With a CAW labor contract expected to be announced today, Fiat has confirmed that cars built in Italy will be exported to markets like the United States, as Fiat looks beyond its ailing home market for growth.
Here’s a statement you won’t see at any other automotive outlet – when I hopped out of a 2012 Mercedes CLS and into a 2012 Nissan Versa SL, I felt like I was at home. This has as much to do with my auto journalist salary as it does my love of bargains. As much as I love $50,000 pickups and supercharged sports sedans, my friends and relations rarely ask which AMG product they should buy. Usually, the decision looks a little like the photograph above. Today’s quandary: the 2012 Nissan Versa vs the 2012 Nissan Sentra. Let the games begin.
As the world struggles to come to grips with economic uncertainty, Bertel has been reporting that Japanese automakers are abandoning their homeland for lower-cost production centers overseas. Now, with economic turmoil shifting to Europe, it seems that Fiat could possibly be preparing for a pullback from Italy. Two basic factors are driving Fiat towards reconsidering its global manufacturing footprint: first, its struggles in the European market where margins are slim and dropping, second, its battles with Italian unions. Though Marchionne’s latest comments are ambiguous at best, some see these factors pushing the Italian automaker away from the market that gave it birth.
Toll roads at one point appeared to be unstoppable. Steady growth in traffic yielded rapidly rising profits, especially for pioneers in the field such as Australia’s Macquarie Bank where executives became so rich from deals that included the leasing of US roads that it was dubbed the “millionaires’ factory.” That all changed when the recession took hold and motorists scaled back on the mileage driven each year. Losses began to mount, and as a report released last week by Fitch Ratings argues, the dynamics for tolling may not improve in the near future.
“Fitch tracks data on toll roads, bridges, and tunnels across its ratings portfolio,” Fitch analysts wrote in the report, Downshifting: US Transportation Reacts as GDP Growth Flattens. “Traffic declined year over year as much as 10 percent during the Great Recession. Sustained positive growth in traffic commenced in February 2010. The most recent Fitch data indicates that growth in traffic volumes began slowly declining on tolled facilities, heading to zero growth in second-quarter 2011.”
Are we “out of the ditch”? While some in the world of financial analysis say the US is headed for a double-dip, Fiat-Chrysler CEO Sergio Marchionne reckons the worst is behind us, but that growth from here will be painstakingly slow. Right or wrong, at least Marchionne isn’t falling victim to the irrational optimism that traditionally infects the auto industry…
14 millions Americans are out of work. The government is facing default. U.S. home prices are at their lowest level since 2003, and Robert Shiller, the economist who co- founded the S&P/Case-Shiller index of U.S. home prices, said a decline in property values up to 25 percent in the next five years “wouldn’t surprise me at all.” From Bernanke on down, everybody is scaling back the rhetoric that economic growth is just around the corner. Suddenly, automakers aren’t so sure anymore about all that pent-up demand that will bring back U.S. car sales back to their old glory. Reuters asked around and didn’t come back with good news. (Read More…)
Bloomberg reports that a “person familiar with the matter” says the US Treasury won’t sell its remaining stake in GM as long as the automaker trades below its $33/share IPO price. Previously the government’s auto team had said it would not try to “time the market” and our analysis showed that the Treasury was likely to sell sometime late this Summer. But it’s been months since GM spent more than a few days above its IPO price, indicating that Treasury may be waiting considerably longer if the IPO-price floor is set in stone. And with $36.5b in cash equivalents on hand and only $5b in debt, GM’s $45b market cap is hardly encouraging… especially with investors waiting for The General to match Ford’s profitability levels. Heavier discounts mean a lower operating profit for GM in the US market, and the first quarter shows a $1b swing in pricing between the two firms (with Ford improving $700m and GM dropping $300m) according to Bloomberg. Lower finance earnings are also holding The General back relative to Ford. So, what’s GM’s response?
I spent an interesting Saturday with two old friends of mine. They had never met before. One, American, CFO of an insurance company, had been in the finance and banking business all his professional life. The other, born Chinese, naturalized American. Was one of the top mortgage writers in the Silicon Valley before the dotcom crash. Came back to China and heads a Chinese/American bank. The two got along splendidly.
Of course, we talked about money and cars. Recently, there was a discussion on TTAC on how the bursting of the Chinese real estate bubble would destroy the car market just like it had in the USA. I eagerly set out to pick their brains.
Quite oddly, the first one to throw water on the bubble theory was my friend, the staid CFO of the staid insurance company. (Read More…)
According to a study by the Consumer Federation of America (PDF), relatively low gas prices haven’t done much to change consumer trends towards more fuel-efficient vehicles. This revelation comes amid claims that small car demand was artificially inflated by high gas prices and increased truck production from General Motors. The survey asked respondents to rate the importance of gas prices, global warming and US dependence on Middle East oil over the next five years, with 76 percent reporting “great concern” for gas prices and energy independence.