Mexico's auto industry reopening picked up pace on Tuesday, with Fiat Chrysler
Moody's Investors Service, ("Moody's") confirmed its ratings for Ford Motor Credit Company LLC (Ford Credit) and its subsidiaries, including the Ba2 long-term senior unsecured rating. The rating actions follow similar actions on the ratings for Ford Credit's parent, Ford Motor Company (Ford, Ba2 corporate family rating, negative).
The coronavirus pandemic has paused the electric vehicle revolution, forcing producers of battery metal lithium into survival mode with output cuts, expansion delays and sales of major assets. Lithium industry shares have dropped sharply since January as the economic downturn from the pandemic slammed the brakes yet again on the electrification revolution that for years has seemed just around the corner. The holdup will result in a shortage of the white metal available for EV batteries when markets rebound, warned industry analysts, executives and consultants.
SpaceX is launching astronauts into space on Saturday. That’s a big deal for the country. But is it significant for Tesla stock?
(Bloomberg) -- At a factory near Germany’s border with the Czech Republic, Volkswagen AG’s ambitious strategy to become the global leader in electric vehicles is coming up against the reality of manufacturing during a pandemic.The Zwickau assembly lines, which produce the soon-to-be released ID.3 electric hatchback, are the centerpiece of a plan by the world’s biggest automaker to spend 33 billion euros ($36 billion) by 2024 developing and building EVs. At the site, where an East German automaker built the diminutive Trabant during the Cold War, VW eventually wants to churn out as many as 330,000 cars annually. That would make Zwickau one of Europe’s largest electric-car factories—and help the company overtake Tesla Inc. in selling next-generation vehicles.But Covid-19 is putting VW’s and other automakers’ electric ambitions at risk. The economic crisis triggered by the pandemic has pushed the auto industry, among others, to near-collapse, emptying showrooms and shutting factories. As job losses mount, big-ticket purchases are firmly out of reach—in the U.S., where Tesla is cutting prices, more than 36 million people have filed for unemployment since mid-March. Also, the plunge in oil prices is making gasoline-powered vehicles more attractive, and some cash-strapped governments are less able to offer subsidies to promote new technologies.Even before the crisis, automakers had to contend with an extended downturn in China, the world’s biggest auto market, where about half of all passenger EVs are sold. Total auto sales in China declined the past two years amid a slowing economy, escalating trade tensions, and stricter emission regulations. EV sales are forecast to fall to 932,000 this year, down 14% from 2019, according to BloombergNEF. The drop-off is expected to stretch into a third year as China's leaders have abandoned their traditional practice of setting an annual target for economic growth, citing uncertainties. Economists surveyed by Bloomberg expect just 1.8% GDP growth this year.The global market contraction raises the prospect of casualties. French finance minister Bruno Le Maire has warned that Renault SA, an early adopter of electric cars with models like the Zoe, could “disappear” without state aid. Even Toyota Motor Corp., a hybrid pioneer when it first introduced the Prius hatchback in 1997, is under pressure. The Japanese manufacturer expects profits to tumble to the lowest level in almost a decade.Automakers who for years have invested heavily in a shift to a high-tech future—including autonomous vehicles and other alternative energy-based forms of transportation such as hydrogen—now face a grim test. Do their pre-pandemic plans to build and sell electric cars at a profit have any chance of succeeding in a vastly changed economic climate? Even as Covid-19 has obliterated demand, for the car makers most committed to electric, there’s no turning back.“We all have a historic task to accomplish,” Thomas Ulbrich, who runs Volkswagen’s EV business, said when assembly lines restarted on April 23, “to protect the health of our employees—and at the same time get business back on track responsibly.”Volkswagen Pushes AheadGlobal EV sales will shrink this year, falling 18% to about 1.7 million units, according to BloombergNEF, although they’re likely to return to growth over the next four years, topping 6.9 million by 2024. “The general trend toward electric vehicles is set to continue, but the economic conditions of the next two to three years will be tough,” said Marcus Berret, managing director at consultancy Roland Berger.Volkswagen’s Zwickau facility became the first auto plant in Germany to resume production after a nationwide lockdown started in March. Before restarting, the company crafted a detailed list of about 100 safety measures for employees, requiring them to, among other things, wear masks and protective gear if they can’t adhere to social-distancing rules.The cautious approach has reduced capacity—50 cars per day initially rolled off the Zwickau assembly line, roughly a third of what the plant manufactured before the coronavirus crisis. (VW said Wednesday that daily output had risen to 150 vehicles, with a plan to reach 225 next month.) Persistent software problems also have plagued development of the ID.3, one of 70 new electric models VW group is looking to bring to market in the coming years. Still, Ulbrich and VW CEO Herbert Diess over the past three months have reaffirmed Volkswagen’s commitment to electrification. “My new working week starts together with Thomas Ulbrich at the wheel of a Volkswagen ID.3 - our most important project to meet the European CO2-targets in 2020 and 2021,” Diess wrote in a post on LinkedIn in April. “We are fighting hard to keep our timeline for the launches to come.”Diess has described the ID.3 as “an electric car for the people that will move electric mobility from niche to mainstream.” Pre-Covid, the company had anticipated that 2020 would be the year it would prove its massive investments and years of planning for electric and hybrid models would start to pay off.A more pressing worry that could hamper VW’s ability to scale up production is its existing inventory of unsold vehicles. The cars need to move to make room for new releases, but sales are down as consumers are tightening their spending. One response has been to offer improved financing in Germany, including optional rate protection should buyers lose their jobs. VW also has adopted new sales strategies first used by its Chinese operations, such as delivering disinfected cars to customer homes for test drives, and expanding online commerce.Other German automakers are similarly pushing ahead with EV plans. Daimler AG is sticking to a plan to flank an electric SUV with a battery-powered van and a compact later this year. BMW AG plans to introduce the SUV-size iNEXT in 2021 as well as the i4, a sedan seeking to challenge Tesla’s best-selling Model 3.A potential obstacle for all these companies—apart from still patchy charging infrastructure in many markets—is the availability of batteries. Supply bottlenecks appear inevitable given that the number of electric car projects across the industry outstrip global battery production capacity. And boosting cell manufacturing is a complicated task.China's (Weakened) EV Dominance For VW and others, the first big test of EVs’ appeal in a Covid-19 world will come in China. Diess has referred to China as “the engine of success for Volkswagen AG.” VW group deliveries returned to growth year-on-year last month in China, while all other major markets declined.Not long ago, China appeared to be leading the world toward an electric future. As part of President Xi Jinping’s goal to make the country an industrial superpower by 2025, the government implemented policies that would boost sales of EVs and help domestic automakers become globally competitive, not just in electric passenger cars but buses, too.With the outbreak seemingly under control in much of the country, China is seeing some buyers return to the showrooms, but demand for passenger cars is likely to fall for the third year in a row, putting startups like NIO Inc. at risk and hurting more-established players like Warren Buffett-backed BYD Co., which suffered from a 40% year-on-year vehicle sales decline in the first four months of 2020.The Chinese auto market may shrink as much as 25% this year, according to the China Association of Automobile Manufacturers, which before the pandemic had been expecting a 2% decline. EV sales fell by more than one-third in the second half of 2019.NIO, the Shanghai-based startup that raised about $1 billion from a New York Stock Exchange initial public offering in 2018 but lost more than 11 billion yuan ($1.5 billion) last year, was thrown a much-needed lifeline when a group of investors, including a local government in China’s Anhui Province, offered 7 billion yuan last month.Other Chinese manufacturers are counting on support from the government, too, including tax breaks and an extension to 2022 of subsidies, originally scheduled to end this year, to make EVs more affordable.For now, the government will also look to help makers of internal combustion engine vehicles, at least during the worst of the crisis, said Jing Yang, director of corporate research in Shanghai with Fitch Ratings. But, she said, “over the medium-to-long term, the focus will still be on the EV side.”America is Tesla CountryCompanies can’t count on that same level of support from President Donald Trump in the U.S., where consumers who love their SUVs and pickup trucks have largely steered clear of electric vehicles other than Tesla’s.The U.S. lags China and Europe in promoting the production and sale of EVs, and that gap may widen now that Americans can buy gas for less than $2 a gallon.“When you’re digging out of this crisis, you’re not going to try to do that with unprofitable and low-volume products, which are EVs,” said Kevin Tynan, a senior analyst with Bloomberg Intelligence.Weeks after announcing plans to launch EVs for each of its brands, General Motors Co. delayed the unveiling of the Cadillac Lyriq EV originally planned for April. Then on April 29, the company said it would put off the scheduled May introduction of a new Hummer EV. The models are part of CEO Mary Barra’s strategy to spend $20 billion on electrification and autonomous driving by 2025, to try to close the gap with Tesla.In another move aimed at winning over Tesla buyers, Ford Motor Co. unveiled its electric Mustang Mach-E last November at a splashy event ahead of the Los Angeles Auto Show. The highly anticipated model had been scheduled to debut this year. Ford has not officially postponed the release, but the company has said all launches will be delayed by about two months, potentially pushing the Mach-E into 2021.Elon Musk, whose cars dominate the U.S. electric market, cut prices by thousands of dollars overnight. The Model 3 is now $2,000 cheaper, starting at $37,990. The Model S and Model X each dropped $5,000.Musk engaged in a high-profile fight with California officials this month over Tesla’s factory in Fremont, California, which had been closed by shutdown orders Musk slammed as “fascist.” In a May 11 tweet, he said the company was reopening the plant in defiance of county policy. On May 16, Tesla told employees it had received official approval.During most of the shutdown in California, the company managed to keep producing some cars thanks to better relations with local officials regulating its other factory, in Shanghai. That plant closed as the virus spread from Wuhan in late January, but the local government helped it reopen a few weeks later in early February.First Zwickau, Then the WorldThe ID.3’s new electric underpinning, dubbed MEB, is key to VW’s strategy to sell battery-powered cars on a global scale at prices that will be competitive with similar combustion-engine vehicles. Automakers typically rely on such platforms to achieve economies of scale and, ultimately, profits. MEB will be applied to purely electric vehicles across all of the company’s mass-market brands, including Skoda and Seat.VW said it spent $7 billion developing MEB after Ford last year agreed to use the technology for one of its European models. Separately, the group’s Audi and Porsche brands are built on a dedicated EV platform for luxury cars that the company says will be vital in narrowing the gap with Tesla.VW plans to escalate its electric-car push by adding two factories, near Shanghai and Shenzhen, that it says could eventually roll out 600,000 cars annually, more cars than Tesla delivered globally last year.While China is the initial goal, making a dent in Europe and the U.S. is the long-term one. Like China, Europe had been tightening emissions regulations significantly before the pandemic. New rules to reduce fleet emissions will gradually start to take effect this year, effectively forcing most manufacturers to sell plug-in hybrids and purely electric cars to avoid steep fines.Because of the mandates, Europe’s commitment to electrification isn’t going away, said Aakash Arora, a managing director with Boston Consulting Group. “In the long term, we don’t see any relaxation in regulation,” he said.For VW, this crisis wouldn’t be the first time it started a new chapter in difficult times. Diess saw an opportunity coming off the manufacturer’s years-long diesel emissions scandal that cost the company more than $33 billion to win approval for the industry’s most aggressive push into EVs. When VW unveiled the ID.3, officials compared its historic role to the iconic Beetle and the Golf, not knowing that this might hold in unintended ways: The Beetle arose from the ashes of World War II, and the Golf was greeted by the oil-price shock in the 1970s.“We have a clear commitment to become CO2 neutral by 2050,” VW strategy chief Michael Jost said, “and there is no alternative to our electric-car strategy to achieve this.”(Updates with Tesla price cut starting in the third paragraph. An earlier version corrected the spelling of Berret in the ninth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Aaron's could benefit from the pandemic Continue reading...
What happened Shares of several global automakers were rising on Tuesday, as auto factories around the world continued to ramp up after shutting down in March amid the COVID-19 pandemic. Here's where things stood for these three companies' stocks as of 2:30 p.
The leaders of this swing state are swinging back at the president. Trump has been butting heads with Michigan leaders — namely the governor, the secretary of state and the attorney general, who are all female Democrats — which came to a head when the commander-in-chief visited a Detroit-area Ford (F) plant on Thursday, and only wore a state-mandated face mask for part of the tour. Attorney General Dana Nessel had written an open letter to the president earlier in the week noting that he had “a legal responsibility” to wear a face covering while visiting the Ypsilanti facility, as the social distancing guidance is not only a Ford company policy, but also a state law.
Moody's Investors Service, ("Moody's") confirmed the Ford Motor Company's (Ford) corporate family rating (CFR) and senior unsecured debt ratings at Ba2; the outlook is negative. Ford's ratings, including the Ba2 CFR, reflect Moody's view that the company's pro forma March 31 cash liquidity position of $42 billion (after the impact of $8 billion in proceeds an April 22 debt issuance) will provide it with ample liquidity to cover the sizable cash burn the company will generate through 2021.
(Bloomberg Opinion) -- From the customer’s perspective, car rental is a straightforward business. The only uncertainty is whether the hire company will charge you for the scratch they discover when you hand back the vehicle. Hertz Global Holdings Inc.’s bankruptcy protection filing on Friday was a reminder that today even the simplest business models are underpinned by a lot more financial complexity than meets the eye. Rather than make the rental giant more robust, financial engineering seems to have made Hertz more brittle. The proximate cause of Hertz’s demise was of course the sudden collapse in bookings caused by coronavirus travel restrictions. The company’s monthly revenue fell 73% year-on-year in April, a shortfall that even the most resilient companies would struggle to withstand for long.But Hertz’s complicated financial plumbing contributed to it becoming one of the most high-profile companies to seek protection from creditors during the corona crisis. This byzantine organizational chart from the bankruptcy filing gives you just a taste of what lies underneath the company’s hood:In the decade preceding its collapse, Hertz took on too much debt, participated in overpriced M&A and was accused of playing accounting games to pad its earnings. (For more, read this colorful account from Bloomberg’s David Welch.)So when disaster struck and a request for a government bailout was rejected (rightly in my view considering top shareholder Carl Icahn is worth some $18 billion), Hertz was already standing far too close to the precipice. Regrettably Covid-19 will probably expose more of this type of corporate frailty, both in America and around the world.Hertz’s debt binge began when it was acquired by private equity firms from Ford Motor Co. in 2005; the new owners quickly took out a $1 billion dividend. Piling on debt juiced the potential returns for the owners and helped pay the inflated $2.3 billion price tag for the Dollar and Thrifty brands in 2012, which Hertz struggled to integrate.Hertz was only able to amass an eye-watering total of $19 billion in borrowings thanks to a massive program of asset-backed lending, which became its primary source of capital.(2)Special-purpose financial entities purchase cars on Hertz’s behalf, and investors in the asset-backed securities make a return via the lease payments that Hertz is obliged to stump up. Put another way, Hertz leases cars long term from the financing subsidiary — typically for about 18 months in the U.S. — and then rents them out to customers for shorter periods.In theory, this is a stable and low-cost way for a risky borrower such as Hertz to fund the large capital outlays needed to keep its fleet looking fresh. Hertz’s corporate credit has been rated junk for the past decade but many of the asset-backed securities it issued were triple-A rated, at least until recently. However, economic shutdowns stemming from efforts to curb the new coronavirus suddenly threw a lot of sand in Hertz’s gears: The resale value of its vehicles fleet fell sharply, requiring the company to inject more cash into the financing structure.With only about $1 billion of cash on its books, Hertz was ill-placed to fund that collateral call, and the pandemic meant it wasn’t able to sell vehicles to generate cash because potential buyers were confined to their homes and auctions and dealerships were closed. (Hertz’s chief financial officer describes these acute pressures in this filing.) Asset-backed securities holders appear to have decided that allowing Hertz to fall into bankruptcy will prove no impediment to them getting most of their money back, at least for those holding the better-rated tranches of debt. The same can’t be said, however, for Hertz’s unsecured lenders, or its shareholders. Building a 39% stake since 2014 probably cost Icahn about $1.6 billion, based on a Bloomberg average share-cost estimate, but he now risks being wiped out. Hertz’s predicament was made more severe because in the U.S. it couldn’t hand back most of its surplus vehicles to the manufacturer, as is common practice in Europe. Instead it faced the task of selling them itself and bore the risk of any unexpected depreciation. The company is one of the 10 largest sellers of used vehicles in the U.S.The preponderance of these so-called “risk vehicles” in its half-a-million strong U.S. car fleet has increased since 2014 because it was more profitable than paying a premium to the manufacturer to guarantee a fixed repurchase price. There’s no reward without risk, though, as Hertz’s bankruptcy filing made abundantly clear. Having lost money in three of the past four years, Hertz did seem to have turned a corner lately: It raised capital to pay down debt last year and was ranked No. 1 for customer satisfaction in J.D. Power’s North American car rental rankings. Not that customers have much choice. Consolidation has given just three groups — Hertz, Enterprise Holdings Inc. (owner of the National and Alamo brands) and Avis Budget Group Inc. — control of almost the entire U.S. market for airport car rentals in the U.S.New competition from ride-hailing companies and a litany of management missteps meant Hertz never achieved the pricing power that Icahn and other recent investors probably assumed would come from all that merger activity. Because the industry’s fortunes are so closely tied to air and business travel, car rental demand is likely to remain weak for a while. Still, Hertz remains open for business and thanks to the more lenient Chapter 11 process it should get another chance to make a success of that oligopoly, albeit as a smaller company with different shareholders and a new capital structure. Next time you return a rental car, expect the attendant to check even more thoroughly for dents and scratches. (1) $14.7 billion of Hertz's debt relates to vehicle financingThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Japanese automakers Toyota, Nissan and Honda said they are gradually restarting in Mexico as the nation's automotive industry reboots in line with a broader economic reopening, despite still-high numbers of new coronavirus cases. Mexican officials in mid-May said the automotive industry could exit the coronavirus lockdown before June 1 if approved safety measures were in place. Toyota Motor Corp and Nissan Motor Co Ltd told Reuters on Monday that they were preparing to gradually resume operations, and Honda Motor Co Ltd last Friday said it had begun a gradual return to operations.
The more than a century old car rental firm Hertz Global Holdings Inc filed for bankruptcy protection on Friday after its business all but vanished during the coronavirus pandemic and talks with creditors failed to result in needed relief. Hertz said in a U.S. court filing on Friday that it voluntarily filed for Chapter 11 reorganization. A large portion of Hertz's revenue comes from car rentals at airports, which have all but evaporated as potential customers eschew plane travel.
In the week since U.S. auto factories reopened after coronavirus lockdowns, workers at all three Detroit automakers have tested positive for COVID-19 but only Ford Motor Co has temporarily closed plants. Ford paused production at its Claycomo, Missouri, plant for an hour on Tuesday after a worker tested positive. Work resumed at the plant, which builds the F-150 pickup truck and Transit van, without workers being sent home following a deep cleaning, Ford spokeswoman Kelli Felker said Wednesday.
A group of 23 U.S. states led by California, the District of Columbia and some major cities are challenging a Trump administration decision to weaken Obama administration fuel efficiency standards. In March, the Trump administration issued final rules requiring 1.5% annual increases in efficiency through 2026 - far weaker than the 5% increases in the discarded Obama-era rules - but abandoned its August 2018 proposal to freeze requirements at 2020 levels through 2026. Last week, a trade group representing General Motors Co , Fiat Chrysler Automobiles, Toyota Motor Corp and others sided with the Trump administration on its plan and opposed a legal challenge to further weaken the requirements.
The work-from-home movement and growth of ridesharing have implications for the Blue Oval's future.
(Bloomberg Opinion) -- Amazon.com Inc.’s interest in acquiring a self-driving car pioneer is the prime example (pun intended) of how expectations for driverless vehicles have been recalibrated.The e-commerce giant is in advanced talks to buy Zoox Inc. for less than the $3.2 billion at which it was valued in 2018, the Wall Street Journal reported on Tuesday. Given the California-based startup’s approach to autonomous cars, its fate is particularly instructive.In a very crowded field, Zoox was practically alone in aiming to build a whole new kind of electric-powered vehicle, and to operate the fleet itself. Peers such as Alphabet Inc.’s Waymo, General Motors Co.’s Cruise unit, Ford Motor Co. and Volkswagen AG’s joint venture Argo AI, and Aurora Innovations Inc. have focused solely on developing the self-driving technology that could subsequently be fitted into vehicles.Zoox wanted to be Tesla Inc., Waymo and Uber Technologies Inc. all rolled into one.Back in 2015, that seemed like an attractive proposition. If the triple threat to the automotive industry was autonomous technology, electric drivetrains and ride-hailing, why not embrace all three? After all, there were expectations that by 2020 robotaxis would ferry you around the world’s metropolises. Capital flowed into self-driving car startups, typified by the $1 billion GM spent acquiring Cruise in 2016.Those dreams, needless to say, have failed to materialize. Companies that had aimed to jump straight to the fourth of five levels of autonomy have quietly downshifted. (The first level of self-driving encompasses driver-assistance functions such as cruise control, and the fifth is full automation.) Bloomberg New Energy Finance doesn’t expect vehicles with Level Four automation to start gaining traction until 2034. Even then, they will likely represent just 831,000 of the 95 million-unit global car market that year.What’s more, the expense of developing, building and operating a fleet of self-driving cars would be considerable. Even deep-pocketed Alphabet and GM have sought outside investment for their efforts. Established carmakers are meanwhile focusing their capital on electric cars, a more imminent threat. And owning and operating a fleet is expensive too. Zoox had a tough sell to investors: In 15 years’ time, it might have been an attractive business.Which brings us to Amazon. Even if robotaxis aren’t coming any time soon, there are alternative applications for autonomous technology that fall squarely in the Seattle-based firm’s wheelhouse, namely, logistics. Given Amazon’s shipping costs are set to hit $90 billion a year, tech from Zoox could help save $20 billion in shipping costs, according to Morgan Stanley analysts. Its solutions could be used across warehousing and distribution. Buying Zoox could take Amazon's other moves in this field — an existing investment in Aurora and experiments with self-driving truck specialist Embark and electric vanmaker Rivian — to a whole new level.Amazon has become the fantasy acquirer for any number of companies seeking a soft landing: theater chains, brick-and-mortar retailers, food deliverers, mobile carriers, real estate brokers, dental suppliers, film studios and plenty more besides.Sometimes, just sometimes, those deals make sense. Zoox is one of them.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The Internet Ecosystem Innovation Committee (IEIC), an independent committee that promotes internet diversity and resilience through the formation of new global internet nexus points, today announced that Akamai (NASDAQ: AKAM) has joined as a founding member.
The U.S. death toll from the coronavirus that causes COVID-19 edged closer to 100,000 on Friday, as the news emerged that the Centers for Disease Control and Prevention has been combining the results of two different types of tests for the illness in a move that has been sharply criticized by health experts.
Mexico's auto industry reopening picked up pace on Tuesday, with Fiat Chrysler and BMW AG joining peers in gradually dusting off operations even as the wait for approvals slowed the return of Ford Motor Co and other companies. Fiat Chrysler on Tuesday began reopening two facilities in the central Mexican city of Toluca after a gradual restart of its operations in the northern city of Saltillo a day earlier, said a company spokesman. The announcement means two of Detroit's Big Three automakers have begun restarting Mexican operations.
Some Wall Streeters believe the absence of live sports has led gamblers to wager on shares, contributing to the market’s comeback from the March plunge. Will they stick with stocks when games return?