The Truth About Cars » High Finance http://www.thetruthaboutcars.com The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Wed, 23 Apr 2014 11:48:14 +0000 en-US hourly 1 http://wordpress.org/?v=3.8.1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars editors@ttac.com editors@ttac.com (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » High Finance http://www.thetruthaboutcars.com/wp-content/themes/ttac-theme/images/logo.gif http://www.thetruthaboutcars.com/category/news-blog/high-finance/ Automakers, Dealers Prepare For 2016 Off-Lease Market Flood http://www.thetruthaboutcars.com/2014/04/automakers-dealers-prepare-for-2016-off-lease-market-flood/ http://www.thetruthaboutcars.com/2014/04/automakers-dealers-prepare-for-2016-off-lease-market-flood/#comments Tue, 22 Apr 2014 13:30:50 +0000 http://www.thetruthaboutcars.com/?p=807362 Used cars

Currently, around 2.13 million cars will come off-lease by the end of 2014, up from 1.7 million last year. By 2016 and beyond, however, over 3 million vehicles annually will turn up on many a CPO and used car lot, replacing a long drought with an El Niño-esque flooding of the U.S. used car market.

Automotive News reports the predicted rise in off-lease vehicles, though a boon for used-car dealers and their customers, will slam new-car buyers come trade-in time, as lower prices for used means lower value for those trading their vehicles for a new experience in the showroom floor. Rising interest rates and lease payments to make up for lower used pricing will also add pain to a new-car buyer’s wallet come 2016.

As for automakers and dealers, both parties are preparing the flood with various strategies being put together, such as Volkswagen’s partnership with DealerMatch — allowing VW dealers to buy and sell as many used vehicles as desired for a flat monthly fee, in lieu of the auction lot’s per-vehicle rate — and workshops designed to optimize CPO sales among dealers and sales representatives.

That said, some automakers and dealers may still find themselves overwhelmed by the coming tsunami due to leasing more vehicles than are sold. Edmunds.com senior analyst Jessica Caldwell says leases accounted for 26 percent of all new sales in the U.S. last year, while 28 percent of sales in Q1 2014 were leases. The increase in leases is aided by easy credit, rising residual values and record-low interest rates, and serves as a marketing tool to build customer loyalty through repeat visits as each lease agreement draws to a close.

The last time over 3 million vehicles came off-lease was in 2002, when 3.4 million returned to the used-car lot before slowly coasting downward to a low of 1.56 million a decade later.

]]>
http://www.thetruthaboutcars.com/2014/04/automakers-dealers-prepare-for-2016-off-lease-market-flood/feed/ 23
Ally IPO Brings New Subprime Lending Options To The Table http://www.thetruthaboutcars.com/2014/04/ally-ipo-brings-new-subprime-lending-options-to-the-table/ http://www.thetruthaboutcars.com/2014/04/ally-ipo-brings-new-subprime-lending-options-to-the-table/#comments Tue, 22 Apr 2014 13:15:43 +0000 http://www.thetruthaboutcars.com/?p=807346 Ally_Financial

With Ally Financial’s IPO now making the rounds on the New York Stock Exchange, the former financing arm of General Motors has its eyes on taking more of the subprime market, a move benefiting dealers once the last ties to the U.S. federal government have been severed and sold to the stock market.

Automotive News reports Ally is moving forward with plans to lower cost of funds by paying off older high-interest debt, as well as issuing the IPO that would allow the U.S. Treasury to sell its remaining 17 percent ownership in the automotive lending company in the near future, having already sold 95 million shares for $2.4 billion through the IPO early this month.

In turn, Ally would be able to use bank deposits to fund “near prime” consumers — those with credit scores between 620 and 660 — in financing new car leases and purchases. Currently, the lender holds 11 percent of its portfolio in subprime lending, though the percentage was obtained through more expensive funding sources.

Once bank deposits are made available, however, the increased lineup of options for Ally would provide more flexibility for gaining more share in the subprime market, a strategy CEO Michael Carpenter says is “dealer-centric.”

]]>
http://www.thetruthaboutcars.com/2014/04/ally-ipo-brings-new-subprime-lending-options-to-the-table/feed/ 2
AutoNation Parts Ways With Third-Party Lead Providers, Pursues Own Online Project http://www.thetruthaboutcars.com/2014/04/autonation-part-ways-with-third-party-lead-providers-pursues-own-online-project/ http://www.thetruthaboutcars.com/2014/04/autonation-part-ways-with-third-party-lead-providers-pursues-own-online-project/#comments Mon, 21 Apr 2014 13:00:41 +0000 http://www.thetruthaboutcars.com/?p=806306 autonation-inc-logo

In its pursuit of establishing an online store where shoppers can do (almost) everything related to the car-buying experience, AutoNation Inc. announced last week it would no longer use third-party lead providers, focusing instead on its own online plans.

Automotive News reports the move is related partly to rising costs, whose savings will be invested toward AutoNation’s online storefront as laid out in the announcement by CEO Mike Jackson:

We’re really looking at the whole spectrum of how we interact with our customers. We’re also going to be looking to broaden the brand attributes of AutoNation and move into different business fields with branded products from AutoNation, whether that’s service contracts, warranty contracts. We’re full of ideas.

The project, launched in 2012, aims to make shopping for a new car at any of its 229 branded dealerships as seamless as possible, from making the purchase at home, to finalizing financing et al the next day. $100 million will be invested into the project over the next several years, with the bare-bones version of AutoNation’s storefront opening for business in December 2014.

]]>
http://www.thetruthaboutcars.com/2014/04/autonation-part-ways-with-third-party-lead-providers-pursues-own-online-project/feed/ 9
Dealers Still Waiting For Replacements, DeGiorgio Linked To Original Design And Upgrade http://www.thetruthaboutcars.com/2014/04/dealers-still-waiting-for-replacements-degiorgio-linked-to-original-design-and-upgrade/ http://www.thetruthaboutcars.com/2014/04/dealers-still-waiting-for-replacements-degiorgio-linked-to-original-design-and-upgrade/#comments Mon, 14 Apr 2014 14:00:51 +0000 http://www.thetruthaboutcars.com/?p=797362 GM ignition diagram

Automotive News reports dealers are still waiting for the ignition switches meant to replace the out-of-spec switch at the center of the ongoing recall crisis at General Motors. The switch was to have arrived at dealerships beginning this week, yet most dealers are in a “holding pattern” on deliveries. Once the parts do arrive, service bays will begin work on affected customer vehicles immediately before turning toward the used lot, where vehicles under the recall are currently parked until the customer vehicles are fixed.

As for GM seeking help from NASA with its woes, however, The Detroit Bureau learned from NASA Deputy Associate Administrator for Communications Bob Jacobs that his employer “is not working with General Motors on its ignition switch issue”; a separate source claimed “low-level” discussions between the two were taking place, but hasn’t gone any further thus far. He added that while NASA would be more than willing to help GM, a formal request would require some coordination between the agency and both the National Highway Traffic Safety Administration and the Justice Department so as to not interfere “with their own, ongoing investigations of the GM ignition switch recall.”

Speaking of the Justice Department, Reuters says five senators, including Richard Blumenthal of Connecticut and Barbara Boxer of California, penned a letter asking Attorney General Eric Holder to “intervene in pending civil actions to oppose any action by GM to deny responsibility for damages”:

We write to request your immediate intervention and assistance on behalf of victims of severe damage – financial harm, physical injury, and death – resulting from serious ignition switch defects in General Motors (‘GM’) cars.

The aforementioned actions may be in reference to the liability shield erected upon the automaker’s 2009 exit from Chapter 11 bankruptcy, where “New GM” is only responsible for the claims linked to the switch from June 2009 forward.

That division within the company may be more of a thin line than a 4-inch-thick steel plate, however, as Autoblog reports an investigation by the House Energy and Commerce Committee uncovered an email exchange between the NHTSA and GM last July to discuss the latter’s “indifferent attitude toward safety issues” face-to-face. The agency cited the automaker’s slow response to urgent matters and preference toward regional recalls over full recalls as two examples of GM not having changed much since leaving bankruptcy.

Bloomberg adds the agency itself didn’t do enough to take GM to task on its attitude toward safety, though, based on a memo unearthed by the committee regarding airbag failures on a number of Chevrolet Cobalts and Saturn Ions with warranty claims being four times’ higher than similar competitors. The decision to investigate those claims was rejected by a review group within the NHTSA, believing the airbag issue “did not stand out” among other incidences of failure.

Automotive News reports the committee also found an email chain that ties GM engineer Ray DeGiorgio — who denied having knowledge of the April 2006 change to the ignition without a change to the part number — with said change. In short: DeGiorgio signed-off on both changes to the spring and plunger to help prevent the slipping issue now linked to 13 fatalities and 33 accidents, as well as on the decision to retain the original number issued to the part he designed for the Saturn Ion as his first project for GM in 2001.

Regarding the Ion, Reuters says the troubled development of the compact vehicle — and the equally troubled relationship between GM and supplier Delphi — may have laid the groundwork for the current recall crisis. The supplier alerted the automaker about the out-of-spec switch, but fearing an embarrassing introduction, money issues, and the possible wrath of then-vice chairman of product development Bob Lutz, GM pressed ahead with the switch as-is.

 

]]>
http://www.thetruthaboutcars.com/2014/04/dealers-still-waiting-for-replacements-degiorgio-linked-to-original-design-and-upgrade/feed/ 21
GM Seeks Aid From NASA, Issues New Ignition-Related Recall http://www.thetruthaboutcars.com/2014/04/gm-seeks-aid-from-nasa-issues-new-ignition-related-recall/ http://www.thetruthaboutcars.com/2014/04/gm-seeks-aid-from-nasa-issues-new-ignition-related-recall/#comments Fri, 11 Apr 2014 09:00:47 +0000 http://www.thetruthaboutcars.com/?p=793690 gm-headquarters-logo-opt

Autoblog reports 2.19 million of the same vehicles under the current General Motors ignition recall are under a new ignition-related recall, as well. The new recall warns of a problem where the key can be removed without the switch moved to the “off” position. According to GM, the automaker is aware of “several hundred” complaints and at least one roll-away accident resulting in injury, and is instructing affected consumers to place their vehicles in park or, in manuals, engage the emergency brake before removing the key from the ignition until repairs are made.

Regarding the original recall, The Detroit News reports has called upon NASA’s Engineering & Safety Center to review whether or not the 2.6 million affected Chevrolets, Pontiacs and Saturns are safe to drive with just the ignition key in position. The agency, which has performed similar reviews in the past, will look over the work performed by the automaker in the latter’s effort to make the affected vehicles safe to drive, as well as review its overall approach to safety concerns.

On the financial front, Automotive News says GM will take a $1.3 billion charge in Q1 2014 for the original recall, 40 percent greater than the $750 million charge originally estimated at the end of last month. The charge — which includes repair costs and loaners for affected owners — comes on the heels of a $400 million charge tied to currency challenges in Venezuela, the total sum of which threatens to knock out most if not all of the automaker’s Q1 2014 earnings set to be announced toward of end of this month.

Meanwhile, The Detroit News reports Michael Carpenter, the CEO of former GM financial arm Ally Financial, says his company will complete its exit from government ownership by Election Day of this year:

The U.S. Treasury is quite happy today. My own view is they will definitely be out before the election and we are close to having Treasury and U.S. government ownership in the rearview mirror.

By the end of trading Thursday, Ally’s IPO netted taxpayers $17.7 billion with a profit of $500 million on the $17.2 billion bailout of the consumer finance company, while the Treasury currently holds 17 percent of its remaining shares after selling 95 million for $25 per share at the opening bell; share price fell 4.4 percent to $23.50 at the closing bell.

In lawsuit news, Automotive News reports GM settled with the families of two Saturn Ion drivers who lost their lives in 2004 when their respective cars’ airbags failed to deploy. The two fatalities were identified by the publication as the earliest of 13 linked to the out-of-spec ignition switch at the root of the current recall crisis. In addition, while one case was settled out-of-court in September of 2007, the second case drew its settlement terms after the automaker filed for bankruptcy in June of 2009, placing the plaintiffs and their lawyer with other unsecured creditors.

The Detroit News reports Cadillac and Buick are at the top of their respective lists for dealer service satisfaction as determined by the J.D. Power & Associates U.S. Customer Service Index Study. Cadillac’s dominance over the luxury brand category comes as former No. 1 Lexus — who held the top spot for five consecutive years — falls to third behind Audi, while Buick leads Volkswagen, GMC, Mini and Chevrolet in the mass-market brand category.

Finally, Autoblog reports the last of eight Corvettes swallowed by the sinkhole that formed inside the National Corvette Museum in Bowling Green, Ky. back in February has been recovered. The 2001 Corvette Mallett Hammer Z06 will need extensive work performed to bring it back to its original state, but not before it joins its brethren in a new exhibit entitled “Great 8″ beginning next week. The exhibit will last until the museum’s 20th anniversary in late August, at which point GM will begin restoration work on the eight Corvettes.

]]>
http://www.thetruthaboutcars.com/2014/04/gm-seeks-aid-from-nasa-issues-new-ignition-related-recall/feed/ 13
GM Fined $28k By NHTSA, Places 2 Engineers On Paid Leave http://www.thetruthaboutcars.com/2014/04/gm-fined-28k-by-nhtsa-places-2-engineers-on-paid-leave/ http://www.thetruthaboutcars.com/2014/04/gm-fined-28k-by-nhtsa-places-2-engineers-on-paid-leave/#comments Thu, 10 Apr 2014 14:56:25 +0000 http://www.thetruthaboutcars.com/?p=793305 Rencen. Picture courtesy GM

Associated Press reports General Motors has placed two engineers on paid leave as “an interim step” in the investigation conducted by former U.S. attorney Anton Valukas. Spokesman Greg Martin declined to name the two engineers in question.

The Detroit News reports GM has been fined $28,000 by the National Highway Traffic Safety Administration for failing to answer in full by the April 3, 2014 deadline the 107-question survey sent to the automaker regarding the recall of 2.6 million vehicles with an out-of-spec ignition switch linked to 13 fatalities and 33 accidents. Furthermore, the agency will fine GM $7,000/day so long as the automaker continues to fail to comply with the inquiry in full, and may call in the Justice Department to sue GM for answers and fines.

As for how this came to pass, GM says it couldn’t provide all of the answers as the outside investigation by Valukas had yet to be completed. Meanwhile, spokesman Greg Martin defended the automaker’s response to the survey, citing the millions of related documents already delivered to the NHTSA as proof of compliance.

The agency may not be alone in its dimming view of GM, however, as concerns running through Wall Street have sent price targets of GM stock downward amid gloomy forecasts of rising costs, diminished earnings and other challenges outside of the recall crisis. Analysts for Morgan Stanley and RBC Capital Markets have dropped their target prices of $49 and $47 per share to $33 and $46, respectively, with the former downgrading GM stock to “underweight.”

Without the crisis, however, the automaker still has rough seas ahead after emerging from government ownership, with Wall Street fearing for the long-term future of GM in the face of strengthening Japanese automakers — bolstered by a weakened yen — dependency on its joint ventures in China, problems in Europe and other international markets, and domestic challenges from Ford and Tesla.

In other financial news, Bloomberg reports former GM financial arm Ally Financial’s exit from U.S. Treasury ownership would allow Ally to take on more subprime auto loan borrowers. The finance company currently holds 11 percent of its portfolio in such loans, and at $25/share in its IPO, the $2.83 billion raised would give Ally a boost in attracting more subprime borrowers.

However, both CreditSights Inc. analyst Jesse Rosenthal and independent banking consultant Bert Ely shared concerns regarding the finance company’s reliance on auto loans, especially in the subprime market, citing the lack of diversification other consumer-finance companies or large banks possess in weathering the credit risk subprime auto lending could bring. Bloomberg adds that Ally’s relationship with GM — 39 percent of its lending and leasing portfolio came from the automaker in 2013 — could add an additional risk in light of the latter’s ongoing recall crisis.

Finally, Automotive News presents a history of failure between GM and its suppliers over the functionality of the ignition switch in Chevrolet Cobalts and Saturn Ions, leading to numerous changes, complaints, claims and, a decade later, a recall crisis that may bring more pain than the automaker could bear.

The first problem — Ion owners not being able to start their vehicle in cold weather — prompted the 2004 redesign currently linked to the recall, then quietly changed in April 2006 when the second and third problems — Cobalt owners not being able to shut off their vehicle unless they accidentally bumped their knee into the ignition — led to the conclusion by two engineers that the switch was mounted too low, and that it was “falling apart.”

Furthermore, in the deposition given by engineer David Trush in the case regarding the 2010 death of Brooke Melton behind the wheel of her Cobalt, Trush stated GM had its supplier at the time make replacement parts for the first ignition problem alongside a service bulletin asking dealers to install the new part in affected cars; the automaker changed suppliers in 2008, citing deficiencies in quality and production in the former supplier.

Lastly, nearly two years before the recall in April of 2012, GM began offering to replace the switch on 2007 – 2009 Cobalts and Pontiac G5s and 2008 – 2012 HHRs for free, citing a “binding condition” with the cylinder and its housing which could prevent basic functionality of the ignition system.

]]>
http://www.thetruthaboutcars.com/2014/04/gm-fined-28k-by-nhtsa-places-2-engineers-on-paid-leave/feed/ 58
More Trade-Ins Pulled Underwater As Negative Equity Level Rises http://www.thetruthaboutcars.com/2014/04/more-trade-ins-pulled-underwater-as-negative-equity-level-rises/ http://www.thetruthaboutcars.com/2014/04/more-trade-ins-pulled-underwater-as-negative-equity-level-rises/#comments Thu, 10 Apr 2014 13:00:30 +0000 http://www.thetruthaboutcars.com/?p=793233 01-cadillac-dealership4

As more consumers trade-in their old vehicles for a newer model, a growing number of consumers are owing more on their trade-in than their vehicle’s actual worth.

Automotive News reports a gradual rise in negative equity among trade-ins beginning in Q3 2011 according to information from the Power Information Network. At that time, 22 percent of trade-ins were upside down; however, by Q1 2014, the percentage reached 27.3 percent after hitting 25.9 percent and 23.6 percent in the first quarters of 2013 and 2012, respectively.

The cause? Longer loan terms of 73 to 84 months (and now, beyond), increased subprime borrowing, and declining values in the used-car market as negative equity takes hold.

Regarding the aforementioned loan terms, Experian Automotive said the loans were the fastest growing category in Q4 2013 compared to the previous year, taking 20.1 percent of the new-car market and 23 percent of used-car retail volume in comparison to 19 percent and 12.5 percent respectively in Q4 2012. However, PIN senior director Thomas King explained that while 73+-month loans should be watched carefully, the only consumers who suffer from being upside down are those who roll the negative equity in their trade-ins into the next vehicle repeatedly.

]]>
http://www.thetruthaboutcars.com/2014/04/more-trade-ins-pulled-underwater-as-negative-equity-level-rises/feed/ 132
Off-Lease Consumers Add Fuel To New-Vehicle Demand http://www.thetruthaboutcars.com/2014/04/off-lease-consumers-add-fuel-to-new-vehicle-demand/ http://www.thetruthaboutcars.com/2014/04/off-lease-consumers-add-fuel-to-new-vehicle-demand/#comments Wed, 09 Apr 2014 14:15:54 +0000 http://www.thetruthaboutcars.com/?p=791313 Cadillac-Pre-owned

New-vehicle sales are on the rise due not only to demand originally held back by the Great Recession, but by consumers coming off of their leases for their next latest and greatest.

Automotive News reports Manheim Auctions chief economist Tom Webb proclaimed that off-lease volume will be on par with new-vehicle sales throughout 2014 before surpassing sales the following year and into 2016, forecasting over 3 million new leases signed in that year alone:

If you consider that new vehicles are increasingly being bought by high-income households that do, in fact, want to trade on a regular cycle, then they should be in a lease, not a retail contract.

Webb added that since residual risk “always has to reside somewhere,” the perfect place for such risk would be none other than the lessor “who has a portfolio of vehicles and hopefully also has a professional remarketing arm.”

Speaking of remarketing, Webb says the certified pre-owned market is in good health, with sales of CPO vehicles outpacing the off-lease market for the third consecutive year in 2014, with the latter providing the foundation stones for the former.

]]>
http://www.thetruthaboutcars.com/2014/04/off-lease-consumers-add-fuel-to-new-vehicle-demand/feed/ 29
GM Invests $449M Into Next-Gen Volt Production http://www.thetruthaboutcars.com/2014/04/gm-invests-449m-into-next-gen-volt-production/ http://www.thetruthaboutcars.com/2014/04/gm-invests-449m-into-next-gen-volt-production/#comments Wed, 09 Apr 2014 14:10:01 +0000 http://www.thetruthaboutcars.com/?p=791273 2013 Chevrolet Volt Exterior-001

General Motors announced Tuesday that it would invest $449 million into the two plants responsible for assembling the Chevrolet Volt in preparation for the next generation of the plug-in hybrid’s arrival in 2016.

The Detroit News reports $384 million will immediately go into the Detroit-Hamtramck assembly plant for body shop tooling, equipment and other plant upgrades, while the remaining $65 million heads for the Brownstown Township battery assembly plant for expanded production of GM’s advanced lithium-ion batteries, as well as any future technologies that come down the road. The investments are expected to last for the next two years, and would add 1,400 new jobs to both facilities.

As for what fruit the investment will bear, GM vice president of North American manufacturing Gerald Johnson announced the next generation of the Volt will roll into showrooms in 2016 as a 2016 model, with production slated to begin in the autumn of 2015. Though he didn’t go further into what the new Volt would bring to the table, a number of analysts said the PHEV would likely gain an improvement in range over the 38 miles currently provided in electric-only travel.

Further, two new vehicles will accompany the new Volt within the next couple of years, including the Buick LaCrosse — expected in mid-2016 — and an all-new large Cadillac sedan set to be the brand’s flagship that would begin production around the same time as the next-gen PHEV.

]]>
http://www.thetruthaboutcars.com/2014/04/gm-invests-449m-into-next-gen-volt-production/feed/ 142
GM Dealers Deal With Part Backlog, CEO Asked To Back Rental Car Bill http://www.thetruthaboutcars.com/2014/04/gm-dealers-deal-with-part-backlog-ceo-asked-to-back-rental-car-bill/ http://www.thetruthaboutcars.com/2014/04/gm-dealers-deal-with-part-backlog-ceo-asked-to-back-rental-car-bill/#comments Wed, 09 Apr 2014 14:03:25 +0000 http://www.thetruthaboutcars.com/?p=791337 ChevyDealership03.jpg

Automotive News reports the repairs of some 2.6 million vehicles affected by the 2014 General Motors ignition switch recall will be delayed by one week as the needed part slowly enters into the automaker’s dealership network. Though most dealers thought they would be receiving the part Monday, GM spokesman Kevin Kelly insisted the part was set to arrive sometime during “the week of April 7″:

We plan to send letters this week informing affected customers that parts are arriving at dealerships and to schedule a service appointment with their dealer. Repairs are likely to begin to follow soon after the customer letter mailing.

Until then, dealerships may face service backlogs, especially with affected vehicles already on the lot that cannot be sold until they are repaired, which can only happen once customer vehicles go through the 30-minute swap. On the other hand, while dealers have noticed some frustration from their customers, the majority of their base was found to be patient with the status of the repair plan.

Over in Washington, D.C., The Detroit Press reports Senator Barbara Boxer of California sent a letter to GM CEO Mary Barra asking her to back a bill that would keep recalled rental cars under recall off of the road. The bill would require affected rentals to be grounded within 24 to 48 hours upon receipt of a safety recall notice, as well as establish a temporary protocol evaluating safety risk if parts are not available right away, and allow the National Highway Traffic Safety Administration the oversight to investigate rental company safety practices for the first time.

Though the bill — named after two sisters who lost their lives in 2004 when their rental car caught fire and crashed into a truck — has seen support by rental companies, the Alliance of Automobile Manufacturers — where GM is a member — has stymied the legislation out of a fear that automakers would be forced to fix rental fleets first before individual-owned vehicles, as well as potential lawsuits from the rental companies over lost revenues.

Detroit Free Press reports the NHTSA is calling upon engineers to be the agency’s eyes and ears in the battle against defects like the one linked to the current recall crisis. Lead attorney Kevin Vincent laid his case out before attendees of this year’s SAE World Congress:

Each manufacturer is actually responsible for identifying defects… and promptly reporting those defects to NHTSA. The message I have delivered to senior lawyers at the automakers is that they need to have practices and procedures in place so that when they find a problem, they will respond.

The first line of defense against safety defects is not my agency — not NHTSA. You are truly the first line of defense… to prevent safety defects from reaching the American public.

The safety agency has been taken to task as of late regarding the GM recall as well as those related to Jeep, and has been asked by the Center for Auto Safety to investigate an airbag deployment issue with 2003 through 2010 Chevrolet Impalas.

Automotive News says the 2014 Chevrolet Equinox and its GMC Terrain twin both received a top safety pick+ award from the Insurance Institute for Highway Safety in surviving the group’s new small-overlap crash test designed for midsize SUVs. The results were linked to improvements in the front structure and door-hinge pillars.

Finally, The Detroit News reports GM will pay a dividend of 30 cents per share for Q2 2014 on June 26 to all shareholders of record as of June 10. The dividend is the second consecutive payment made by the automaker to shareholders — the first, worth 30 cents/share for Q1 2014 earnings, was paid last month — and will cost $1.8 billion annually.

]]>
http://www.thetruthaboutcars.com/2014/04/gm-dealers-deal-with-part-backlog-ceo-asked-to-back-rental-car-bill/feed/ 12
Ally Financial Files IPO, US Treasury Sells More Shares http://www.thetruthaboutcars.com/2014/03/ally-financial-files-ipo-us-treasury-sells-more-shares/ http://www.thetruthaboutcars.com/2014/03/ally-financial-files-ipo-us-treasury-sells-more-shares/#comments Fri, 28 Mar 2014 13:04:58 +0000 http://www.thetruthaboutcars.com/?p=782833 Ally_Financial

Three years in the making, Ally Financial — formerly GMAC — has filed for an IPO that could net as much as $2.7 billion for the United States Treasury.

Bloomberg reports the income generated from the IPO — expected to be priced between $25 and $28 when the offering debuts April 9 — will go directly to the Treasury upon selling 95 million shares of the financial company, according to a filing with the Securities and Exchange Commission this week.

Ally originally intended to go public at this time in 2011, but shelved the plans in order to set the stage for its mortgage arm, Residential Capital LLC, to enter into bankruptcy, which Automotive News says was not formalized until late last yearm at the same time General Motors sold their remaining 8.5 percent stake in Ally.

After the dust settles, the Treasury will still have anywhere between 14 percent to 17 percent ownership, down from the 37 percent stake the agency currently owns. For their part, Ally has repaid $15.3 billion — or 89 percent — in TARP funds to the federal government.

]]>
http://www.thetruthaboutcars.com/2014/03/ally-financial-files-ipo-us-treasury-sells-more-shares/feed/ 37
NADA, House Committee Press CFPB On Lending Rules http://www.thetruthaboutcars.com/2014/03/nada-house-committee-press-cfpb-on-lending-rules/ http://www.thetruthaboutcars.com/2014/03/nada-house-committee-press-cfpb-on-lending-rules/#comments Thu, 20 Mar 2014 09:00:25 +0000 http://www.thetruthaboutcars.com/?p=776401 CFPB

Uncertainty on auto lending rules resulting from the Consumer Financial Protection Bureau’s methodology behind consent orders issued to lenders found overcharging or otherwise misleading minority borrowers has prompted calls from the National Automobile Dealers Association and the House Financial Services Committee for a detailed explanation from the bureau on said methodology.

Automotive News reports complaints made by NADA, the U.S. Chamber of Commerce, the auto finance industry and Congress regarding the CFPB’s enforcement of consumer protections, all citing a lack of clarity behind the enforcement, as NADA general counsel Andy Koblenz explained during a panel discussion at a conference held this week by the U.S. Chamber:

It’s almost like the cop standing by the side of the road, pulling people over for speeding. Someone says, “OK, I want to comply. What’s the speed limit?” And they say, “I’m not going to tell you. After the fact, I’ll look back and I’ll tell you whether you were speeding.” That’s not fair, and it’s ultimately going to drive credit out of the market.

In 2013, the bureau issued guidance upon findings of dealerships charging minority consumers higher dealer reserve than other similar borrowers, proclaiming the action a “disparate impact,” and thus, illegal discrimination.

The specific charge prompted the House Financial Services Committee to send a letter to CFPB director Richard Cordray requesting a thorough explanation on the bureau’s methodology for determining an occurrence of disparate impact, with answers due no later than March 13; the deadline passed with no response, and a subpoena may soon follow.

In defense, CFPB deputy director Steve Antonakes said the bureau has, and intends to use in full, five regulatory tools in fighting disparate impacts: rulemaking; consumer complaints; supervision and examination; enforcement; and consumer education. Further, the bureau itself has said in the past it has used proxies in determining legally protected classes in lending.

However, Capital One chief counsel Andy Navarette — whose employer refunded $140 million for alleged misleading marketing involving product add-ons for credit cards after the bureau issued a consent order to the lender — would like to see the CFPB make “a broader use of the rulemaking tool” in future decisions related to auto lending:

You have 5,000 auto lenders in this country. Tackling individual institutions via supervision or enforcement may change behaviors at those individual companies. But it’s not going to move markets in a way that actually produces consistent rules of the road for the industry.

]]>
http://www.thetruthaboutcars.com/2014/03/nada-house-committee-press-cfpb-on-lending-rules/feed/ 3
Akerson Named Vice Chairman Of Carlyle Group Board Of Directors http://www.thetruthaboutcars.com/2014/03/akerson-named-vice-chairman-of-carlyle-group-board-of-directors/ http://www.thetruthaboutcars.com/2014/03/akerson-named-vice-chairman-of-carlyle-group-board-of-directors/#comments Mon, 17 Mar 2014 12:08:38 +0000 http://www.thetruthaboutcars.com/?p=773865 Dan Akerson - Picture courtesy Astroman.com.pl

Former General Motors CEO Dan Akerson has been named Vice Chairman to the private-equity firm Carlyle Group’s board of directors, where he will act as special adviser to the firm’s investment teams, managment and the board itself.

Bloomberg reports Akerson returned to Carlyle March 1, having headed the firm’s global buyouts and co-headed the U.S. buyouts divisions prior to steering General Motors out of bankruptcy beginning in 2009. His history with the company goes back to the 1980s when Akerson was both COO and president of MCI; one of the firm’s co-founders, William Conway, was CFO at the telecommunications company.

Carlyle board chairman and co-founder Daniel D’Aniello believes Akerson’s return will prove beneficial overall to the firm:

His remarkable depth of leadership experience will be a great asset to the board and our investment teams.

Carlyle oversees $189 billion in assets, conducting leveraged buyouts in telecommunications, transportation, and health care industries among others. The firm also oversees real estate, credit and hedge funds.

]]>
http://www.thetruthaboutcars.com/2014/03/akerson-named-vice-chairman-of-carlyle-group-board-of-directors/feed/ 12
Average Car Price Affordable Only To Washington, DC Customers http://www.thetruthaboutcars.com/2014/03/average-car-price-affordable-only-to-washington-dc-customers/ http://www.thetruthaboutcars.com/2014/03/average-car-price-affordable-only-to-washington-dc-customers/#comments Fri, 14 Mar 2014 11:37:39 +0000 http://www.thetruthaboutcars.com/?p=771290 1000px-Capital_Beltway_Map_Color.svg

Unlike the average Beltway insider, a report by Interest.com claims the majority of medium-income American households in 24 of 25 cities studied cannot afford the average new-car price of $32,086.

AOL Autos reports the study focused on each city’s median income in relation to the new-car price average as pegged by Kelley Blue Book. Said price was broken down to monthly payments of $633 per month for 48 months with 20 percent down while interest, insurance and principal exceeded no more than 10 percent of the household’s gross income.

The only city out of 25 to pull off the feat? Washington, D.C., whose residents can afford the average of $32,531 on a new car, broken down to 48 monthly payments of $641. San Francisco and Boston trailed the nation’s capital, while everyone else in the remaining cities were paying too much for their new car, according to Interest.com managing editor Mike Sante:

Too many families are spending way too much on new cars and trucks. Just because you can manage the monthly payment doesn’t mean you should let a $30,000 or $40,000 ride gobble up such a huge share of your paycheck.

Experts recommend spending up 20 percent of take-home pay on a vehicle purchase and subsequent payments.

]]>
http://www.thetruthaboutcars.com/2014/03/average-car-price-affordable-only-to-washington-dc-customers/feed/ 266
Yajnik: Loan Delinquency Increase A Return To “Norm” http://www.thetruthaboutcars.com/2014/03/yajnik-loan-delinquency-increase-a-return-to-norm/ http://www.thetruthaboutcars.com/2014/03/yajnik-loan-delinquency-increase-a-return-to-norm/#comments Thu, 13 Mar 2014 12:34:39 +0000 http://www.thetruthaboutcars.com/?p=771001 Sanjiv Yajnik

As fears of increasing auto loan delinquencies are giving some lenders pause, Capital One Auto Finance president of financial services Sanjiv Yajnik calls said increase a return to “norm,” with pent-up demand and greater competition will maintain availability of credit.

Automotive News interviewed Yajnik last week about the state of auto loans, beginning with a recent statement made by Capital One CEO Richard Fairbank about how lending had experienced a “once in a lifetime” period of growth prior to the start of the Great Recession. He explained the resulting downturn led to a higher quality of lending due to both lenders and consumers becoming more conservative, prompting “very low losses and good returns” that are continuing to this day for the most part:

Now as we come out of the downturn, conditions are becoming more normal. Some consumers are coming to the high side of what they should be borrowing. Private equity-funded lenders and other lenders are coming back to autos. Some lenders are developing habits in loan amounts and loan approvals that mean one has to be discerning in what loans you approve. It’s not the volume of loans; it’s the quality.

Yajnik goes on to state that while auto lending continues to increase overall, top-line growth is still in the offing. He also cautioned lenders to “be careful with maintaining the right customers with the right cars,” and to take “the high road” when lending, lest a repeat of 2008 occurs.

]]>
http://www.thetruthaboutcars.com/2014/03/yajnik-loan-delinquency-increase-a-return-to-norm/feed/ 29
Tax Refunds, Easy Credit Boost Used Car Prices http://www.thetruthaboutcars.com/2014/03/tax-refunds-easy-credit-boost-used-car-prices/ http://www.thetruthaboutcars.com/2014/03/tax-refunds-easy-credit-boost-used-car-prices/#comments Mon, 10 Mar 2014 13:42:53 +0000 http://www.thetruthaboutcars.com/?p=768770 145640_cars_KJH_

A combination of income tax refunds issued in January and February with accessible financing have boosted used-car prices overall in the first two months of 2014.

Automotive News reports prices rose 1.1 percent year to date, and 0.8 percent over the past month, according to the Manheim Used Vehicle Value Index. Meanwhile, the IRS processed 40.4 million returns in the first two months of the year, refunding $125.8 billion to taxpayers at an average of $3,112, which helped in propping up wholesale used vehicle prices.

Easy credit with attractive terms also aided used-vehicle pricing, making the market “more profitable than the underlying unit sale numbers would suggest” according to Manheim.

Overall sales fell 1 percent from the previous year, and 12 percent from January to 2.05 million units, with used compact cars falling the hardest at 3 percent from last year due to heavy supply and competition from newer vehicles. Used truck sales rose 8 percent in the same period due to high demand and low inventories.

]]>
http://www.thetruthaboutcars.com/2014/03/tax-refunds-easy-credit-boost-used-car-prices/feed/ 43
Booming Van Sales Driven By Small Business http://www.thetruthaboutcars.com/2014/02/booming-van-sales-driven-by-small-business/ http://www.thetruthaboutcars.com/2014/02/booming-van-sales-driven-by-small-business/#comments Fri, 28 Feb 2014 15:25:16 +0000 http://www.thetruthaboutcars.com/?p=757265 Florist Vans

In a sign the broader economy is on an upswing, small business owners who use commercial vans in their business are replacing their aging equipment with new vans, fueling a boom not seen since the start of the Great Recession.

USA Today reports as small businesses begin to invest in their companies once more — and with borrowing on the rise with loosened credit now available — commercial van sales rose to over 40 percent since 2010. The winter weather failed to put a dent in sales, rising 9 percent in January as auto sales fell 3 percent in the same period. IHS Automotive, in particular, expects sales to grow 27 percent overall between 2013 and 2015, with over 400,000 units leaving the lot for the wrap shop annually.

Though the commercial van market has been dominated by Ford, Mercedes-Benz and General Motors, more automakers are entering the market with offerings of their own, such as Nissan’s NV series and Ram’s minivan-based Cargo Van. As a result, total small van sales — such as the Ford Transit Connect and Nissan NV200 — were over 53,000 units in 2013, while 259,000 large vans were sold in the same period.

More vans are expected to enter the market this year, including the Nissan NV200-based Chevrolet City Express and Fiat Doblo-based Ram ProMaster City.

]]>
http://www.thetruthaboutcars.com/2014/02/booming-van-sales-driven-by-small-business/feed/ 45
Tesla Unveils $5 Billion Gigafactory http://www.thetruthaboutcars.com/2014/02/tesla-unveils-5-billion-gigafactory/ http://www.thetruthaboutcars.com/2014/02/tesla-unveils-5-billion-gigafactory/#comments Thu, 27 Feb 2014 15:10:18 +0000 http://www.thetruthaboutcars.com/?p=755721 Tesla Gigafactory

After months of speculation, Tesla drew back the curtain on their most ambitious project to date, the Gigafactory.

Yahoo News reports the Gigafactory’s price tag would total $5 billion, $2 billion of which would directly from Tesla — including a portion from a proposed $1.6 billion convertible note offering that will also be used for future vehicle development — with current partner Panasonic and their partners fronting the remainder of the investment. Interestingly, Morgan Stanley announced it was expecting to collect underwriting fees from the note just one day after also issuing a research memo that called for a doubling of their price target for Tesla shares.

Four sites in Arizona, Nevada, New Mexico and Texas are under final consideration for the site of the Gigafactory, and the finished project will employ 6,500 workers. The first goal for the Gigafactory is to begin construction this year in time to open its doors in 2017 at the same time the low-cost Model E is set to enter showrooms, with battery costs projected to fall 30 percent in the same timeframe. The milestone will be followed by a push to increase cell and pack outputs by 35 and 50 GWh/yr by 2020, where Tesla expects to move 500,000 units a year into showrooms around the world. Despite widespread reports to the contrary, Musk told Bloomberg that Panasonic’s participation “is not 100 percent confirmed“.

]]>
http://www.thetruthaboutcars.com/2014/02/tesla-unveils-5-billion-gigafactory/feed/ 41
Ford Seeks $12 Billion Credit Line Expansion http://www.thetruthaboutcars.com/2014/02/ford-seeks-12-billion-credit-line-expansion/ http://www.thetruthaboutcars.com/2014/02/ford-seeks-12-billion-credit-line-expansion/#comments Thu, 27 Feb 2014 13:55:42 +0000 http://www.thetruthaboutcars.com/?p=756281 Ford Glass House

In anticipation of heavy spending this year and beyond, Ford is seeking a line of credit expansion totaling $12 billion.

Bloomberg reports the line of credit will consist of a $9 billion revolving loan for a term of five years — which can be borrowed again once repaid — augmented by a $3 billion financing pact set to expire within three years of issuance. The Blue Oval may pay 1.5 percentage points for the line expansion, which is more than the three-month LIBOR rate on both items meant to replace a $10.7 billion credit line expiring in 2017.

Funding for the line is being led by JPMorgan Chase, helping to drive the heavy spending Ford anticipates this year as more new models — such as the new Mustang and F-150 — roll off the assembly line.

]]>
http://www.thetruthaboutcars.com/2014/02/ford-seeks-12-billion-credit-line-expansion/feed/ 19
Tesla’s Latest Filing: The Good, The Bad And The EPS http://www.thetruthaboutcars.com/2014/02/teslas-latest-filing-the-good-the-bad-and-the-eps/ http://www.thetruthaboutcars.com/2014/02/teslas-latest-filing-the-good-the-bad-and-the-eps/#comments Thu, 27 Feb 2014 12:00:18 +0000 http://www.thetruthaboutcars.com/?p=755881 nikola-tesla

Tesla’s shares roared to over $250 on Tuesday February 5th, amid release of financial results. Tesla’s 8-K regulatory filing highlights a record 6,892 Model S’s sold, non-GAAP earnings of $46M ($0.33 on a per share basis), and projected vehicle delivery growth of 55% among others. The shares are currently trading just above the $260 during after-hours trading.

Here we find ourselves at yet another quarterly earnings report, and yet again when looking at the GAAP figures, Tesla posts a net loss of about $74 million, and an EPS of -$0.62. Yet another year of losses for Tesla, but the punch line for accounting stiffs like myself seems to be “who cares!”

From this time last year Tesla’s share price has grown over 600% (this time last year, it was trading at $34.38 versus $248 today).[1] For those of you who have consulted my past work for free investment advice in the past, I apologize, but I am quickly learning that a business degree doesn’t turn you into Jordan Belfort overnight. To capture the highlights of Tesla’s recent results I present you with the good, the bad, and the ugly.

The Good

Tesla exhibited strong quarterly sales growth with revenues up by 43%. An even more impressive figure is the fact that Tesla’s revenue grew by 387% from 2012 to 2013 which was a result of the company’s ability to deliver 22,477 vehicles throughout the year.

Tesla was also able to vastly improve its gross margin. In 2012 the company’s gross margin was just over 7%. In 2013 the margin had improved to almost 23%. By contrast, Porsche’s gross margin in 2012 was 37%.[2] Continued growth in gross margin will be a key factor moving forward to improve profitability.

Strong cash flows from operating activities amount to roughly $258 million. This is the first year for Tesla in which it has exhibited positive cash flow from its operating activities. Tesla also has a large cash balance of over $845 million, largely driven from the proceeds of debt and equity financing.

The Bad (aka the not so good)

While I would be hard pressed to call a net loss of $74 million good, there is still some upside when comparing the loss figure to last year’s loss of $396 million. The 82% reduction in net loss and continued upward trend is a definite positive to Tesla’s less than stellar earnings. Sales growth and increased margins will only help to bring Tesla into the black in future.

However, it still seems that operating expenses are getting the best of the company. While in 2012, total operating expenses amounted to 103% of total revenues, they are only 26% in 2013. Despite the reduction, with a gross profit of only $456 million, the related operating expense figure of $517 million is gobbling up what remains of the gross profit. Selling General and Admin expenses increased by 90%, while Research and Development expenses decreased from $274 million to $232 million. As a high growth company that relies on continued innovation for success, it will be interesting to see how the company will manage R&D expenditure in the future. Tesla could find itself in a Catch-22 situation whereby revenues are dependent on new technology, but profits cannot be delivered without a decrease in its cost structure, which includes spending on this precious R&D.

The Ugly

The ugly fact remains that Tesla’s earnings per share is negative $0.62. Based on Tesla’s February 25th closing stock price, its Price to Earnings multiple is negative 400. Simply put, investors are willing to pay $400 for every $1 in losses the company incurs. If I were to get a message in my inbox that told me that a Nigerian Prince was willing to pay me $400 for every dollar of student debt to my name, it would quickly become part of my Happy Hour story-telling repertoire.

Now I understand that the basic fundamentals of valuation are based on a company’s future earnings, and not their past, but I wouldn’t put my precious dollars into a company before I saw some concrete return.



[1] http://ca.finance.yahoo.com/q/hp?s=TSLA

NB: All calculations completed using Tesla’s 8-K and 10K figures

[2] Calculated using: http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2013/03/Porsche_Annual_Report_2012.bin.html/binarystorageitem/file/Porsche-Download_e.pdf pg. 131

Note: Article was ammended due to the reporter mixing the R&D and SG&A numbers.

]]>
http://www.thetruthaboutcars.com/2014/02/teslas-latest-filing-the-good-the-bad-and-the-eps/feed/ 117
UAW Money Woes Worry Detroit Three http://www.thetruthaboutcars.com/2014/02/uaw-money-woes-worry-detroit-three/ http://www.thetruthaboutcars.com/2014/02/uaw-money-woes-worry-detroit-three/#comments Wed, 26 Feb 2014 12:30:03 +0000 http://www.thetruthaboutcars.com/?p=754881 Bob King

With declining membership and fees paired with a defeat in a close election recently held at Volkswagen’s plant in Chattanooga, Tenn., the Detroit Three fear the United Auto Workers not only have no future, but their replacement would bring back the days of turmoil settled over a decade before.

The Detroit Free Press reports the three Detroit automakers worry the UAW could be absorbed by another, more hostile union not as willing to keep labor costs competitive with overseas competitors, as well disrupting the brokered peace which set lower wages for new hires and health care concessions that brought United States production costs on parity with Japan.

Meanwhile, the UAW continues to weaken, as annual dues fell by 40 percent to $115 million over the period between 2006 and 2012 with membership falling by 30 percent to 382,000 in the same period, having peaked at 1.5 million members in 1979. The union’s assets totaled $1 billion in 2012, making the UAW the wealthiest union the U.S., though $300 million in assets were liquidated in the six-year period to pay operating expenses while spending was cut 15 percent; $47 million in assets were sold in the last year alone to balance the union’s budget. Further, with lower wages from new workers unable to fill the coffers fast enough to make up the difference, the UAW may raise dues for the first time in 47 years.

In UAW president Bob King’s view, the union has no future without an organized South, where transplants such as VW and BMW have expanded in the region over the past decade as more and more factories in and around Detroit closed. King’s potential successor, secretary-treasurer Dennis Williams, has vowed to fight on, from higher wages for new hires to more organization battles in the South; the UAW recently filed an appeal with the National Labor Relations Board over the outcome of the Volkswagen vote.

]]>
http://www.thetruthaboutcars.com/2014/02/uaw-money-woes-worry-detroit-three/feed/ 87
Ford Raises Incentives To Clear Growing Fusion Inventories http://www.thetruthaboutcars.com/2014/02/ford-raises-incentives-to-clear-growing-fusion-inventories/ http://www.thetruthaboutcars.com/2014/02/ford-raises-incentives-to-clear-growing-fusion-inventories/#comments Tue, 25 Feb 2014 11:00:34 +0000 http://www.thetruthaboutcars.com/?p=753497 fusion

As inventories of Ford’s Fusion continue to outpace demand — the result of a second plant brought online last year to keep up with demand for the newly redesigned midsize sedan — the automaker has been raising incentives to move more Fusions out of the lot.

Automotive News reports most dealers around the United States are offering potential Fusion owners zero-percent financing for 60 months plus $1,000 cash back, with discounts up to $3,000 available for trade-ins to those who decline the financing; lessees receive no money due at signing with no payment for the first month of the lease.

The incentives — the most generous offered since the Fusion’s new look debuted in 2012 — come as inventories of the midsize sedan climbed to 97 days as of February 1 — up from 84 days in January — while sales of midsize cars overall have declined from a peak of 200,000 since August of last year, with winter weather holding back more sales.

Though Ford is spending $2,900 in incentives on every Fusion — Toyota’s Camry and Nissan’s Altima both hold higher incentives — the automaker’s chief analyst, Erich Merkle, says the car still commands the highest transaction price in the segment, and is confident inventories will thin as winter gives way to spring:

The midsize sedan segment is the most competitive segment in the industry right now. The good thing is average transaction prices are still very healthy.

 

]]>
http://www.thetruthaboutcars.com/2014/02/ford-raises-incentives-to-clear-growing-fusion-inventories/feed/ 99
China To Relax Restrictions On Foreign Joint Venture Ownerships http://www.thetruthaboutcars.com/2014/02/china-to-relax-restrictions-on-foreign-joint-venture-ownerships/ http://www.thetruthaboutcars.com/2014/02/china-to-relax-restrictions-on-foreign-joint-venture-ownerships/#comments Fri, 21 Feb 2014 18:00:41 +0000 http://www.thetruthaboutcars.com/?p=750969

China’s Ministry of Industry and Information Technology, in line with President Xi Jinping’s desire for opening the domestic economy to private and foreign investors, plans to relax restrictions on foreign ownership of joint ventures with local automakers in the face of those warning such a move would be the beginning of the end of the Chinese local auto industry.

Automotive News China reports the organization will join their fellow ministries in developing a plan to implement the proposed deregulation sometime in the future. Currently, foreign companies are mandated to form joint ventures with local companies in order to do business in China, while foreign shareholders are barred from owning more than half of said ventures.

Meanwhile, the China Association of Automobile Manufacturers, representing local interests, voiced their opposition in a statement following the announcement by ministry spokesman Xiao Chunquan:

Relaxing the current foreign ownership restrictions will wipe out Chinese brands. Foreign companies can totally use the competitive advantage of their global supply chains to support a price strategy to kill Chinese brands in the cradle.

The death spiral may have already begun, however, as Chinese consumers opt for foreign makes such as Buick, Volkswagen and Peugeot. Local brands lost 4.9 percent market share in 2013 from the year before, hovering around 38.4 percent as Volkswagen AG became the No. 1 foreign automaker over General Motors during a prosperous run by all foreign manufacturers bolstered by higher industry sales.

]]>
http://www.thetruthaboutcars.com/2014/02/china-to-relax-restrictions-on-foreign-joint-venture-ownerships/feed/ 15
PSA-Dongfeng Deal Backed By EU, Skepticism Remains http://www.thetruthaboutcars.com/2014/02/psa-dongfeng-deal-backed-by-eu-skepticism-remains/ http://www.thetruthaboutcars.com/2014/02/psa-dongfeng-deal-backed-by-eu-skepticism-remains/#comments Fri, 21 Feb 2014 17:00:40 +0000 http://www.thetruthaboutcars.com/?p=751025 Dongfeng Peugeot 308

The PSA Peugeot Citroen-Dongfeng-French government deal agreed upon by the three parties earlier this week received initial backing from the European Union, though skepticism remains as to whether the deal will bring stability to the ailing French automaker.

Bloomberg and Automotive News Europe report French Finance Minister Pierre Moscovici received a letter of initial backing from European Competition Commissioner Joaquin Almunia, confirming the 3 billion-euro deal met “at first glance” European Union rules related to state aid. The EU also approved an earlier 7 billion-euro guarantee to help Peugeot made by the French government via new bonds issued by Banque PSA Finance, which are set to expire next year.

Fellow Minister of Industrial Renewal Arnaud Monteburg, in an interview with France Inter this week, said the deal allows Dongfeng and PSA to use their complimentary strengths in building their respective brands, defending the French government’s decision to sign based on “economic and industrial patriotism”:

PSA is a company with the technology, the marques, but has not been able to grow in Asia, while Dongfeng doesn’t have the technology or the marques, but has the growth in Asia.

Analysts and observers close to the matter remain skeptical of the deal, especially as to whether it would ultimately stabilize Peugeot. GERPISA director Bernard Jullien told French newspaper Les Echos the deal has no precedent, and comes with the potential for instability down the road. Meanwhile, Financial Times voiced a similar concern over how incoming PSA CEO Carlos Tavares will be able to execute his reform plan with a board consisting of Dongfeng, the French government and the already divided Peugeot family.

]]>
http://www.thetruthaboutcars.com/2014/02/psa-dongfeng-deal-backed-by-eu-skepticism-remains/feed/ 4
Tesla Q4 Sees $16 Million In Losses, Annual Revenue Climbs To $2 Billion http://www.thetruthaboutcars.com/2014/02/tesla-q4-fall-16-million-in-losses-annual-revenue-climbs-to-2-billion/ http://www.thetruthaboutcars.com/2014/02/tesla-q4-fall-16-million-in-losses-annual-revenue-climbs-to-2-billion/#comments Thu, 20 Feb 2014 16:30:05 +0000 http://www.thetruthaboutcars.com/?p=749913 tesla-model-s-01

Tesla announced their Q4 2013 earnings saw a total net loss of $16 million while pulling in an annual revenue of $2 billion on the strength of higher sales and more efficient manufacturing methods.

Automotive News reports the luxury EV automaker’s annual loss for 2013 totaled $74 million, while Q4 revenues using GAAP accounting standards were $615 million; non-GAAP revenue for the same period totaled $716 million. Contributions to the fourth quarter revenue stream included $13 million via a powertrain-sharing program with Daimler and Toyota, $15 million in regulatory credits, and $5 million from favorable foreign currency rates.

Tesla’s crystal ball for 2014 sees deliveries climbing to over 35,000 units worldwide through expansions into new markets — including China, Australia and the United Kingdom — production output increasing from 600 to 1,000 units/week, and the introduction of the Model X SUV.

Near-term, deliveries for Q1 2014 are predicted to hit 6,400 units, though production of the Model S will be constrained due to battery-cell supplies. Tesla CEO Elon Musk hopes to remedy the issue in the long-term through his “giga-factory” concept, meant to supply the automaker with lithium-ion packs while protecting it from forces outside of their control.

Finally, Tesla’s assets for the outgoing year were $846 million in cash and $738 million in equipment and property, including a new body-in-white assembly facility that will serve as the starting point for the Model X when units begin to roll off the line early next year.

]]>
http://www.thetruthaboutcars.com/2014/02/tesla-q4-fall-16-million-in-losses-annual-revenue-climbs-to-2-billion/feed/ 121