How sound is your franchise? Seven global carmakers compared.


This post is the first of a series reviewing the financial KPI’s of seven major car makers for the period 2007 up to 2017 and the implications for franchised dealers and other stakeholders. Links to further posts in the series can be found at the foot of the article.

Click on images or tables to enlarge.



For almost four decades dealer associations have been gathering their members views on the service and products of the vehicle manufacturers that they represent. Usually, ‘dealer surveys’ restrict themselves to issues that have an immediate impact on individual dealers such as the unit profitability, or otherwise, of the franchise or the affordability of the investments it requires.

Table 1. Financial KPI’s useful to dealers by Category. NB. In ‘Revenue & Growth’Global GDP and Global Sales Volume are data for benchmarks not for individual car makers

That may no longer be enough. Vehicle manufacturers have rarely faced such a turbulent global business environment. Consumers and politicians are converting environmentalists demands into specific policies that herald a different landscape for car use. Central banks are signalling the end of ultra-low interest rates and access to floods of cheap money. Digital service-based ‘disruptors’ predict an urban landscape where their tailored mobility packages make car ownership just one option among many. At the same time century-old brands have been challenged in their domestic markets by nimbler entrants who have reduced their market share and may even plan to buy them.

Even the company that has been the world’s largest for 70 years has been humbled. General Motors saw its US sales fall by 40% between 2004 and 2008, which contributed to its bankruptcy in 2009. GM also lost money in Europe in every year from 2000 up to 2017, when its Vauxhall – Opel operations in Europe were sold to PSA for €2.2bn (£1.9bn), as reported by AM-Online. GM’s financial woes were not confined to their own employees and assets. After GM filed for Chapter 11 bankruptcy protection in 2009, its 2,000 GM dealers across the US received notices of termination alongside 218 Saab dealers and the 4,000 dealers in their European dealer network braced for a similar shock. Now their European ex-dealers face uncertainty again.

In contrast, 2016 was a good year for Daimler AG. It sold more vehicles in total than its prime rivals BMW and Audi. More importantly, it grew faster in China and Europe and beat BMW’s growth in the US, according to Trefis Research. For those dealers and investors who stayed loyal after 2007, when the company lost over $27.5BN on the Chrysler de-merger, or 2010, when the firm agreed to pay US prosecutors $185MN in bribery fines, it has been worth it to see the company returning to rude health.

But past success – or failure – is not an indicator of future prosperity. Global demand for vehicles has grown by over 3% a year since 2007, and almost 6% per year since 2011, so many car makers have experienced strong growth, both the strong and the weak. There are two questions for dealers and investors: Number 1. Does this carmaker have a sustainable future? Is the success of this manufacturer the consumer’s response to their great product offers or simply that carmakers had access to ultra-low cost money for the last few years to support give-away finance deals. Number 2. If car makers are successful with their leap into new electric, connected and autonomous cars how will they distribute and service the? Will there be a future for an independent dealer network? If so where do independents fit in among giant-sized ride-hailing fleets and factory-owned mega-dealers? Just as important, who will own your auto-maker? Is it strong enough to survive? Geely’s 10% stake in Daimler suggests there could be a wave of M&A action in the next decade.

While it’s not the case that a major manufacturer is on the edge of failure, financial stresses are uncertain in their timing and impact. With that in mind, in the same way that manufacturers assess their dealers annually on financial yardsticks, now may be the time for dealers to start assessing their manufacturers on the same financial basis.

Method and Results

This post summarises a financial assessment of seven global car manufacturers, using KPI’s that are useful from a dealer’s viewpoint. KPI values were included for the period from 2007 up to 2017, where available. These were used to calculate a growth trend and then scored from 1 – 5 based on the benchmark performance of the average for the survey group or the global trend.

For example, OICA provided the global unit sales. The Compound Annual Growth Rate for global vehicle sales was calculated and the unit sales growth rate of each individual carmaker in the survey was compared to it. If the individual carmaker growth rate was 25% – 50% higher than the global rate, they scored 4; if greater than 50% above, they scored 5. Similar scoring ranges were used for scores below the global average. If the individual carmaker growth rate was 25% – 50% lower than the global rate, they scored 2; if more than 50% below, they scored 1. If a global average was not available, the average performance of the members of the survey group were used to provide the benchmark.

The seven car makers reviewed were Daimler and BMW, Ford and GM, Volkswagen, Toyota and Fiat-Chrysler Autos (FCA). Morningstar and the car makers own published figures provided the financial or sales data. A range of key performance ratios were selected to assess the seven car makers from the viewpoint of attractiveness to car dealers and investors in four categories: Revenue & Growth; Profitability; Liquidity & Debt; and Operating Efficiency. The KPI’s in each category are shown in Table 1.


So, how did the individual car makers rank? The tables above give the summary results. Table 2 provides the Category scores and Table 3 displays the rankings for each category and overall.

Toyota New Global Architecture (TNGA) modular platform.

Toyota ranked #1 overall with the highest score in three categories – Revenue & Growth, Liquidity & Debt and Operating Efficiency – and the second highest score in Profitability. Over the last decade, notwithstanding the financial crisis, the strength of the Japanese Yen vs. US$ during the financial crisis and fronting up to recalls covering millions of cars, they still grew global sales, maintained profitability and investment and increased their efficiency. Toyota are the least indebted and  have delivered consistent working capital and asset management. If I was a dealer, Toyota’s balance sheet strength and position as the #1 car maker in the world suggests it’s highly likely to be there for the long term. Their Toyota (TM) New Global Architecture (TNGA) platform mated with better powertrains has raised their global sales potential and delivered a 20% reduction in cost, freeing cash flow for investments such as Toyota Artificial Intelligence. Toyota plans 37 TNGA models by 2021, increasing the portion of TNGA-inspired models to 63%. Alongside that Toyota has pivoted towards electric vehicles, down-sizing Hydrogen Fuel Cell research, and promising 10 EV’s in the 2020’s and electric options on all its models by 2025. If Toyota have made a breakthrough in next-generation solid state battery technology, as reported in 2017, it will allow it to out-pace VW, GM, Tesla, Ford, Volvo and Daimler to the market with affordable, longer-range EV’s – the ‘Holy Grail’ of the industry at the present time.

Mercedes S-Class completes autonomous driving tests on 5 continents.

Daimler took #2 place by  ranking #1 on Profitability and #2 on Liquidity & Debt, although Revenue & Growth and Operating Efficiency were both average. Revenue per unit has recovered to its pre-crisis levels while Gross Profit per unit has doubled over the review period. Their Gross Profit per unit – at almost $8,500 per unit is 50% higher in dollars than BMW – coupled with a high rate of unit sales growth in units helped them to achieve high and consistent earnings. This is a remarkable outcome for a company that has both diversified and downsized its product range. Given their high level of Cap-Ex required to fund new models, Daimler have managed to keep debt levels and finance charges low, although Free Cash Flow has been negative for the last five years, as they invest in new products and technology.  Low debt and effective working capital management helped them to second place in Liquidity and Debt.  A well-funded dealer or group would likely be very positive about Daimler for the next five years as their current new product offensive comes to market, but institutional shareholders – 70% of the company’s base – may want to see more value coming their way. This could either be cash or a clear breakthrough in technology. While investors might be indifferent as to how their return is generated, dealers would prefer the latter so that they can build on the the expanding Daimler sales base in its main markets – Europe (35%), US (25%) or China (10%).

BMW ‘rad°hub’ – think tank on future mobility.

BMW  ranked #3 by a small margin and came third on both Profitability and second on Operating Efficiency. Their Gross Profit % at 19.9% was slightly behind Daimler – who scored #1 in the group – but BMW’s internal cost controls pushed them to #1  position at the Operating Profit line with 10%. BMW retain over 50% of their Gross Profit margin – only Toyota have done better in recent years. Operating efficiency is strengthened by a well-controlled cash conversion cycle which requires reducing amounts of working capital to finance growing sales volumes without alienating either suppliers or customers – but it does bring extra risks. On the debit side, BMW’s revenue and gross profit per car seems to have peaked in recent years. More significant is that free cash flow has been negative for almost a decade. Those funds, of course, have been ploughed into new technology and models but selling more cars at lower margins may not be an attractive long-term strategy for investors. Even though it’s high, the operating profit margin for BMW has been declining since 2011, reported by Bloomberg. But this did not reduce BMW’s share price in 2017, which has grown by 12%+ a year since 2011. All German car-makers were down-rated as investors began to add up the investment costs required for connected, electric and autonomous technology. However, only BMW have gone public on how radically their business will need to change if it’s to remain relevant in the future. Given the need to match the Daimler product offensive and pay to switch to electric, BMW will be under financial pressure for some time. But, on balance, it remains a very attractive proposition for both dealers and investors.

Ford’s new research centre at Palo Alto, Silicon Valley.

Ford edged into #4, thanks to achieving the second highest score in Revenue & Growth, alongside VW. Ford scored average or just above in all other categories. Liquidity & Debt were impaired by their improving, but still high leverage. Profitability scored poorly on volatile operating profits coupled with a falling global market share. It seems that Ford’s relatively high fixed costs – compared to their peers – make them vulnerable to market swings. Operating Efficiency was impacted by Ford’s limited ability to manage  debtors (payables) and, consequently, excessive cash being used to finance working capital. Dealers will raise concerns about Ford’s capacity to generate enough money to respond to new technology and keep shareholders on side. It’s no coincidence that Tesla’s market capitalization has stubbornly been above that of Ford since Spring 2017, as investors bet that Silicon Valley may solve electric and autonomous car issues faster than traditional carmakers. But, everyone should keep in mind that Ford has around $25BN in cash reserves and that its US and – since 2014 – its European businesses are cash positive. In short, Ford remains a global player – but has yet to regain its former place in the first division, currently dominated by VW and Toyota. If I was a dealer investing in the US or Europe who believed that BEV (battery electric vehicles) were the future, Ford would be a candidate for my portfolio but, outside that region, there may be other more attractive franchise options.

VW ‘Together’ Strategy 2025 logo.

Volkswagen Group are ranked #5 in this comparison but do so only two points behind Ford.In Revenue & Growth Volkswagen ranked #2 equal with Ford, helped by their stable operating cash flow, enabling them to invest consistently in new technology and models, without resorting to excessive debt. In fact their debt levels have been stable or falling for the last 5 years. Only Toyota has lower leverage. Profitability is growing slower than its rivals – especially in Europe. Although separate financial data is not available, this may be due to their focus on the highly competitive mini-car and small SUV segments across their brands in Europe. However, perhaps owing to the contribution from premium brands such as Audi and Porsche, their healthy Gross Profit margin is only bested by BMW and Daimler. Operating Efficiency was impaired by both lower than average Fixed Asset Turnover and Total Asset Turnover. Looking forward, how good an investment is VW for a dealer investor? Isn’t VW an undoubted global player with the most successful brand portfolio in the market, ranging from successful brands in every segment, from budget through to Exotic? True, but it still has the ‘dieselgate’ scandal hanging over it, has failed to generate sales in the US and sales are on a plateau in Europe. Doubtless VW will resolve these but, the core issue for their future, concerns their ability to deliver their ‘Together‘ strategy. Carmakers are broadly in two camps concerning their attitude to the transition to electric and, ultimately, autonomous vehicles. Some think they will lose money switching to electrc cars. VW is not one of them. Its management believes they have the scale and funds to switch quicker than the rest and bring a global electric range to market first. If you’re a dealer who believes they can and will achieve this, all VW brands should be on the top of your list.

General Motors ranked #6 by a few points – but, to be fair – the new GM is less than 6 years old and some would argue that it’s still in transition, shedding its European operations. It ranks #3 in Liquidity & Debt, alongside Ford, BMW and VW, owing to its tight control of external debt and working capital – thanks in part to the US government. In Operational Efficiency, it rated #5 with the same score as BMW, it’s strongpoint is stock turn – it moves quickly to match supply and demand allowing GM to achieve almost double the stock turn of its premium rivals. Only Ford and Toyota better it. Sadly, GM’s working capital control is slowly deteriorating as the speed of payments from debtors has slowed in recent years.  Revenue & Growth is an area of concern. Losing global market share would not be worrying taken alone but both Revenue and Gross Profit Margin are static, while its rivals have seen some improvement. GM scored the lowest on Profitability. The most optimistic indicator is that, while maintaining large Cap Ex, it has positive Free Cash Flow. However, much of that Cap Ex has been used for share buy-backs  ($9BN by 2016) rather than new models and the free cash flow has been used to boost dividend payments.  Looking forward, there are also significant costs to be paid for exiting Europe – $5.5BN in exit charges plus $3BN in debt to cover pension liabilities. It would be short-sighted to write-off GM. It sells cars in 120 countries, has world-wide production and distribution and sells 10MN+ cars a year. Its strategy – electric cars – is a potential world-beater: it plans 20 electric vehicles by 2023 based on its own battery research and collaboration with Panasonic. In 2016 the Chevrolet Bolt – the first affordable electric vehicle with 200mile/300km+ range was launched and achieved the highest sales of an electric car in its first year. So, if I was a dealer in China or the US, GM would remain on my list, but not at the top.

FIAT-Chrysler’s Millennial Vehicle Strategy

FIAT-Chrysler Auto took #7 position – just below GM…but with higher potential risk.They scored the same in Operating Efficiency as VW, due to their control of debtors and stock. However, they operate with negative Net Working Capital – a double-edged financial sword that reduces FCA’s cash requirement but leaves them vulnerable to debtor litigation. Few other car maker in the group surveyed operates this financial policy as a group except BMW, although GM and VW have dipped into it when unforseen crises have hit them. Of course, no one forgets that all carmakers financial divisions operate with negative Working Capital or technical Insolvency. On the credit side, they enjoy the second-best Fixed Asset Turnover Ratio in the group. Profitability KPI’s scored mid-range – but still on a par with VW or GM. On a slowly growing unit sales trend, FCA have achieved a significant improvement in Sales Revenue, Revenue per unit and GP per unit – all of these KPI’s improving at double the average rate for the group. Sadly, it’s likely that these figures reflect the almost 300% increase in Ferrari and Maserati sales (around 48,000 units in 2017, up from 13,000 units in 2011).  As Ferrari was spun off from the group in 2016, future gross profits are expected to be halved. Another cause for concern is that most of the GP income has been used up in costs over the last 5 years. FCA and Ford were the least ‘profit efficient’ among the survey group. Incentives to shift stock in Latin America – where FCA’s volumes halved since 2011 – and Asia Pacific – which also halved since 2014 – may also have contributed. While FCA is a merger of two established car-makers, few dealers may have the risk appetite to place them high on their list. The Fiat and Chrysler brands have limited traction in the US, the Dodge brand has limited traction in Europe. Their stated business strategy to build MPV’s and SUV’s for ‘millennials’ has few analysts convinced. Even if that is successful, do FCA have the scale to to build and distribute globally? Not everyone thinks so. Invest in FIAT in Europe? Probably not. They don’t plan to introduce any new models because they’re already losing money in Europe. Invest in Chrysler or Dodge? Not before new platforms hit the tarmac. Their current platforms are old – Chryler 300 and Dodge Charger/Challenger are all from Mercedes-Benz of 2005 vintage and have a growing weight disadvantage against the competition – so, less fuel efficient and worse emissions. FCA have reported no progress with connected cars and autonomous driving, technologies that the CEO, Segio Marchionne, called a “Pandora’s box of problems”. However, the fundamental issue for FCA is credibility. It has posted plans in the past – to achieve 6.5MN units by taking FIAT up-market , reviving Alfa-Romeo (400,000 units by 2018) and developing Jeep (1.9MN units by 2018). By 2017 global sales were 4.7MN. FIAT increased by less than 200,000 units. Alfa-Romeo sold 100,000 units and Jeep reached 1.2MN.


If you want more detail on how each car maker scored on individual KPI’s please link to the posts with ‘Seven Global Car Makers’ in the title.

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

For a summary of the FCA & Chrysler deal see earlier post