NADA Headlines (Oct. 29, 2010)
GM Moves to Shore Up Finances Ahead of Stock Sale
DETROIT -- General Motors Co. moved to strengthen its finances ahead of an initial public stock sale, announcing plans on Thursday to cut debt and pension obligations by $11 billion. The moves, including a big payment to U.S. taxpayers, are aimed at making the automaker's balance sheet look more attractive to potential investors who might buy GM stock in an offering expected next month. The debt repayment is a huge milestone in GM's comeback from a financial calamity that began in 2008 after years of billion-dollar losses. Thursday's plan is another sign that GM has begun rebuilding itself and wants to cut ties with the government, its largest shareholder. GM CEO Dan Akerson told employees at an assembly plant in Lansing, Mich., on Thursday that the company wants the government to get its money back. "Over the coming months you'll see that GM is, indeed, a resurgent company," he said. Read more from The Associated Press.
The U.S. economy grew at a 2 percent annual rate in the third quarter as consumer spending climbed the most in almost four years, a sign the expansion is developing staying power. The increase in gross domestic product matched the median forecast of economists surveyed by Bloomberg News and followed a 1.7 percent gain the prior three months, Commerce Department figures showed today in Washington. Household purchases, about 70 percent of the economy, rose at a 2.6 percent pace, the best quarter of the recovery that began in June 2009. “Consumer spending looks considerably better,” Jim O’Sullivan, chief economist at MF Global Ltd. in New York, said before the report. At the same time, “it’s pretty clear the Fed will do more as they’re trying to get above-trend growth to reduce the unemployment rate.” Automakers were another bright spot last quarter. Vehicle production climbed at a 21 percent annual rate, adding 0.4 percentage point to growth. A pickup in auto demand may keep helping manufacturers. Vehicle sales are running at a 12 million annual rate in October, Mark Fields, Ford’s president of the Americas, said this month. The rate would be the highest since the government’s “cash for clunkers” incentive boosted demand in August 2009. “We continue to see good, steady improvement,” Fields said on Oct. 25 at an event in Sterling Heights, Michigan. Read more from Bloomberg.
Members of the Detroit Auto Dealers Association (DADA) had some positive things to say about Congressman John Dingell (D-MI) recently. The congressman, facing a tough re-election campaign against Republican physician Rob Steele, was one of the guests of honor at the annual DAD luncheon at the MGM Grand Casino last week. “It’s not often that you have a friend in the legislature,” said Edward Tonkin, chairman of the National Auto Dealers Association (NADA). “He’s really been there for us.” Tonkin owns several car dealerships in the Portland OR area. Dingell was recognized for his votes on legislation that helped bring the automobile industry back from one of its most difficult periods in history, including the ‘Clash for Clunkers’ program and the bridge loans that helped keep two of the Big Three automakers afloat. “What we have done is paying off,” said Dingell. “The Auto industry is showing signs of prosperity.” He said helping the industry was a no-brainer because of what it meant to the state of the nation, over all and the state of Michigan, in particular. “If the auto industry is doing well, the country is doing well,” he said. Read more from The Wayne Eagle (Wayne County, Mich.) .
TOKYO -- Japanese automakers Honda and Mazda posted hefty profits despite a strengthening yen as the global recovery and government incentives for green cars drove sales higher. Honda, the manufacturer of the Insight hybrid, Accord sedan and Asimo human-shaped robot, said Friday its second quarter profit more than doubled to 135.93 billion yen ($1.68 billion) from 54 billion yen the year before. Mazda's second quarter profit surged more than 10-fold as car sales grew at home and abroad. Its net profit was 7.62 billion yen ($94.4 million) for July-September, up from 707 million yen the year before. The results show the resilience of the Japanese automakers amid a battering from a plunging dollar, which erodes the value of overseas earnings of this nation's exporters. Read more from The Associated Press
Kia Motors Co., South Korea’s second-biggest automaker, boosted profit 66 percent in the third quarter as new models increased sales at home, in China and the U.S. Kia raised global deliveries 24 percent as new models including the K5 midsize sedan and revamped Sorento sport- utility vehicle lifted sales at home and overseas, according to company data provided before the earnings announcement. Operating profit, or sales minus the cost of goods sold and administrative expenses, rose 34 percent to 421 billion won, Kia said. Higher profits from Kia affiliates including Hyundai Mobis Co. and Hyundai Steel Co. also boosted earnings. Hyundai Mobis, South Korea’s largest auto-parts maker, said yesterday third-quarter profit jumped 45 percent to 605 billion won as Kia and Hyundai Motor, its biggest clients, sold more vehicles. Read more from Bloomberg.
Daimler, the German maker of Mercedes-Benz cars, reported a third-quarter net profit that handily beat market expectations Thursday and said it was revising upward its 2010 forecasts. The profit of €1.6 billion, or $2.2 billion, was 29 times higher than the €56 million Daimler reported in the year-earlier period, when sales were depressed by the financial crisis and recession. The company credited strong sales of Mercedes cars in China and the United States, as well as exchange rate gains. Daimler also raised its forecast for earnings before interest and taxes to “more than €7.0 billion” from its prior forecast of €6 billion. “Of course, the world economy is not yet as stable as it was before the recession, but we are confident that we will continue to operate successfully in our markets,” Dieter Zetsche, Daimler’s chief executive, said in a statement. Read more from The New York Times
AutoNation Inc., seeking to broaden its customer base, is expanding a set of no-haggle outlet centers specializing in the sale of older-model, lower-priced used cars. Top executives of the largest U.S. auto retailer outlined the strategy (Thursday) as they announced an increase in third-quarter operating profit and the addition of seven Fiat franchises awarded by Chrysler Group. The used-car centers, called Value Vehicle Outlets, are located at existing stores, though the outlet cars are segregated and marked differently. AutoNation launched a pilot at its Courtesy Ford store near Orlando during the second quarter. “We were very impressed with the customer demand for that product, so we moved very quickly and opened 15 more in the third quarter,” AutoNation COO Michael Maroone said in an interview today. “Those are on our existing real estate, and they utilize cars that we normally would be sending to wholesale.” AutoNation expects incremental sales of between 50 and 60 vehicles from each outlet per month, Maroone said. Vehicle margins as a percent of revenue are higher than the typical used vehicle, he said, though the absolute dollar profit is slightly less. “It's an opportunity to retail a vehicle that we normally would wholesale,” Maroone said. “It's incremental business, and it helps us create another retail customer.” Read more from Automotive News.
Internet shopping by buyers of late-model used vehicles increased significantly in 2010, an indication that at least some new-vehicle intenders opted to buy a used vehicle instead of a new one. The J.D. Power and Associates 2010 Used-Vehicle Market Report released (Thursday), found that 68 percent of shoppers looking for 2005-10 model used vehicles rely on the Internet to find them, up from 63 percent in 2009, says Arianne Walker, director of automotive research at J.D. Power. “It is a reflection, in part, of the economy,” Walker says. “People felt they could get the same value and same quality for less cost, and more options and features” for their money. The report also reveals that use of online classifieds is steadily growing among all shoppers of used vehicles, increasing to 51 percent this year. That is up from 46 percent in 2009 and 40 percent in 2008. Among the used-vehicle shoppers who use the Internet, third-party sites are visited more than dealership sites. Two-thirds of those shoppers perceive independent third-party sites to be the most useful sites during the shopping process. Read more from Automotive News.
General Electric Co. may jump-start the electric-vehicle industry with an order that Chief Executive Officer Jeffrey Immelt said will be the largest in history. GE, whose power-generation equipment provides a third of the world’s electricity, will order “tens of thousands” of the vehicles in about a week, Immelt said yesterday in a speech in London, without giving a total or identifying a manufacturer. “This is a huge step up,” said Brett Smith, a vehicle technology analyst at the Center for Automotive Research in Ann Arbor, Michigan. “It’s the biggest order to date I’m aware of, by a lot.” Expanding the world’s fleet of electric vehicles would bolster GE as it expands so-called clean-energy technology such as car chargers, solar panels and wind turbines. For every dollar of electric-vehicle sales, GE estimates it may get 10 cents in revenue, said Gary Sheffer, a spokesman. GE is investing $10 billion over the next five years in clean energy across its business lines, including power- transmission software and so-called smart-grid technologies. Its products include lithium-ion batteries for cars and trucks via a venture with A123 Systems Inc. and sodium-based batteries for use in large vehicles such as locomotives. Read more from Bloomberg.