Earnings/Financials auto news

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GM financing arm investigated over subprime loans

08/06/2014   [Original: Autoblog]
Category: Car Buying, Government/Legal, GM, Earnings/Financials

General Motors Investigation

General Motors just can't seem to avoid controversy in 2014. Of course, there has been a continual run of recalls throughout the year, and now, its GM Financial division is under investigation for possibly violating the Financial Institutions Reform, Recovery and Enforcement Act, according to Reuters. FIRREA gives the DoJ the power to examine and potentially sue companies that are found to be acting fraudulently. In this case, the feds want to know the division's criteria when securitizing subprime loans.

GM bought the company previously known as AmeriCredit in 2010 for $3.5 billion and renamed it GM Financial. It allowed the automaker to have an in-house division to offer finance and lease options through dealers, since it sold off GMAC, now Ally Financial. According to Reuters, GM Financial has issued $2.15 billion in subprime-auto-loan-backed securities in the first six months of the year.

Subprime auto loans have been on the upswing this year, despite the recent financial crisis. According to a recent study from credit reporting company Equifax looking at data as of April 2014, $46.2 billion in auto loans have been extended to subprime buyers. That's an eight-year high and about 28 percent of the auto loan balance.

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Safety systems supplier Mobileye raises $890 million in IPO

08/05/2014   [Original: Autoblog]
Category: Safety, Tech, Earnings/Financials, Middle East

Financial Markets Wall Street Mobileye IPO

Israel-based vehicle safety technology company Mobileye (NYSE: MBLY) has successfully launched its Initial Public Offering on the New York Stock Exchange, raising approximately $890 million to value the company at a reported $5.3 billion.

You may have never heard of Mobileye, but that doesn't mean its system isn't in your car. The company, which lists its headquarters in the Netherlands (much like Fiat Chrysler Automobiles and the Renault Nissan Alliance) but operates its R&D center in Jerusalem, develops and produces safety systems for automobiles that combine cameras (instead of radar) and software algorithms to detect other vehicles, pedestrians and lane markers (among other objects) to keep the car on the straight and narrow. While it sells systems (often purchased by fleet operators) that can be retrofitted to existing vehicles, a large portion of its business is in selling its devices to automobile and truck manufacturers for installing in their products on the assembly line. Mobileye lists among its customers General Motors, Ford and Chrysler; Honda, Nissan, Mitsubishi and Hyundai; Audi, BMW, Volvo, PSA and Jaguar Land Rover. The company is said to be developing its own autonomous vehicle prototype.

The IPO launched on Friday was the largest ever fielded by an Israeli company in the United States and makes it the fifth largest company trading on Wall Street. While Israel accounts for the third largest number of companies listed on the NASDAQ, Mobileye chose the NYSE instead, opening trading at $25 per share (higher than the expected $21-23 per share) to raise $890 million for the company's principal owners and stockholders. After a fierce day of trading that saw its stock jump as much as 58 percent to $39.40/share, it closed at $37/share for an increase of 48 percent.

While the company included outside shareholders in the IPO, it was the company's founders who benefited the most. Mobileye was started in 1999 by Professor Amnon Shashua and Israeli businessman Ziv Aviram. Shashua studied at Tel Aviv University, the Weizman Institute of Science and MIT, lecturing at the Technion Israel Institute of Technology and the Hebrew University of Jerusalem before founding Mobileye with Aviram, who had previously run local operations like Keter Publishing and the Gali shoe chain. The two were said to have made $92 million between them from the IPO.

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Mercedes, DVAG continue sponsoring Michael Schumacher [UPDATE]

08/05/2014   [Original: Autoblog]
Category: Marketing/Advertising, Mercedes Benz, Earnings/Financials

Monaco F1 GP Auto Racing

Up until his tragic accident that left him in a coma, Michael Schumacher was still one of the highest-paid Formula One drivers in the world... even though he was no longer actively competing. That came down to the numerous lucrative personal sponsorship arrangements that the seven-time world champion retained even after retirement. But while some of his sponsors have been canceling their arrangements with Michael as he fights to recover, Mercedes is reportedly committed to standing by its former driver and brand ambassador.

Speaking with German newspaper Bild am Sonntag, Daimler chairman Dieter Zetsche said "We have given no thoughts to changing something in his contract," wishing the retired F1 driver the best of luck in his recovery.

By way of contrast, bottled water brand Rosbacher reportedly canceled its sponsorship contract with Schumacher in June.

UPDATE: When reached for comment, German investment company Deutsche Vermögensberatung AG, whose logo has long adorned Schumacher's hat, told Autoblog that "At the moment, the health of Michael Schumacher is ranked first.... We back Michael Schumacher and his family and wish them all the imaginable energy they need for the next months."

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It's been 5 years since Cash For Clunkers, was it a success? [w/poll]

08/04/2014   [Original: Autoblog]
Category: Car Buying, Government/Legal, Earnings/Financials

Cash For Clunkers Program Yielded Nearly 700,000 Sales

CARS set out to kill two birds with one stone: jumpstart slow automobile sales and get a large number of older cars off the road.

A lot has happened since 2009. President Obama was re-elected. The Arab Spring saw popular uprisings overthrow dictators across the Middle East and North Africa. General Motors declared and subsequently emerged from bankruptcy. Fiat bought Chrysler. And the Cash for Clunkers program came and went.

That's right, it's been five years since the federal government launched the Car Allowance Rebate System - known as CARS for short, or more popularly as Cash for Clunkers. The program set out to kill two birds with one proverbial stone: jumpstart slow automobile sales across the country on the one hand, and get a large number of older (and less environmentally friendly) cars off the road. Identifying both problems and a single way to solve them, the government offered financial incentives (cash) for drivers to trade-in their old cars (clunkers) in favor of new ones, following the lead set by similar scrappage programs that had taken place in other countries around the world.

Even with a moribund economy, buyers jumped at the opportunity, and in less than a month, the entire $1 billion allotted by Congress to the program had been used up. So legislators approved an additional $2 billion, which ran out before the end of August 2009 - two months ahead of schedule.

The question that lingers five years later is whether the program was actually a success. Proponents point to the rapid rate at which customers took advantage of the program as a sign of its success, providing a boost in sales to automakers and dealers across the country. The Department of Transportation also reported that the new vehicles acquired averaged over 60-percent better fuel economy than the ones that were traded in, all the while giving a shot of adrenaline to Detroit's automakers.

Critics, however, debate the veracity of those claims and paint a different picture. The program's detractors claim that the increased sales promoted by the program were not created out of nowhere, they merely pulled ahead future sales that would've taken place anyhow, resulting in a zero net gain at the cost of $3 billion to the taxpayer. Implementing the program also required the National Highway Traffic Safety Administration to take on thousands of additional employees to process the applications for reimbursement and necessitated the government setting up the National Motor Vehicle Title Information System just to keep track of it all.

Meanwhile, detractors point out, it was not American automakers but Japanese ones like Toyota, Honda and Nissan that brought in the lion's share of new car sales from the program (while American cars were ineligible under Japan's own scrappage program). The initiative is also said to have had the unfortunate side-effect of raising prices on used cars (which only made things harder on those who couldn't afford new ones during difficult financial times), and reduced the number of old cars being donated to charities that depended on them.

As for the improvement in fuel economy, critics claim that drivers are likely to drive their newly fuel-efficient cars more (canceling out any environmental benefit of their improved economy), also arguing that the environmental impact of manufacturing and shipping the new cars bought hadn't been taken into account. Further, they note that many large SUVs and crossovers qualified for the program even though they didn't meet the 20-mpg threshold for eligibility.

Whether the program, now five years in hindsight, could ultimately be viewed as a success or not, one thing's for sure: it was certainly expensive.

View Poll

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Outstanding auto loans total higher than ever

07/31/2014   [Original: Autoblog]
Category: Car Buying, Earnings/Financials

Massive Ignition Switch Recall Weighs Heavy On GM's Profits

It looks like Americans are feeling more confident about borrowing money again, at least when it comes to their cars. Credit reporting giant Equifax has released its latest National Consumer Credit Trends Report, and the data suggests that auto lending is booming in 2014.

The total amount of outstanding auto loans in the US amounted to $902.2 billion in the company's analysis. Not only was that a new record, it was also a 10-percent increase from a year ago. "Auto lending continues to thrive, accounting for more than fifty percent of all new non-mortgage lending through April of 2014," said Dennis Carlson, Deputy Chief Economist at Equifax, in the study.

The results mixed some bright spots with some seemingly worrying trends following the recent subprime credit crisis, though. According to the report, year-to-date new auto loans as of April 2014 reached $163.5 billion, the highest amount since 2005, and the number of them in that period was also at record levels. According to Carlson, the amount of delinquencies was at near-record lows of less than 1 percent of that $902 billion.

"Subprime lending has grown across all sectors in 2014. This is good news as a fully functioning second-chance market is essential for a healthy economy," said Carlson in the study. Auto loans to these buyers reached $46.2 billion year-to-date, an eight-year high, which made them about 28 percent of the total loan balance from this year.

The rest of the report indicated a strong credit market elsewhere too. Banks issued more credit cards, and overdue accounts were at a five-year low. The total amount in mortgages was actually down from last year, but delinquencies were lower as well. Want to know more? Scroll down.

Continue reading Outstanding auto loans total higher than ever

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Porsche acquires Kyalami race track at auction

07/28/2014   [Original: Autoblog]
Category: Motorsports, Porsche, Earnings/Financials

SAFRICA-AUTO-PRIX-RSA

With more victories under its belt than any other manufacturer, you could say, in a figurative sense at least, that Porsche owns countless numbers of race tracks around the world. But here we're not talking about figuratively owning a track - we're talking about literally buying one. And Porsche has just bought Kyalami.

Kylamai, for those unfamiliar, is a grand prix circuit near Johannesburg in South Africa. Between 1967 and 1985, and again in '92 and '93, it was home to the South African Grand Prix, and has since hosted a variety of local and lower-level international races, but apparently fell on hard times. As a result, the track's owners - listed as Universal Property Professionals - put it up for auction. Bidders had to deposit four million Rand (about $380k) to participate, but after just 50 seconds, the auction was over.

The winning bid was placed - via telephone from the local press launch for the Macan - by Porsche South Africa CEO Toby Venter, who bid a reported 205 million rand (about $19.5 million) to take over the complex. The German automaker's South African division reportedly intends to keep the track open for racing, but could also be expected to use the facility for testing, customer track days and such moving forward.

It would not be the only track, after all, owned by a Porsche - even if the South African option is owned and operated independently of the German automaker and its holding company. The factory at Leipzig has its own test track on premises, there's another one in the works for the company's new US headquarters in Atlanta, Porsche Engineering owns the Nardo high-speed test track in Germany and there's probably a few more we're forgetting about, not to mention facilities like Ehra-Lessien which Porsche effectively owns through its 50+ percent stake in the Volkswagen Group.

Porsche also has a number of customer experience centers opening at tracks around the world - including LA, Atlanta, Silverstone and Le Mans - and given the new acquisition, we wouldn't be surprised to see it set one up at Kyalami as well.

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VW's Winterkorn tells 20,000 staffers of big cost-cutting plans

07/25/2014   [Original: Autoblog]
Category: Volkswagen, Earnings/Financials

Germany Earns Volkswagen

During a gathering of 20,000 Volkswagen Group employees at company headquarters in Wolfsburg, Germany on Wednesday, CEO Martin Winterkorn dropped a bombshell. The boss stated that the automaker isn't operating efficiently enough and admitted the company needs to radically start cutting back to raise its profit margins. To right the ship, Winterkorn has proposed killing off less profitable models and spending less on research and development.

According to Reuters, Winterkorn wants to raise the VW brand's profit margin from about 2.9 percent in 2013 to a target of 6 percent. To make that possible, his plan amounts to increasing cost cutting until Volkswagen reaches about 5 billion euros ($6.7 billion) per year to get things back in order. "Over the short-term, we urgently need more efficiency and higher profit," the CEO said during his speech, according to Reuters.

However, Winterkorn can't make these decisions unilaterally. Volkswagen's works council also has a seat on the supervisory board to represent laborers, and it isn't likely to take the proposed cuts sitting down.

Winterkorn's plan is especially interesting because the Volkswagen Group is going gangbusters worldwide, even if it's not meeting expectations here in North America. In the first quarter, it posted the equivalent of over $3 billion in global profits after taxes, and the group is aiming to meet its 10-million vehicle sales goal in 2014, four years early. Contrast that to the problems of the VW brand that saw its Q1 operating profits fall to around 440 million euro ($592 million), compared to about 590 million euro ($794 million) in the same quarter for the previous year. At the time, the automaker attributed the lower figure to falling sales, like in North and South America, poor exchange rates and higher investments in technology.

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Ford books $2.6B pretax quarterly profit

07/24/2014   [Original: Autoblog]
Category: Ford, Earnings/Financials

Earns Ford

While its crosstown competitors at General Motors are smarting over a drastic drop in net income to $200 million in the second quarter, Ford has reason to celebrate. The Blue Oval has announced its own Q2 financial results, including a growing net income of $1.3 billion, a $78 million increase over last year. Pretax profits for the company reached $2.6 billion, up $44 million from 2013, but total revenue dropped slightly to $37.4 billion, down from $37.9 billion. Profits per share before one-time charges totaled 40 cents per share, beating Wall Street analysts' expectations of 36 cents a share.

Regionally, the Blue Oval performed strongly, as well. North America posted a record quarterly pre-tax profit of $2.4 billion, a $119 million increase. Europe also showed signs of turn around with its first profit in three years of $14 million after a loss of $306 million in Q2 2013. Ford is actually predicting profitability in the troubled region in 2015. Asia Pacific operations also performed well with $159 million in profits, up $29 million from last year. The only region where the business posted a loss was South America.

According to Automotive News, Ford also announced more precise plans about the changeover to build the aluminum-intensive 2015 F-150. In August, the Dearborn plant will shutdown for eight weeks to retool and its Kansas City plant will do the same next year.

For the end of the year, Ford predicts it's on track to meet its pretax goal of a profit between $7 and $8 billion. You can read the entire financial announcement in PDF format, here.

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GM quarterly earnings tank due to recall costs

07/24/2014   [Original: Autoblog]
Category: GM, Earnings/Financials

US-DETROIT-AUTO-SHOW

Given General Motors' steady stream of recalls this year (including a single day with around 8.4 million vehicles needing repair), it's not a huge surprise that the cost to deal with all of the problems will be high. However, few analysts expected the tab to be this steep. In the General's just-announced second-quarter financial filing, it revealed that net income for the quarter was just $200 million, compared to 1.2 billion in Q2 2013 - a drop of over 80 percent. To put this in proper perspective, though, that figure is still up from the $100-million income booked from the first quarter of 2014.

The cause of the sharp descent was not only the recalls themselves, but other costs related to them, as well. According to the report, GM paid out $1.2 billion in recall-related repairs during the quarter. The company had to set aside $400 million for ignition-switch compensation, an amount it admits is an estimate that may need to be raised by an additional $200 million in the future. To prepare for possible future campaigns, the automaker also took a charge of around $900 million to be ready to pay for them.

Earnings before interest and tax also fell to $1.4 billion, compared to $2.3 billion in the same quarter of 2013. However, net revenue was up slightly to $39.6 billion, compared to $39.1 billion in the previous comparable quarter, and revenue was also up through the first six months of the year.

CEO Mary Barra put a positive spin on the tepid results, saying, "Our underlying business performance in the first half of the year was strong as we grew our revenue on improved pricing and solid new vehicle launches," she said in the company's announcement. Scroll down to read the entire release, including a table comparing Q2 2014 to 2013.

Continue reading GM quarterly earnings tank due to recall costs

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Maserati to cap output at 75,000 cars

07/18/2014   [Original: Autoblog]
Category: Sports/GTs, Maserati, Earnings/Financials, Luxury

2014 Maserati Ghibli

Maserati appears set to take a page out of corporate sibling Ferrari's playbook with the possibility that it may cap global annual output in the coming years. Ferrari announced in 2013 that it would limit itself to 7,000 vehicles a year to maintain exclusivity, and so far, it has stuck to the plan.

According to an unnamed Maserati executive speaking to Reuters, the Italian luxury car maker wants to cap its sales to 75,000 vehicles a year. However, it's hardly there yet. The company doesn't forecast reaching that production benchmark until 2018.

Dave Sullivan, an auto industry analyst for AutoPacific, thinks that limiting sales could be a smart move for Maserati. "If it is profitable at 75,000 and doesn't require a significant investment in capacity to get there, this appears to be sound," he said to Autoblog via email. "Alfa Romeo is intended to be the volume brand and by capping Maserati, it means that even if you opted to buy the 'entry level' Ghibli, you still have a level of exclusivity."

Maserati is on a spectacular growth path at the moment. After selling just 15,400 cars in 2013, sales are on track to at least double this year. Getting more units out the door should be helped by the brand's expanded model lineup, too. It plans to add the Levante crossover in 2015, a production version of its Alfieri Concept in 2016, a convertible version of it in 2017 and a replacement for the aging GranTurismo in 2018. For now, though, the still-new Quattroporte and Ghibli are making lots of friends.

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