Monday, Apr 28, 2008
Auto finance arms feel the credit squeeze
FT.com: Auto finance arms feel the credit squeeze
The effects just keep rippling through... soon they will start rippling back (well they have done already really)
Posted by whiteknight @ 06:14 PM (504 views) Add Comment
9 Comments
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1. plato said...
This will make a big difference to Germany's economic stability that is being so widely boasted about by the euro rampers.The Auto industry runs in parallel with the property market and can only rely on emerging markets for growth over the next few years. Will they have a big demand for German manufacturing against their own? Something has to give.
The West has to economise in more ways than one and gone are the days of free spending on status symbols.
The pressure will start to mount on the euro from all angles as every day goes by now, and it's looks to me like the heights have been reached with this currency.Could be time to jump ship.
2. alan said...
The squeeze hasn't bothered Kirk Kekorian who bought 4.7% of Ford shares (announcement today:Bloomberg) at a big premium.
Ford Europe (incl UK) is having one of it's best profit runs in a decade (1st Qtr results, last week).
The "ripple back" may come if the EU finance industry cuts staff in the next couple of months. Meanwhile the UK & European public sector continues to buy vehicles at a steady rate.
3. whiteknight said...
I have an interesting hypothesis about money going into one end of the system, inflated profits versus real profits and why this causes a sucking of capital from the venture end of the business where it is really creating value.
Maybe I wil share it if ihave the energy sometime.
4. whiteknight said...
keep talkin' ..... the problem will keep walkin'
5. whiteknight said...
"The move comes amid signs of progress on a wrenching restructuring plan at Ford, which last week reported improved first-quarter earnings and that it was on track to return to profitability next year in spite of the slowing US car market."
6. alan said...
The US segment of Ford should return to profit next year. However, S America is doing well, as is Europe:
"The $520 million improvement in European pretax profit was the biggest surprise, said Argus Research analyst Kevin Tynan in New York",
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=amnYZ288POcw
As yet, the EU hasn't suffered much from failure to obtain credit (by buyers) as has been the case in the US. I guess the problem will come to Europe & the UK very soon.
7. drewster said...
I've seen car adverts on american tv a few times over recent years. They promote hire-purchase and leasing arrangements far more than we do. Nearly every car is advertised in dollars per month rather than the actual sticker price. I suspect there has been a large degree of sub-prime lending for people to buy cars.
Consider a "ninja" - no income, no job, no assets. Ordinarily they would be unable to buy a car. However if they first buy a home with a subprime mortgage, then when they apply for a car loan they can tick the "homeowner" box and that could increase their credit score so that the leasing company accepts them. If that "ninja" then defaults on the mortgage, they can easily drive off to the next state and become more difficult for the leasing company to track down.
There's a whole can of worms just waiting to be opened here. If I were a bond trader I'd steer clear of GMAC or Ford Credit bonds right now.
8. waiting for the crash said...
Banks on wheels! Thats what they describe themselves as.
That profit in EU was no surprise to Ford.
Now having worked for Ford - they have been pretty canny about finance. When the rating agencies where downgrading their bonds 2005-6 Ford got miffed of with the markets and sorted themselves out with 40bill of credit in 2006 to last them through the hard times (yes they predict with accuracy their profits 5 years ahead) plus they have a 20bill cash reserve. - well they did have.
Ford of Europe makes profit from transits (so much so they moved Turkey into the EU operation to make the EU op profitable seems Transit are really popular in Turkey) and the new Mondeo is selling well which they also make profit from. The other models make no money. Ford also makes more profit in a recession as people stop buying audis and bmw's and buy cheaper cars.
GM sold a stake in GMAC a couple of years back when they suffered credit agency downgrades. GM and Ford owe so much money that the US govt want allow them to go bankcrupt otherwise big big mess, and these companies have political power and employ millions of people. Over the last 10 years GM and Ford's market share has eroded in the US, I would also think that all the moto manus have risks from a US downturn. The average price of a US car is US25K not a 6K fiesta increasing the exposure to the Yap and Korian manufacturers.
Friend of mine sells boats - vast numbers of people are trying to sell their yahcts in Florida.
The truth about Ford shares. Ford A stock has no voting rights. The Ford family and Friends own the class b stock which does. Making Ford a family run business and takes a longer term view. Kirk is looking for the stock to rise to maybe 12+ dollars if he bought class A stock.
Its not the finance charges that have been affecting auto makers in the US its the health care costs to their pensioners. GM is the world largest buyer of Viagra. Yep!
Ford have their own internal daily news blog of whats happening in the auto industry, its not filtered. HPC blog and comments will probably turn up in the listing tomorrow.
9. drewster said...
waiting4...... Thanks for the inside info - it's always good to have solid numbers.