Whatever your business in the automotive supply chain – whether you’re a supplier, OEM or distributor – all motor industry businesses face some momentous business decisions linked to the transition to new energy vehicles (NEV’s). While manufacturers consider the existential threats arising from transition timing, investment, regulatory and technology issues, dealers too have threats to consider. NEV’s generate a much reduced after-market value chain, for example which will lower earnings for everyone. Both OEMs and dealers face the question of how NEV’s will be distributed – direct or via a dealer network. Tesla are pioneering direct distribution and, it would be surprising if every vehicle maker wasn’t assessing the same option. The twin threats of direct distribution and ever-reducing after market earnings are stark for dealers around the globe. This series of posts looks at the profitability of seven global car makers under three scenarios: slow, moderate and fast transition to EV’s. In each scenario five changes are made to forecast the impact on OEM volumes and profitability over the next thirty years. Read on through this series of posts if you;d like to know which OEMs are at the most risk and where their pressure points are.Read more
Successful independent or family based motor groups pass through three stages: Formation of a stable business; alignment with a manufacturer to achieve control of a region; and either dominance of the region or adding a new one
But a few manage to get beyond this stage, heading towards the national market.
To achieve success they need a clear strategy and vision, relationships with a broad range of partners and a management infrastructure.
But above all, they need a restless and relentless senior management to drive the process through
This post looks at three companies doing it: Stoneacre, Johnson Cars and Toomeys
Stop Press! Medium sized independent motor groups out-perform large PLC’s during the recession. Not much new there. They often do. Many independents, particularly established family owned dealer groups, certainly are surviving this recession, measured between 2007 and 2010, What is less well known is why. That’s not to say that all of them survived. A number of established family-owned dealer groups ceased trading or were significantly reduced in size. But not only did many survive, some actually prospered. Which begs two questions: why did many independent groups do better than larger PLC’s and why did some out-perform their peers? If you study the AM100 and the Sunday Times’ Fast Track 250 it’s evident that the ingredients for survival are different from the ingredients for success for medium-sized, independent motor groups. Many are survivors; fewer are successes. So what makes a survivor?Read more
GM spent months dithering over whether to sell or wind down Saab. Given they had lost a fortune on the brand over the last twenty years, and they need the money to pay back the US government, it’s a fair question to ask why they delayed. Maybe because they needed to find a buyer strong enough to get the money together, but weak enough to pose no threat in the future. They aren’t easy to find. Have they found one in Spyker NV?Read more
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?Read more
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.
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