TABLE OF CONTENTS
US Car Sales Down from May, but Overall on Rise
GM to Form Latin America Division
GM to Sell Steering Unit to Chinese Group
BMW Raises Outlook as Demand Improves
Mercedes Enters Pre-owned Car Business in India
Fiat to Get $5 Billion Euros of Loans to Fund Spinoff of Industrial Unit
Toyota Starts Hybrid Production in UK
Renault's First-Half Global Sales Rise
Ford to Build New Plant in Thailand
Tesla Shares in Strong Demand After IPO
Auto makers saw their U.S. sales rise in June from the depressed level of a year earlier, but sales fell from May as jittery consumers slowed the pace of recovery in the car market.
General Motors Co. said its sales of cars and light trucks rose 11% from a year ago, while Ford Motor Co. reported a 13% increase Chrysler Group LLC had a rise of 35%. Toyota Motor Corp.'s sales rose 6.8%.
Honda Motor Co., meantime, said its June U.S. sales rose 6% from a year earlier, while Nissan Motor Co.'s sales climbed 11%.
Volkswagen AG said its June U.S. sales totaled 21,051, up 11% over June 2009, and Daimler AG reported a 20% increase in Mercedes-Benz and Smart sales for the same comparison period, to 19,574.
Compared to May, however, all the companies saw declines of 5% to 23%.
Toyota, which said its June U.S. sales fell 14% from May, has been battling perceptions about its quality after a series of recalls related to sudden acceleration. Sales of Toyota-brand passenger cars, which were most affected by the recalls, fell 2.2% from the year-ago month.
GM estimated the annualize rate of sales in June for the whole industry was 11.2 million vehicles. That would be a drop from the May rate of 11.6 million .
GM sold 194,716 light vehicles in June, up from 174,785 a year ago. Ford sold 175,960, up from 154,873 in June 2009. Chrysler sold 92,482, up from 68,297 a year earlier.
Toyota sold 140,604 cars and light trucks in June. That's up from 131,654 a year ago, but down from May's total of 162,813.
June auto sales are often slightly lower than those in May, a month that typically gets an extra boost from incentives tied to the U.S. Memorial Day weekend. But makers were hoping the recovery in vehicles sales after last year's steep decline would produce stronger June totals.
GM and Ford both indicated strong demand for pickup trucks, which could be a signal of underlying economic growth. Ford said it expects its market share to grow in June for the 20th time in 21 months.
Rising pickup sales are a sign that small businesses are beginning to replenish their fleets, a signal of underlying economic improvement, said GM Vice President of Sales Steve Carlisle.
"We see a slow recovery with some volatility," he said in a conference call. "The leading indicators are not signaling another downturn. But it will not be smooth."
GM said its year-over-year increase was driven by stronger truck sales and demand for newly launched vehicles. The auto maker gained despite a reduction in sales to fleet buyers. GM's fleet sales made up almost 31% of its June sales total, compared to 37% in May.
General Motors recently said it would create a new division for South America, headquartered in São Paulo, to meet rising demand for cars in the region.
Jaime Ardila, head of GM’s Mercosur operations, will head the unit, joining GM’s executive committee and reporting directly to Ed Whitacre, chief executive.
The reorganisation will see the US carmaker’s Latin American operations split from its international division, which also includes Asia, the Middle East and Russia and is headed by Tim Lee, who is based in Shanghai.
It will raise the number of GM’s regional operations, which also include North America and Europe, from three to four.
The move underscores the growing importance to GM and other carmakers of Latin America, especially Brazil, which industry executives expect to replace Germany as the world’s fourth-largest vehicle market this year because of demand for cars from the expanding middle class.
More carmakers are posting senior executives directly to fast-growing emerging markets, which account for most of the growth in global demand for cars. France’s PSA Peugeot Citroën said last month that it was appointing for the first time a board-level executive to Shanghai to head its Asian operations.
GM employs 29,000 people in South America and sold 394,000 vehicles in South America in January to May, claiming a market share of 20.2 per cent.
GM is Brazil’s third-largest carmaker after Fiat and Volkswagen. Its operation there has been profitable since 2005 and remained ring-fenced from its US parent’s bankruptcy filing last year.
Last September GM opened a new $100m technical centre in Sao Caetano do Sul, near São Paulo, just one of five fully fledged product development sites it operates worldwide, alongside others in Michigan, Germany, South Korea, and Australia. Mr Ardila last month told the Financial Times that GM believed Brazil could sustain 5 per cent annual growth of its car market over the coming five years.
His remit will extend to Argentina, Colombia, Ecuador, Venezuela, Bolivia, Chile, Paraguay, Peru and Uruguay.
GM said that it was naming Denise Johnson, currently its vice-president for labour relations, as president of its Brazilian operation from July 1, reporting to Mr Ardila.
General Motors is to sell its global steering business, formerly owned by supplier group Delphi, to Beijing-based Pacific Century Motors in one of the biggest sales of an auto-parts business to a Chinese company.
GM said recently that it would sell the business, known as Nexteer Automotive, to PCM, an entity formed by the Tempo Group and E-Town, an affiliate of Beijing’s municipal government. No financial details of the transaction were disclosed, but a person involved in the deal, who requested anonymity, said PCM paid about $450m, Financial Times reports.
GM acquired Nexteer from Delphi last year as part of arrangements to help the group exit bankruptcy. The US carmaker last year told its suppliers that it would sell it when market conditions improved.
Nexteer, based in Michigan, employs 6,200 people and makes electric power steering, hydraulic power steering, steering columns, and driveline halfshafts for more than 60 customers in North and South America, Europe, and Asia.
PCM said it planned to leave intact Nexteer’s management team, led by Bob Remenar, its president, and respect the company’s five-year labour agreement with the United Auto Workers Union.
E-Town is a state-owned enterprise that serves as the financing arm of the Beijing municipal government.
Tempo, headquartered in Beijing, makes parts for chassis, powertrain and driveline systems. It has an engineering centre in Detroit and sells its products in North America, Europe, Asia, and the Middle East.
Moelis & Co advised PCM on the deal, which involved eight months of negotiations.
Chinese investors have bought a number of automotive suppliers in recent years as the country’s car industry seeks to build its technological expertise and expand its global reach.
The US and Chinese companies said the transaction would close by the end of this year, pending regulatory approvals.
BMW Raises Outlook as Demand Improves
German luxury car maker BMW AG said recently its profit in 2010 is set to rise more sharply than previously anticipated because vehicle sales are expected to be better than hoped and its financial services division is experiencing a recovery.
"Improved business conditions on the international automobile markets mean that the BMW Group now expects to report much better second-quarter and full-year earnings than previously forecast," the Munich-based firm said in a statement.
The luxury car market was hit hard by the financial crisis and resulting economic downturn, with sales and earnings turning anemic in 2009. However, there has been a faster-than-expected rebound in the segment in recent months, driven by soaring demand in China and a recovering U.S. market.
BMW now expects vehicle sales this year to rise by about 10% to more than 1.4 million cars, after previously forecasting a rise in the single-digit percentage range to more than 1.3 million cars. The company sold 1.29 million cars in 2009, down 10.4% from a year earlier.
In the first six months of 2010, a total of 696,026 BMW, Mini and Rolls-Royce cars were delivered to customers, up 13% from a year earlier.
BMW said it expects the full-year margin on earnings before interest and tax, or Ebit, to exceed 5% in its core automobiles segment this year.
"As a result of attractive market conditions and a less acute risk situation, the financial-services segment is striving for a significant increase in pretax earnings, with a target return on equity of over 18%," BMW said.
For 2012, BMW is still targeting an Ebit margin of between 8% and 10%, and a return on capital employed in excess of 26% for its automobiles segment. The financial-services unit is aiming to achieve a return on equity of at least 18%.
BMW is scheduled to release detailed second-quarter earnings Aug. 3.
Luxury car-maker Mercedes Benz India recently announced its foray into the pre-owned car business in the country, which will bring down the cost of owning a vehicle from its stable to as low as Rs 15 lakh.
The company is also gearing up to enter the car finance business as it looks to push sales in India amid increasing competition from rival BMW.
Mercedes Benz started its pre-owned cars programme, Proven Exclusivity, in 2009 globally and is operating across 35 countries.
"Now we are bringing this to India to make the dream of many customers to own a Mercedes Benz even more achievable," Mercedes Benz India Managing Director and CEO Wilfried Aulbur told reporters here.
He said through the pre-owned programme, customers can own a Mercedes Benz for as low Rs 15-18 lakh as against Rs 26-28 lakh for a brand new, entry-level C Class model.
The company's other models such as E Class, M Class and S Class are priced between Rs 40 lakh and Rs 96 lakh for brand new vehicles.
Aulbur said under the company's pre-owned scheme, only cars not older than six years will be available.
The company is making the facility available in six dealer outlets across four cities, Delhi, Mumbai, Ahmedabad and Chandigarh, initially.
The company said by the end of the year, another 6-8 additional outlets will be added, where pre-owned cars will be available.
Aulbur said the company expects the pre-owned car business to account for 10-15 per cent of its car sales by 2011. He, however, declined to comment on how many new cars it expects to sell in the next year.
This year, in the January-May period, the company sold 2,014 units, up 59 per cent from the year-ago period.
Mercedes Benz is up against tough competition from German rival BMW in the Indian luxury car market. Last year, BMW became the top luxury car-maker in India, selling 3,619 units against 3,247 Mercedes Benz cars.
Fiat SpA, Italy’s biggest carmaker, said it will get as much as 4 billion euros ($5.2 billion) of loans to finance a spinoff of its industrial businesses.
Fiat’s board of directors approved the demerger of its truck and heavy equipment operations from its car unit into a new company called Fiat Industrial SpA. The automaker said it earned 90 million euros in the second quarter, compared with a 168 million-euro loss a year earlier.
The loans, expected to be concluded before the demerger on Jan. 1, will help repay intercompany financing to Fiat Industrial, the Turin-based company said in a statement.
Barclays Capital Plc, BNP Paribas SA, Credit Agricole CIB, Intesa Sanpaolo SpA, Societe Generale SA, Royal Bank of Scotland Group Plc, Citigroup Inc. and UniCredit SpA will provide the financing, which will include a revolving credit facility and a term loan, Fiat said.
Money in a revolving credit can be borrowed again once it’s been repaid; in a term loan it can’t.
The Japanese carmaker started making the new Toyota Auris petrol-electric Hybrid car at the Burnaston Derbyshire plant. The Japanese firm said the vehicle is Europe's first mass-produced hybrid car and has secured 400 jobs at the plant.
Hybrid versions of other Toyota models are made in countries such as the US and Japan but this is the first to be manufactured in the UK.
The plant in Burnaston was shut down for a fortnight in April as a response to the global slowdown in vehicle sales. The workforce has also agreed to a pay freeze in 2010, though a 10% cut in hours and wages has ended.
The factory produces the Auris and Avensis models and currently employs about 3,800 people.
French car maker Renault SA said its global vehicle sales rose 22% in the first half of this year to 1.35 million vehicles, as strong sales in fast-growing markets in Asia and Latin America offset sluggish growth in Europe.
France's second-largest auto maker said its world-wide market share increased by 0.2 percentage points to 3.9%. Sales of passenger cars rose 22% to 1.19 million vehicles.
Renault group sales in Europe rose 22% in the first half of this year in a market that rose just 0.9%, allowing it to expand its market share in the region by 1.8 percentage points to 10.8%.
In June alone, the Renault group's three brands saw a world-wide sales increase of 8.7%, with the Renault brand up 6.9%. Overall sales in Europe were 5.2% higher.
The company said it expects the European automobile market to contract between 7% and 9% this year compared with 2009. That's a less pessimistic forecast than the 10% full-year decline that Renault had projected earlier this year. For the global market, Renault is projecting an increase of about 8% for 2010 compared with 2009.
Renault's larger local rival, PSA Peugeot-Citroen, reported a 17% increase in its first-half sales, while European market leader Volkswagen AG said earlier this week that it sold 3.5 million cars world-wide in the first six months of the year—an increase of 15% from a year before.
Renault said that the European market is expected to continue the fall that began in April with the end of scrapping bonuses and the introduction of government austerity measures.
Outside of Europe, markets are expected to continue growing, however, largely due to more favorable economic fundamentals.
Renault's head of sales and marketing, Jerome Stoll, attributed the strong sales performance in the first half to government supports as well as to the launch of new products such as the New Megane Coupe-Cabriolet and Fluence, the Duster made by its Romanian low-cost subsidiary Dacia, and the SM5 made by its Korean unit, Renault Samsung Motors.
Ford Motor Co. said recently it would spend $450 million to build a new plant in Thailand, giving a much-needed boost to an economy reeling from deadly political unrest.
Ford said the factory in Rayong, about 90 miles southeast of Bangkok, would employ up to 2,200 workers with production scheduled to begin in 2012, starting with the next-generation Ford Focus.
It will have an initial output capacity of 150,000 vehicles a year, mostly for export, boosting Thailand's efforts to be a regional hub for car production.
The move "is another important step in our aggressive expansion in the Asia Pacific region," said Ford chief executive Alan Mulally.
Shares in Tesla Motors, which produces a $109,000 electric-powered sports car, rose sharply in their first day of trading after strong demand helped the company raise more money than expected in its initial public offering.
The carmaker, based in San Carlos, California, had recently increased the number of shares it was selling to 13.3m from 11.1m and said they would be priced at $17 each, higher than the $14 to $16 range it had previously estimated.
Tesla plans to use the IPO proceeds to help fund its move into the production of a mass-market saloon car, the Model S, which will cost about $50,000 including a government subsidy for plug-in cars. The issue is the first by a US carmaker since Ford Motor went public in 1956.
Its success is remarkable for a company that has sold barely 1,000 cars, lost more than $290m since its inception in 2003, and says that it will continue to lose money as it moves into mass-market car production.
Tesla’s flotation marks a triumph and a vindication for Elon Musk, the company’s 39-year-old chief executive and biggest shareholder. Since Mr Musk became its lead investor in 2004, Tesla has contended with supplier headaches, funding shortfalls and scepticism from some competitors about its prospects.
Speaking to the Financial Times in June 2009, the South African-born entrepreneur said he gave “serious thought” to pulling the plug on the company in 2008, when the credit crunch quashed a planned $100m financing round.
Mr Musk is also the chief executive and biggest shareholder in Los Angeles-based SpaceX, that designs and builds spacecraft.
He made his fortune when PayPal, which he co-founded, was bought by Ebay.
In 2004 he provided the bulk of $6.5m of Series A financing for Tesla, then a small start-up seeking funding.
The company settled on a business model of launching with an expensive, small-volume car that would help it defray its high initial investments in technology. Tesla teamed up with Lotus, a specialist in lightweight car construction, which makes bodies for the roadsters at its UK plant.
The car’s launch faced numerous delays, and the company cycled through several chief executives before Mr Musk, then chairman, took over in 2008.
In 2008 Tesla appointed Goldman Sachs to raise $100m of financing to fund the Model S. When the credit crunch hit, Tesla had to postpone the launch, cut staff, and go back to existing investors led by Mr Musk for a smaller $40m.
In 2009, Daimler bought just less than 10 per cent of Tesla, later selling 40 per cent of its holding to an investment fund controlled by Abu Dhabi’s government. In May, Toyota agreed to buy a $50m stake in Tesla and co-operate with it on cars.
As Tesla moves from selling a few high-priced sports cars into the mass market, it will compete with some of the industry’s most skilled manufacturers.
Nearly all carmakers plan to launch electric or hybrid petrol-electric models over the coming three years, but most acknowledge that the cars’ initial sales will be modest.
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