to three core financial concepts – liquidity, solvency and debt. Liquidity and solvency are often coupled but mean two different things. Liquidity is a firm’s ability to pay its debt obligations when they fall due. Debt obligations can be in any amount, but the key factors in liquidity remain the same: cash and timing. Solvency is a broader concept that measures if the value of the firm’s assets is equal to or greater than its liabilities. It makes two balance sheet measurements: One, are total assets greater than total liabilities? Two, are current assets greater than current liabilities? Debt, for businesses, takes many forms, from ‘plain vanilla’ term loans and mortgages through to bonds and complex structured financial instruments, but they too have common features: a repayment schedule; a cost; a consequence and a risk. To start with analysts assess these core financial concepts using ratios. Two common ones are Current Ratio and Financial Leverage. If either of these gives unusual results, they lead to more ratios used to uncover further facts. So, how well did our 7 car makers do against these two ratios? Current Ratio (Current Assets/Current Liabilities): In 2016 BMW’s Current Ratio returned to its long term average for the last decade of 0.98:1. It rose in 2009, when […]

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Seven Global Car Makers KPI’s Part 3: Profitability

Global carmakers have never had it so good and so bad at the same time. Being positive, the global car market is growing and they have never had more potential for profitable business. Being negative they have to keep their investors onside while spending significant sums on untested technology and new product concepts. The key issue is cash flow and the driver of cash flow is profits. This post – the third in the series – looks at where 7 global carmakers generate their profits today and the potential they have for generating profits in the future.

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Seven Global Car Maker’s KPI’s Part 2: Sales Revenue

Every successful business likes to trumpet its sales revenue. None more so than car manufacturers. But, while year on year sales growth gives CEO’s a warm glow, experienced professionals know that revenue alone tells an investor or stakeholder very little. This post explains what you need to know to interpret the headline sales revenue figures using the published results of seven global car makers as examples. It illustrates what else you need to consider to decide if a car maker is really doing well or merely appearing to do so. It’s part of a series of posts assessing the KPI’s of these businesses – Daimler, BMW, VW, Toyota, FIAT-Chrysler Auto, Ford and GM – for the turbulent 10 years from 2007 to 2017.

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Seven global car maker’s KPI’s Part 1: Unit Sales

  Few items of business news grab the headlines more than sales volumes and, whether you’re a consumer or an industry insider, that is never more true than when car sales results for a market or a car manufacturer are published. It’s not just the numbers themselves. Car sales volumes are used as key idicators of global and regional economic development, consumer confidence, consumer preferences and urbanization, to mention just a few. Two factors help to put global car sales figures need to be placed in context. First, the global car market is highly dynamic and is expected to reach 100 MN units by 2022. In that forecast the market in China doubles from it’s current size – from 28MN to 55MN units – and the US grows to around 22MN units. More surprising is that India moves into the #4 slot with sales of around 5MN just behind Japan. Second, the proliferation of modular platforms across manufacturers will reduce production costs and lead to significant model development. Carmakers are likely to produce a growing range of models in shorter production runs. Using the same platform should help them make more profits. But, this may not lead to a bonanza for shareholders. Most of the profits could be eaten up in the extra costs of developing new technology and rising raw material prices. As for dealers, if they’re to keep a role in the distribution chain at all, they will need to become savvy at reaching and trading with a wider range of segments. That will cost them more money too.

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How sound is your franchise? Seven global carmakers compared.

Car makers are skilled at assessing the financial and operational strengths of existing or would-be dealers and, for forty years, dealers have been rating franchises in terms of how profitable they are to invest in and constructive to work with. But, so far, dealers have not assessed car makers on their financial and business viability. However, in a time of unprecedented change and potential disruption to car-makers and the retail dealer model, perhaps its time for a change. This series of posts complete a financial KPI and business analysis of seven global car makers from the viewpoint of a dealer or other potential stakeholder: Daimler, BMW, Ford, General Motors (GM), FIAT-Chrysler Auto (FCA), Volkswagen Group (VW) and Toyota. This first post gives an overall ranking of each car maker based on the data. The subsequent posts look more closely at specific issues such as unit sales volume, sales revenue, profitability, liquidity and debt and operating efficiency.

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Pendragon shares continue to drift down

Prior to issuing their Interim Management Statement in October, Pendragon’s shares were drifting downwards and stood at 19.0p/share. They bounced back for a week or two, but have now returned to the pre-Statement point, even though it had plenty of good news and some analysts rate it as a buy. With only one more year fo their refinancing programme to run, time may be running out for the current management to regain investor coinfidence. Read on to find out more.

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Economic Austerity and the outlook for UK Motor Retailers.

It was at the start of 2009 that luxury brands – LVMH, Burberry, Bulgari, Chanel, Balenciaga – first reported ‘luxury fatigue’, where buyers report that conspicuous consumption becomes an embarrassment. It is more than the fact that demand for allotments is at a record high or that spending in the haberdashery department at John Lewis is up 20%, after decades of decline, as we all make do and mend. Canny retailers all report the emergence of a new customer attitude – saving, not spending, as fear of unemployment and high credit costs become the norm. As a result, the July 2010 Nationwide Consumer Confidence Index fell to its lowest level since May 2008. While the ‘wannabe rich’ are cutting back, the mainstream customer, whose disposal income is falling 2% a year, has almost halted discretionary buying. What might that do for car retailing?

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Lookers Share Price Outlook

Lookers Plc reports its next set of Preliminary Figures for 2009 in March 2010 and the consensus forecast from Brokers is already a strong buy. Is this justified given the company’s fundamentals and the UK’s vehicle market outlook?

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Car Maker Share Prices in 2009 and beyond

The link between sales performance and share price is well known on the High Street. Tesco’s share price dropped  2.4% in December 2009, because their Q3 2009 sales were at the lower end of expectations, and rose 2.7%  in mid-January after publishing a good trading update. While supermarkets (daily consumables) aren’t the same as car makers (cyclical discretionary purchases) are their share prices driven by similar issues? On the UK market over the last 12 months they fared very differently. Food and Drug Retailers gained 17% while cars and parts makers jumped 108%. But, on a global scale, are car maker’s share prices the result of fundamentals or other factors?

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Is the shine coming off Pendragon’s SP?

At the start of 2009, the Pendragon share price languished between 2p to 5p. For those who bought at the bottom, they experienced a spectacular rise to around 45p. But, it may be all over for the present time. The share has been drifting slowly downward since August and now seems stuck in the 30p – 40p range. Many small investors seem to think that unless their are changes on the Pendragon Main Board – or the full year results are exceptional and the dividend is reinstated – that is where the price is stuck for the time being.

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