Car sales are related to economic growth and consumer confidence, says Citi. But wait! The bank’s analysts, Philip Watkins makes the journey to that humdrum conclusion interesting — with a detour through the banks, psuedo-banks, and financing operations of the European car companies.
Even if sales are tied more to GDP than to interest rates — seven in every ten new cars are sold on credit these days. Plus, the financial companies hiding within the automakers have around €400bn of assets and produce a sixth of of pre-tax profits (click chart to enlarge). Read more
Breaking pre-market news on Wednesday,
– Lehman’s joint chapter 11 plan gets support from creditors holding over $160bn in claims – Reuters. Read more
Shortages of a small electronic part that measures airflow to car engines have hit the auto industry in the wake of Japan’s earthquake and tsunami, reports the WSJ. The disaster has forced auto and parts plants throughout Japan to shut down. GM, Toyota and PSA Peugeot-Citroën have cut or are planning to curb output of thousands of vehicles in the US and Europe amid a shortage of critical parts made in Japan. On Wednesday, Toyota warned employees it expects to halt some production in the US and Canada as a result of Japanese parts shortages. One particularly crucial part, the sensor chip made by a unit of Hitachi at a plant damaged by the quake, is used by about a dozen auto makers. The FT meanwhile examines further Japan supply chain disruptions.
PSA Peugeot Citroën plans to expand into India and build a mid-size saloon car as part of a broader plan to build its business overseas and reduce its reliance on Europe’s anaemic car market, reports the FT. The French carmaking group made the announcement as it reported an expected return to profitability in 2010 and predicted higher earnings this year, supported largely by its business in faster growing emerging countries.
PSA Peugeot Citroën said it had signed a letter of intent with Chang’an Automobile Group to create a 50:50 joint venture in China. The French carmaking group said the venture would produce low-emission light commercial vehicles and passenger cars. Peugeot gave no details on the cars it planned to produce in the new joint venture except to say they would be “environmentally friendly”, the FT said.
We’re not talking about automatic breaking systems either.
Last week it emerged Ford and BMW would be breathing life back into the European market for asset-backed securities by issuing more than €1bn of debt backed by automobile loans and leases. Read more
Workers at a failed French car parts supplier are threatening to blow up their factory unless the company’s two biggest clients – Renault and PSA Peugeot Citroen – stump up extra compensation, the FT reported. Employees of the engine parts maker New Fabris have rigged up a series of gas canisters inside a factory workshop which they say will be detonated on July 31 if the two carmakers fail to pay €30,000 to each of the 366 workers facing unemployment.