|
|
SHAREHOLDERS TAKE AIM AT DAIMLERCHRYSLER
22 December 2000
DaimlerChrysler AG shareholders have filed at least 13 lawsuits against the company, claiming the 1998 merger of Daimler-Benz and Chrysler was really a takeover by the German company that has damaged the interests of those who invested in the company.
The most high profile of the 13 - more are expected - has been launched by billionaire investor Kirk
Kerkorian, whose filing is asking for US$8 billion in compensation for various wrongs. Kerkorian holds 3.3 per cent of all outstanding DaimlerChrysler shares.
Officials from DaimlerChrysler say all the suits "appear to be completely unsubstantiated." Still, shareholders are restless in the wake of a US $512 million third quarter loss for the Chrysler division of
DaimlerChrysler. There is speculation that Chrysler may lose as much as US$1 billion in the fourth quarter.
Interestingly, while the various suits allege mismanagement on behalf of DaimlerChrysler's leadership, they apparently do not emphasize that in 1999 the company earned US$5.7 billion, which was much higher than the US$4.8 billion in profits DaimlerChrysler reported in 1998.
On the other hand, the company's recent woes have prompted to two Wall Street credit rating agencies to downgrade DaimlerChrysler's credit ratings. The move by Standard & Poor's and Moody's Investors Service will make it more costly for DaimlerChrysler to borrow money.
In the meantime, slow sales have forced Chrysler to conclude that it must reduce vehicle output to match vehicle demand by roughly 50,000 this month. The company will halt production a week at a time at 11 of 13 assembly
plants--none of them in Germany. There is also speculation that company officials will be looking for concessions from its unionized workers and suppliers have been asked to make price cuts of 15 per cent over the next two. The cuts include an immediate five per cent reduction in all parts and service charges from suppliers.
New Chrysler President Dieter Zetsche will release DaimlerChrysler financial results for calendar 2000 on Feb. 26. Those numbers are expected to be accompanied by a plan to make Chrysler profitable again.
|
|
back |
|
|
|
|
 SLOWDOWN IN CAR BUSINESS
22 December 2000
A slowdown in the car market has begun in the United States, which for about 30 per cent of all new cars sold in the world.
Now the question is: which of the "Big Six" global automakers (and their satellites) will fare best in a less robust car market. The Big Six are General Motors, Ford, Toyota, Volkswagen, DaimlerChrysler and
Renault-Nissan.
This year Canada and the U.S. will account for a record combined sales total of more than 18.5 million vehicles. But next year analysts predict a decline about one million vehicles. For the Big Six that is not good news - not with sales and profits from Western Europe and much of Asia, including Japan, under pressure from high gas prices and currency fluctuations.
"With North America slowing down, it really has a negative impact all over the world because it accounts for so much of the world's volume," said Rebecca
Lindland, senior analyst with Standard & Poor's DRI.
A major concern for the industry is the amount of excess capacity around the world. While about 55 million cars and light trucks will be sold this year worldwide, the industry has a capacity to build about 75 million, according to
PriceWaterhouseCoopers.
But overcapacity is more a regional problem than a global one, says J.
Ferron, PriceWaterhouseCoopers' lead auto analyst. Car plants in North America run at about 85 per cent of capacity, white South American plants average about 50 per cent.
So who will be strong as 2001 starts? GM and Ford have seen their European operations slump and at home both companies' light truck business is under pressure from Toyota, Honda and Nissan. Europe has also presented problems to Toyota, while at home in Japan the strong yen has cut into earnings.
Still, there are some bright lights on the car company horizon.
Nissan chief operating officer Carlos Ghosn appears to be orchestrating a successful turnaround of the company's tangled and
money-losing Japanese operations. Last month, Ghosn announced a half-year operating profit of US$1.2 billion, compared to US$552 million in the same period last year. Volkswagen's profit was up 50 per cent through the first three quarters and sales in Canada and the U.S. continue to grow. And Korea's Hyundai is enjoying strong sales growth in not just the lower end of the market, while it tries to gain ground in the middle segments.
|
|
back |
|
|
|
WANTED: NEW GM FINANCE BOSS:
15 September 2000
J. Michael Losh has left as chief financial officer of General Motors after six years in the job and 34 years as an employee of the world's largest corporation. The new finance boss, yet to be named, will face several critical challenges in the months ahead. He or she will help determine whether to spin off GM's Hughes Electronics while at the same time crafting a strategy to fight off Carl
Icahn, the noted corporate raider famous for driving entrenched management wild with his demands to boost share valuations. At the same time, the new chief financial officer will help decide whether to keep the OnStar telematics system under GM's corporate umbrella. And looming ahead is the possible need to craft a strategy to manage a potential US$9 billion full buyout of Fiat, of which GM has already taken a 20 per cent interest. At the same time, the new CFO will participate in decisions on how to boost GM's car business. Oh, and GM has announced plans to begin producing a compact family car in China next year. Details yet to come. Good luck to the next CFO...
|
|
|
 BETTING ON THE
GENERAL:
8 September 2000
So just why is investor Carl Icahn interested in buying a huge stake in
General Motors -- a minimum of US$15 million, but not more than 15 per
cent of the company? Icahn does have a reputation for pressuring
management into taking the kinds of actions that boost stock prices. Icahn
isn't saying why and GM officials won't speculate. But many analysts
expect GM to give up its remaining hold on Hughes Electronics (GMH), the
satellite television company owned by GM, sometime during 2001. That
should unlock some shareholder value, one way or another, say analysts.
|
|
back
|
|
|
 THE BUSINESS OF
FORMULA ONE MOTORSPORT IS BIG
28 July 2000
MONTREAL - Jackie Stewart - does anybody NOT know who Jackie Stewart is? -- is being frank about the costs of racing in Formula One:
"Every team out here (at Montreal's Air Canada Grand Prix) is spending between $160-$200 million (U.S) dollars to race," says the former three-time champion of the world's premier motorsport circuit. "The stakes are very, very high."
Stewart may, in fact, be underestimating the cost for a team to compete in Formula One racing. Some experts suggest that the best-financed teams might spend as much as $450 million (Canadian) to support teams of three drivers (two to race, one to test) for the full 17-race season. It's the price one must pay for three cars (two for race day and a spare) and a crew of more than 300 support workers. There are also drivers' salaries running in the millions, as well as wind tunnels and travelling expenses for racing a circuit covering five continents and running almost nine months, from March to November.
While the dollars are large, there's more at stake here than mere cash. Formula One racing is also about image and prestige, especially for the large corporations who invest tens of millions of dollars in racing programs. You can see the names of these companies painted onto the 750 horsepower billboards known as Formula One racing cars - cars that can accelerate from 0-160 km/h in four seconds, then brake back down to zero in two seconds.
And for many of the world's automakers the risks and potential benefits of Formula One racing are particularly high. Fiat, Honda, BMW, DaimelerChrysler, Ford and Peugeot all have made substantial investments in Formula One racing this year. But not equal ones.
Ford's Jaguar unit, for instance, is running its own full-blown factory team this year, returning the sport after a 17-year absence. Last year the team competed as an independent under the Stewart Grand Prix banner. But this year Jackie Stewart and his son, Paul, sold out to Ford and now the team is campaigning in Jaguar racing green.
Stewart, who remains with the team in an advisory capacity, argues that with the cost of racing Formula One, he really had no choice but to sell to a company with deep pockets. Stewart's long-time association with the world's second-largest automaker made the deal made sense for both parties.
"The wind tunnel alone that we're building will cost $US47 million. We just couldn't do that on our own," he says."
For Jaguar, the return to Formula One racing is a major step on the road to dramatically increasing the company's global sales. Jonathon Browning, Jaguar's managing director, says Jaguar plans to sell 200,000 cars worldwide within three years, a major increase from the 80,000 cars Jaguar plans to sell this year (about 2,400 of which will be sold in Canada).
"It gives us a global presence," he says with the roar of race cars in the background. "Formula One is the premier racing circuit and we're a premium brand. So it's a good fit for us."
Still, Jaguar and other companies aren't in Formula just to compete. They're in it to win. And through the first seven races of the season all Jaguar has done is score a fourth place at Monaco - its first points of the season. So the pressure is intense to get results on the track from drivers Eddie Irvine and Johnny Herbert.
Moreover, Jaguar returned to Formula One with great fanfare, creating expectations for which this team simply cannot deliver this year. And company officials are frank about that fact. Still, Browning says the value of Jaguar's investment cannot be measured in the black-and-white terms of winning and losing.
"I've told the team they have to demonstrate professionalism, competence and competitiveness on the track, whether we win or
lose. The bigger test is, how do you handle yourself when you're struggling?" says Browning.
Rest assured Jaguar's results are being followed at the highest levels of the company. Neil Ressler, the Ford vice-president brought in to act as chairman of Jaguar Racing, says Ford chief executive Jac Nasser personally made the decision for Ford's Jaguar unit to compete in Formula One. On Mondays after a race, he's intensely interested in the results on the track, says Ressler.
Off the track, Browning and Jaguar officials are interested in measuring Jaguar Racing's impact in terms of consumer awareness. Traffic to the team's web site jaguar-racing.com has been huge, and that in turn has helped channel potential customers to Jaguar's product sites on the Net.
"Certainly we want to start winning as soon as possible," says Browning, adding that regardless of on-track results, for right now Formula One is creating tremendous awareness in the marketplace for Jaguar.
Browning boss, Wolfgang Reitzle who heads Ford's Premier Auto Group -- which includes Jaguar, Volvo, Aston Martin, Lincoln, Mercury and soon Range Rover -- has long argued that Formula One is a fantastic communication tool for a brand like Jaguar. But he's also said that participation in F1 racing can backfire if the team gives a full effort and yet fails. A losing effort holds the potential to devalue the brand and embarrass the manufacture.
All the teams competing at the Air Canada Grand Prix know it all too well. Formula One's worldwide popularity is astonishing, even if it is a niche player in North America. In 1999, 57 billion people saw Formula One on TV around the world. Every race is watched by 400 million people.
In some countries, Formula One is often the top-rated TV show. Manufacturers believe that for certain car brands, such as Jaguar, BMW, Mercedes and Ferrari, customers draw a close link between what they see on TV and what they see in dealer showrooms. The old saying is, "race on Sunday, sell on Monday."
Clearly the connection works for Fiat SpA's Ferrari unit. It builds its own bright red Formula One cars and has no trouble at all selling adverting on them. Ferrari has arguably the circuit's top driver, Michael Schumacher, and rivals concede that only the Mercedes-powered McLaren-Mercedes team has cars as fast and manoeuvrable. McLaren-Mercedes is not a pure factory team like Jaguar and Ferrari, however. Daimler-Chrysler AG shares billing with TAG McLaren Group.
Meanwhile, BMW (Bayerische Motoren Werke AG) and Honda Motor Co. provide engines and technical support. But even that entails a huge cost. A report in the Wall Street Journal notes that Martin
Beck-Burridge, director of Automotive Studies at Henley Management College in the U.K., estimates it can cost $100 million just to develop and build an engine, as Bayerische Motoren Werke AG is doing. BMW officials say that the not only is the global exposure generated by a Formula One entry important, but also there are substantial technical benefits.
Still, every manufacturer would like to duplicate the success currently enjoyed by Ferrari and Mercedes. The two top teams are also enjoying strong sales and both credit their racing efforts. The synergism between racing and selling high-priced sports cars are obvious for Ferrari. At the same time, Mercedes officials argue that winning at Formula One has injected excitement into all the vehicles wearing the Mercedes nameplate.
Juergen Hubbert, the management-board member at DaimlerChrysler in charge of all passenger cars, contends that it would have cost his company three or four times as much in advertising to get the equivalent exposure afforded by Formula One.
And none of that exposure would have been as powerful as the sight of a Mercedes driver taking the chequered flag. The evidence: Cars painted the same silver as the company's race car account for 36 per cent of all Mercedes sold, up from 20 per cent in the
mid-1990s.
Make no mistake, other manufacturers have noticed. Thus, for the 2002 season, Toyota Motor Corp. plans to race a Formula One team. And race venues are rife with speculation that Volkswagen AG is also considering running a team under either the Audi or Lamborghini brands.
So many carmakers, yet only one car takes the chequered flag on Sunday. For race fans and car buyers, it's a golden age.
|
|
