More great news this morning on GMGC from Deutsche Banc Alex, Brown -- Looks like analyst coverage is coming:
-- AB: Global Automotive Daily: Tuesday, February 1, 2000 --
08:07am EST 1-Feb-00 Deutsche Banc Alex. Brown F GM DCX SYLA.PA VLOF.PA 7201
Global Automotive Daily -- Tuesday, February 1, 2000
Analyst: Ken Blaschke 415-477-3206
ken.blaschke@db.com
Rod Lache 212-469-5551
rod.lache@db.com
Toshiki Ouchi +8 1354017228
toshiki.ouchi@db.com
Gaetan Toulemonde +33 1 4495 6668
gaetan.toulemonde@db.com
Christian Breitsprecher +49 69 910 31949
christian.breitsprecher@db.com
Mark Little +44 131 243 4419
mark.little@db.com
Eva Sonnenschein +49 69 910 31960
eva.sonnenschein@db.com
Gianluca Pediconi +39 02 863 797 06
gianluca.pediconi@db.com
Date: February 1, 2000
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Ford, GM and DCX To Report January U.S. Sales (Lache)
Ford (NYSE-F-$49 3/4-Buy), General Motors (NYSE-GM-$80 9/16-Market Perform) and
DaimlerChrysler (NYSE-DCX-$65 13/16-9/16-Market Perform) report January U.S.
auto sales today. The market is expected to annualize at an extraordinarily
strong 18 MM unit pace, despite the impact of two severe winter storms that
impacted the U.S. East Coast. As of January 25th, Ford had been reporting sales
up 3%-4% year over year. We expect GM to report a superb sales comparison of
up 10%-12% year over year, driven by 20%-plus growth in truck sales and a
"loyalty coupon" program started early in the month. We estimate DCX's Chrysler
Group to report sales flat to down 1% vs. January 1999.
GM Board Meets Today (Lache)
General Motors holds its first board meeting of 2000 today. We believe topics
on the agenda are likely to include: 1) the strategy for its Hughes Electronics
subsidiary and the potential structure and timing for a spin-off, 2) capital
budget plans (i.e., dividend changes, cap ex requirements, share repurchases,
etc.), 3) the status of the Daewoo transaction, and, 4) eCommerce. There has
been considerable speculation that GM could make an announcement related to its
plans to spin off Hughes. While it is unclear whether an announcement will come
out of this meeting, we continue to believe a spin off is imminent.
Separately, lack of a share repurchase reauthorization could be indicative of
the company's commitment to acquiring Daewoo.
Sylea Releases Full Year Sales (Toulemonde)
Sylea (Paris Syla EUR45 MP) released strong full year sales yesterday, +7%, with
acceleration in 4Q, +13%. However, due to exceptional start up costs in second
half, results should once again disappoint. 1999 full year EBIT and net profit
are expected to drop by 10%. We believe valuation is attractive (with a P/E of
7.5x 1999E (before goodwill) and 25% discount to NAV) especially if margins
recover in 2000 (we expect sales to rise by 7%). However, we have been
continually disappointed by results posted over last few years. Since 1994, the
EBIT margin has declined to 6% from 12.4%. We remain cautious until we get
stronger evidence of an improvement, all else being equal.
Valeo Reports 1999 Results (Toulemonde)
Valeo's (Paris VLOF EUR 67 MP) 1999 EBIT of EUR487m, +14% was slightly below our
forecast of EUR500m and consensus of EUR500-530m. More importantly, there was
no improvement between H1 and H2 in the gross margin (19.6%) or EBIT margin
(6.3%). The group used its capital gain on LUK to book a huge new restructuring
program (EUR430m). This could be viewed i) as a massage of earnings to secure
2000-01-02 net profit, which we do not like (no restructuring charges expected
in 2000) and ii) as a strong indication of intense pricing pressure from car
manufacturers on their suppliers. Valeo being the leanest supplier and the
benchmark, further pricing pressure from OEMs is a bad news for the sector as a
whole, in our view.
Nissan Is Gaining Confidence In Cost-Cutting Ability (Ouchi)
When we visited Nissan Motor (Tokyo-7201-Y510-Buy) on 31 January, Deputy CFO
Thierry Moulonguet confidently commented that procurement cost reduction
measures - the core element of Nissan's Revival Plan - are proceeding as
planned. He said that the company should be able to meet its cost-saving target
of 8% in fiscal March 2001, which is the first year of the three-year program
for 20% cost reduction. Nissan established cost-cutting targets for each
component group and presented these targets to its suppliers by the end of
November 1999. It appears that, as of our visit, almost all of these parts
makers had responded with concrete cost-reduction proposals, essentially
complying with the company's request.
General Magic: Thoughts From Mgmt. (Lache)
We have been watching General Magic's (OTC-GMGC-$7 5/8-not rated) shares
appreciate significantly subsequent to General Motors 20% investment in the
company (GMGC'S shares have risen to approximately $7 1/2 from $1 1/2 prior to
the announcement). GM plans to use GMGC's voice enabled services technology in
OnStar, GM's in-vehicle communication, navigation, and internet access system.
We spoke with GMGC yesterday and found several points of interest, including: 1)
the company will receive a (undisclosed) monthly fee for every GM OnStar
subscriber (and a royalty fee for non-GM customers using the OnStar system --
i.e., potentially Toyota). In a sense, we believe General Magic could be the
only way for investors to play the expected growth in OnStar. 2) GMGC is also
marketing its voice-activation technology to cellular phone companies,
enterprise software companies, call centers and internet service providers.
While GMGC's business model is still evolving, we believe the potential market
for its technology is significant. |
