Detroit Three 2013 Business Performance Report

All three made good profits in the US and losses in Europe. Big difference in Chinese sales

2014/03/07

Summary

 The notable feature seen in the sustained recovery in the North American auto market is the robust sales of trucks; 2013 is being called "the year of the truck". Strong sales were seen for light- and medium-size SUVs. Especially for the Big Three that all build strong full-size pickup trucks, their total market share combined rose from 45.1% to 45.7% year-over-year (y/y), an increase of 0.6 points. As for Japanese OEMs, their combined market share also gained year-over-year, growing 0.3 points from 37.1% to 37.4%, owing this improvement to the weaker yen-to-dollar rates.

 Among the Big Three, Ford achieved the highest operating profit and net profit, increasing its sales worldwide by working under the banner of the "One Ford" strategy. Even in the North American region, Ford's profit outpaced that of GM, which wasn't able to grow its market share, even in spite of launching several new models. In January 2014, Fiat-Chrysler, after  hard negotiating, was finally able to completely acquire the remaining 41.5% shares from the VEBA (the UAW Retiree Medical Benefits Trust). Fiat held an executive board meeting at the end of January, during which the name of the newly merged company was decided, Fiat Chrysler Automobiles (FCA).

 Even though the US Big Three together were able to rack-up huge earnings in North America, supported by robust sales of both full-size pickup trucks and also SUVs, the three together suffered significant losses in Europe, which was a common factor among them. However, there was a huge discrepancy in terms of performance among the three in China, where GM's sales increased 11.4% y/yto 3.16 million units; Ford's increased 49% to 936,000; and Fiat-Chrysler's sales reached 50,000 units.

2013 Detroit Three Comparison (USD 1 million)
GM Ford FCA
Revenues 155,427 146,917 118,938
EBIT 8,578 8,569 4,071
(EBIT/Revenues) 5.5% 5.8% 3.4%
Net Income 5,346 7,155 2,673

Note 1, EBIT stands for Earnings Before Interest and Taxes; Ford's EBIT is actually Pre-tax results
Note 2, FCA USD amount is calculated by using 1 euro: 1.37 USD exchange rate

  US Big 3 Sales by Region

US Big 3 Profit by Region


Related Reports:
North American International Auto Show 2014: US OEMs (Jan. 2014)
US Pickup Truck Market: On the rebound (Nov. 2013)



GM: New-model launches fail to increase market share

 

Transitioning from "Government Motors" to General Motors

 Since January 2013, the US Department of the Treasury had been selling off GM shares that it owned, through offering shares through the stock markets and elsewhere. It announced in December 2013 that is had eventually sold off all of them.

Timeline Govt. Owned
GM Shares
Scenario of Events
June, 2009 61.8% GM files for bankruptcy. Dept. of the Treasury loaned the company USD49.5 billion, against which it issued shares in the company
October, 2010 Ca. 30% In line with the stock-market relisting of GM, GM sells some of its shares
December, 2012 500.1 million shares Announcement made that all of the 500.1 million of shares held by the Dept. of the Treasury will be sold
December end, 2012 300.1 million shares GM buys back 200 million shares from Dept. of the Treasury
January, 2013 Dept. of the Treasury begins selling 300.1 million shares it owns in GM
December, 2013 0% Dept. of Treasury sold all remaining GM shares that it owns

U.S. Treasury 2013/12/9 Press Release, Treasury Sells Final Shares of GM Common Stock

 

The Pros & Cons of Rescuing GM
Pros Cons
(From US Dept. of the Treasury)
* Created new jobs for 370,000 workers
* Stabilized the financial basis of the Big Three(As reported by GM)
* Was able to keep 1.2 million workers in employment in 2009
* Was able to sustain USD 39.4 billion in individual income and social security tax between 2009 and 2010.
* The government loaned USD49.5 billion to GM, using public funds (taxes). However, it was only able to recover USD39.0 billion dollars. This resulted in a loss to tax-payers of 10.5 billion


 Currently, GM's principle stockholders are the VEBA for the UAW retirees and the Canadian government; the VEBA owns 9.2% and the Canadian government owns 7.2%.

 

Dissolution of GM's Partnership with PSA

Outline of the Strategic Partnership with PSA
Timeline Scenario of Events
Feb. 2012 GM and PSA agree to form a strategic partnership on a global basis
March 2012 GM acquires 7% ownership in PSA, acquiring stock shares
Dec. 2013 PSA announces that it is advancing discussions on furthering its partnership with Dongfeng Motor Corporation (DFM), including further investing in the company
End of 2013 GM sells off its 7% ownership in PSA under certain conditions, which require the two companies to continue conducting joint sales and mutually producing each other's products.
Feb. 2014 PSA announces its partnership with DFM, receiving 14% financing from both Dongfeng and the French government.

 

Akerson Resigns as CEO; Is Succeeded by Maria Barra, the First Female CEO in the Auto Industry.

 Akerson, who assumed the role of rebuilding GM as the CEO on September 1, 2010, resigned on January 15, 2014, after GM reached a pivotal point in its history. So far, the company experienced a recovery in business performance and the last shares of government-owned stock shares were sold. Succeeding Akerson was Maria Barra, who served as Executive Vice President, Global Product Development, Purchasing & Supply Chain, becoming the first female CEO in the auto industry.

 

GM's Launching of the Most New Models Ever, in 2013, and Enhancing Its Product Range Did Not Lead to Greater Sales

GM Product Strategy: In 2013, 18 new vehicles were introduced. 70% of its line-up is freshened
Plus Minus
* Cadillac CTS won U.S. Car of the Year
* Corvette Stingray won North American Car of the Year
* Chevrolet Silverado won North American Car of the Year
* Chevrolet Impala was very highly evaluated by Consumer Report
(Cannot threaten the leaders in the important segments, so that GM failed to increase market share)
* Silverado/Sierra could not narrow the difference to F Series (The difference widened from 70,000 in 2012 to 99,000 in 2013)
* Redesigned Malibu cannot match Camry and Accord(Malibu sold 201,000 in 2013, while Camry sold 408,000 and Accord sold 367,000 units.)


 GM announced 15 new models in 2014, including the Chevrolet Colorado and the GMC Canyon mid-size pickups, four heavy-duty SUV derivatives, and others.

 

GM's FY2013 Business Results and FY2014 Forecast

 GM's operating revenue in 2013 increased 2.1% year-over-year, to USD154.43 billion. Its EBIT improved, increasing 9.1% to USD8.58 billion. Nevertheless, its net profit fell 13.6% year-over-year, dropping to USD5.35 billion due to higher taxes. This created a situation in which the company has come to depend even more on its North American operations to eke out a profit.

 The company forecasts that for 2014, its profits in both North America and China will further improve; it will bear USD1.10 billion in reorganization costs; and that its business performance will surpass that of 2013, if only by a narrow margin.

 Note that in February 2014, GM recalled 1.62 million faulty ignition switches. Faced with a significant increase in workload, which will be needed to rectify the switches as a result of such a large recall, and faced with the risk of possible lawsuits after hearing reports of deaths and injuries due to the faulty switches, the company is quite concerned over the negative impact that this recall will have on its business performance.

 

GM 2011-13 Financial Results (USD 1 million)
2011 2012 2013 YoY
Revenues 150,276 152,256 155,427 2.1%
Automotive Sector 148,869 150,293 152,100 1.2%
  North America(GMNA) 90,233 89,910 95,099 5.8%
  Europe(GME) 26,757 20,689 20,110 -2.8%
  South America(GMSA) 16,877 16,700 16,478 -1.3%
  Other regions(GMIO) 24,761 22,954 20,263 -11.7%
EBIT 8,307 7,859 8,578 9.1%
  North America(GMNA) 7,194 6,470 7,461 15.3%
  Europe(GME) -747 -1,939 -844 ---
  South America(GMSA) -122 457 327 -28.4%
  Other regions(GMIO) 1,897 2,528 1,230 -51.3%
Net Income 7,585 6,188 5,346 -13.6%

Source:GM Press Releases dated 2014/2/6 and 2013/2/14

 

GM Global Sales and Market Share in 2011-13(1,000 units)
Region 2011 2012 2013
Sales share Sales share Sales share
North America(GMNA) 2,925 18% 3,019 16.9% 3,234 16.9%
Europe(GME) 1,751 9% 1,611 8.5% 1,557 8.3%
South America(GMSA) 1,066 19% 1,051 18.0% 1,037 17.5%
Other Regions(GMIO) 3,281 10% 3,616 9.5% 3,886 9.5%
  Including China 2,542 n.a. 2,832 n.a. 3,156 n.a.
Global Total 9,024 12% 9,297 11.5% 9,715 11.5%

 

 



Ford: "One Ford" Strategy continues to sustain favorable results

 

"One Ford" Strategy contributes to sales increases and greater efficiencies  CEO Mulally initiated and promoted the "One Ford" global strategy that calls for reducing the number of product platforms tosave costs and selling strategic vehicles in markets worldwide. This strategy has paid off, significantly contributing to increasing sales and raising operating efficiencies. GM is equipping a large number of vehicles with its low-exhaust-emission turbo-EcoBoost engines, commanding a lead over the other two major US-based OEMS in terms of being eco-friendly. Among its model line-up of strategic vehicles destined for sale in markets worldwide, the company is especially taking pride in emphasizing the fact that its compact-sized Focus became the most widely mass-marketed car in the world, surpassing even the Toyota Corolla.
Investment strategy focused on major segments (super segments), with an aim toward increasing market share  Ford has focused its sales-expansion activities on what it calls "super segment vehicles", which include compact cars, mid-size sedans, and SUVs. The strategy is  based on its discovery that two out of three car buyers who visit dealer showrooms first come with the idea of buying either the Ford Escape or Ford Fusion. As a result, unit sales of the Escape climbed 13.4% year-over-year and sales of the Fusion grew 22.4%.
 Also, Ford has been able to maintain its top position in the full-size pickup truck segment, following the sales policies that it set, which include offering sales incentives. Other initiatives include building its full-size pickup, the F-150, as a CNG vehicle, in spite of its being the end of the pickup's model cycle; developing its EcoBoost engine; and launching the Tremor sport truck. This has resulted in raising the company's market share in 2013 from 15.6% y/y to 16.1% y/y, an increase of 0.5 points.
Rebuilding the Lincoln brand still remains an issue  In rebuilding the Lincoln brand, Ford plans to launch four new vehicle models over four years. The first of the models to be launched was the Lincoln MKZ, a mid-size sedan. It was plagued with quality issues that significantly delayed the initial sales launch, resulting in a sales decline for the brand as a whole by 0.6% y/y.
 In 2014, Ford will launch the second of the models, the Lincoln MKC, a compact SUV, hoping that it would be the model to "save" the brand. Unfortunately, sales growth of Lincoln brands outside of North America has been slow to materialize.
Ford launching 23 new vehicle models worldwide in 2014, with plans to launch 16 new vehicle models in North America  On December 12, 2013 Ford announced that it would launch 23 new models worldwide and 16 in North America. Among these is the F-150, the highest selling vehicle model in the U. S., which the company will build with an aluminum body as a means to further contribute to weight reduction. However, there are concerns that the aluminum body will lead to increased costs and difficulties in terms of dealers for in-house repair work.

 

Ford 2011-13 Financial Results
2011 2012 2013 YoY
Revenues(billion) 136.3 133.6 146.9 10.0%
Automotive Sector(billion) 128.2 126.6 139.4 10.1%
  North America 75.0 79.9 88.9 11.3%
  South America 11.0 10.1 10.8 6.9%
  Europe 33.8 26.6 27.9 4.9%
Asia Pacific Africa 8.4 10 11.8 18.0%
Pre-tax results (million) 8,681 7,966 8,569 7.6%
Automotive Sector 6,332 6,256 6,897 10.2%
  North America 6,191 8,343 8,781 5.2%
  South America 861 213 -34 ---
  Europe -27 -1,753 -1,609 ---
Asia Pacific Africa -92 -77 415 ---
After-tax results (million) 20,213 5,665 7,155 26.3%

 

Ford Wholesales in 2011- 2013 (1,000units)
Region 2011 2012 2013 YoY
  North America 2,686 2,784 3,088 10.9%
  South America 506 498 538 8.0%
  Europe 1,602 1,353 1,360 0.5%
  Asia Pacific Africa 901 1,033 1,344 30.1%
Wholesales Total 5,695 5,668 6,330 11.7%

Source:Ford Press Release dated 2014/1/29 and 2012 Annual Report

 

Forecast for 2014 Business Performance

 Ford has suffered from disruptions to production in 2014, which have occurred as a result of its launching so many new model vehicles. Subsequently, this situation will reduce its operating profit margin because of the tremendous costs involved with launching the new models. It forecasts that its pre-tax profit in 2014 will between USD7-8 billion, which is slightly lower than what it was in 2013.

 

 



FCA: Fiat completes full acquisition of Chrysler

 

Agreement reached for Fiat to acquire the remaining 41.5% of Chrysler shares, from Chrysler's VEBA

 In January 2014, Fiat acquired the remaining 41.5% shares in Chrysler, for USD4.35 billion, from the VEBA, i.e., the medical benefit trust set up for UAW retirees. As a result, Fiat formed a new company, naming it Fiat Chrysler Automobiles (FCA), which was established in the Netherlands and is tax domiciled in the UK. As result of the merger of Fiat and Chrysler, the newly formed FCA has become the world's seventh largest global automaker, following Toyota, GM, VW, Renault-Nissan, Hyundai-Kia, and Ford. However, the total of unit sales at both Fiat and Chrysler in 2013 combined amounted to 4.40 million units, which is less than half of the totals at each of the top-ranking automakers (Toyota, GM, and VW) and just two-thirds of that at Ford.

 

Timeline of Fiat's Acquisition of Chrysler
Ownership Ratio Scenario of Events
June 2009 20.0%  Fiat was able to acquire a 20% ownership in Chrysler on condition that it share its technical expertise in small- and mid-size vehicles and its global logistics network with Chrysler.
January 2011 →25.0%  Condition 1, for increasing Fiat's ownership ratio in Chrysler, was satisfied: production of Fiat's FIRE, a low-fuel consumption engine, was launched at Chrysler's Dundee, Michigan plant. (The engine is a 1.4L, inline4-cylinder multi-air engine designed for the US version of the Fiat 500.)
April 2011 →30.0%  Condition 2, for increasing Fiat's ownership ratio in Chrysler, was satisfied: Chrysler, for the first time ever since the companies started on the road in June 2009 to forming a new company, was finally able to generate a total of USD1.5 billion in non-North-American sales. In addition, sales of Chrysler vehicles in Brazil and Europe became a reality.
May 2011 →46.0%  At the time Chrysler paid back its loans in full to both the US and Canadian governments, Fiat exercised a call option and bought 16% of the outstanding shares in Chrysler for USD1.27 billion, increasing its ownership ratio further.
July 2011 →53.5%  Fiat acquired 6% of the Chrysler shares owned by the US government and 1.5% of the shares owned by the Canadian government, for a total of USD125 million. This completed the sale of all shares owned in Chrysler by the governments of the two countries.
 Exercising a purchase option, Fiat, for USD7.5 million dollars, acquired the shares held by the governments of both countries in Chrysler's VEBA for UAW retirees (the UAW Retiree Medical Benefits Trust). Fiat paid the US government USD6 million and the Canadian government USD1.5 million.
January 2012 →58.5%  Condition 3, for increasing Fiat's ownership ratio in Chrysler, was satisfied: development activities started on the Dodge Dart, a small-size sedan, which is based on Fiat's small-size platform used for the Alfa Romeo Guilietta. The Dart achieves a combined fuel efficiency of 40mpg. It is being built at the Belvidere, Illinois plant.
September 2013  Since no agreement could be reached during negotiations with VEBA on the value of the remaining 41.5% Chrysler shares, VEBA, as a means to hopefully create a higher stock-price value, demanded that Chrysler file for an IPO, which in September it agreed to do. While preparations were being made to launch the IPO sometime in October or after, the market value of the Chrysler shares began to crystalize.
January 2014 →100.0%  Fiat and VEBA reached agreement on the acquisition price of Chrysler shares. As a result, Fiat is to pay VEBA a total of USD4.35 billion, which put an end to plans calling for an IPO. The Fiat board of directors on January 29 held a meeting, deciding that the new company would be named FCA, be organized in the Netherlands, and be domiciled in the UK for tax purposes.

Source:Fiat Q4 & FY 2011 Results Review, Fiat Press Release 2011.1.21/2011.4.21, Chrysler Press Release 2012.1.5
Chrysler Release 2014.1.2, 2014.1.29

 

2013 Business Results and 2014 Business Forecast (Company Achieves Strong Performance in US, While Posting Losses in Europe)

 The number of vehicle units shipped by Chrysler in 2013 fell 3.3% y/y in Europe and 3.0% y/y in South America. In spite of this, the company's shipments in North America increased 5.8%, enough to offset the other regions' poor performance. The Group as a whole saw a 2.9% year-over-year increase in shipments. While overall auto demand in the US market was strong, growing 7.6% y/y. Chrysler experienced a growth in demand of 9%, which increased its market share from 11.5% to 11.6%, a 0.1 point improvement.

 The company had scheduled the sales launch of the compact SUV Jeep Cherokee in the summer of 2013; however, suffering setbacks caused by issues with the Cherokee's level of quality, the company had to postpone the launch date until the end of October. In spite of this one negative factor on Chrysler's performance, sales of pickups and SUVs overall were robust. For example, sales of the Ram pickup rose 21.2% year-over-year, sales of the full-size SUV Dodge Durango rose 42.6%, and sales of the Jeep Grand Cherokee rose 12.6%. In addition, Chrysler stayed ahead of the other automakers in terms of launching vehicles mounted with 9-speed automatic transmissions and turbo-diesel engines.

 The bottom line profit for Fiat-Chrysler in 2013 was EUR1.95 billion, but this result comes with a caveat: Fiat on its own posted a loss of EUR910 million. In terms of sales by region, year-over-year gains were achieved in North America (5.2%) and in Asia/Pacific (47.7%), where sales in China especially began to take off. However, year-over-year losses were posted in Europe (2.1%) and South America (9.8%). On a more positive note, sales in the luxury-brand sector of high-end vehicles (Ferrari and Maserati) were exceptionally strong, up 31.4% y/y.

 The company has set the following performance targets for 2014. Sales are forecast to be EUR9.30 billion, a 7% year-over-year increase. The company is aiming for an trading profit of EUR3.60-4.00 billion and a net profit of EUR600-800 million. The greatest business challenge that FCA faces is expanding its sales in North America and China. In responding to the very heated and competitive mid-size sedan market, which makes up the largest passenger-car segment in North America, the company is planning to launch the Chrysler 200, designed to compete head on with the Camry and Accord. In addition to this, the company is waging that it will obtain approval to build its Jeep Cherokee in China, a major market where its business expansion activities have lagged behind those of its competitors, forging ahead with plans to launch production at the end of 2014.

 

Fiat Chrysler Automobiles 2013 Financial Results                                              (EUR 1 million)
2011/6
Consolidation
2011/1
Consolidation*
2012 2013 YoY
Revenues 59,559 74,949 83,957 86,816 3.4%
Trading profit 2,392 3,232 3,541 3,394 -4.2%
Net profit 1,651 --- 896 1,951 117.7%

Source:Fiat Chrysler Press Release
*2011/1 Consolidation is the simulated figures for comparison as if Fiat consolidated Chrysler from January, 2011.
Actually Fiat consolidated Chrysler from June, 2011.

 

Revenues by Region and Sector                                                                      (EUR 1 million)
Region/Sector 2011/6
Consolidation
2011/1
Consolidation*
2012 2013 YoY
North America 19,830 33,800 43,521 45,777 5.2%
Europe 19,591 20,078 17,800 17,420 -2.1%
South America 10,562 11,068 11,062 9,973 -9.8%
Asia Pacific 1,513 2,086 3,128 4,621 47.7%
Luxury Brands 2,686 2,699 2,898 3,809 31.4%
Components 5,489 8,122 8,030 8,080 0.6%
Other 617 1068 979 929 -5.1%
Adjustment   -3,972 -3,461 -3,793 N/C
Total 60,288 74,949 83,957 86,816 3.4%

Source:Fiat Chrysler Press Release
*2011/1 Consolidation is the simulated figures for comparison as if Fiat consolidated Chrysler from January, 2011.
Actually Fiat consolidated Chrysler from June, 2011.

 

EBIT by Region and Sector                                                                            (EUR 1 million)
Region/Sector 2011/6
Consolidation
2011/1
Consolidation*
2012 2013 YoY
North America 1,087 1,770 2,491 2,290 -8.1%
Europe -941 -897 -737 -520 -29.4%
South America 1,331 1,385 1,025 492 -52.0%
Asia Pacific 63 119 255 318 24.7%
Luxury Brands 358 358 392 470 19.9%
Components -110 -110 165 146 -11.5%
Others -108 -108 -149 -167 12.1%
Adjustment 1787 1,788 -38 -57 50.0%
Total 3,467 4,305 3,404 2,972 -12.7%

Source:Fiat Chrysler Press Release
*2011/1 Consolidation is the simulated figures for comparison as if Fiat consolidated Chrysler from January, 2011.
Actually Fiat consolidated Chrysler from June, 2011.

 

Wholesales by Region                                                                                      (1,000 units)
Region 2011/6
Consolidation
2011/1
Consolidation*
2012 2013 YoY
North America 1,033 1,783 2,115 2,238 5.8%
Europe 1,166 1,180 1,012 979 -3.3%
South America 910 929 979 950 -3.0%
Asia Pacific 53 74 103 163 58.3%
Total 1,855 3,966 4,209 4,330 2.9%

Source:Fiat Chrysler Press Release
The above chart does not include luxury brands (Ferrari, Maserati)
*2011/1 Consolidation is the simulated figures for comparison as if Fiat consolidated Chrysler from January, 2011.
Actually Fiat consolidated Chrysler from June, 2011.

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