Boeing had very, very bad year, Tesla had a very, very good year, and Nissan is asking for buyouts in the U.S. All that and more in The Morning Shift for Wednesday, Jan. 29, 2020.
1st Gear: Boeing’s 737 MAX Disaster Cut Deep Into Profits
This whole mess has led to halting production of the 737 Max, firing its CEO, revealing its contempt for pilots who sought more training, and, now, the first annual operating loss for the company in over 20 years.
From CNBC:
Boeing said it lost $636 million in 2019, marking the first annual loss since 1997. As a comparison, Boeing had posted a profit of $10.46 billion in 2018.
Boeing reported a loss of $2.33 per share for the fourth quarter of last year. Revenue in the last three months of the year dropped 37% to $17.91 billion compared with $28.34 billion in the year-earlier period.
[...]
The debacle’s costs to Boeing are rising to more than $18 billion, the company said, roughly double what it outlined in the previous quarter. That amount includes an additional $2.6 billion pretax charge to compensate airlines and other 737 Max customers because of the grounding. Boeing had taken a $5.6 billion pretax charge in the second quarter to compensate its customers.
Boeing still has hopes of getting the 737 Max back flying again, though that is far from certain given the regulatory hurdles it must clear before that can happen. And even if it does, the whole episode will remain reputationally disastrous, and now financially so as well.
2nd Gear: Global Auto Production Might Have Already Reached Its Apex
That’s according to Bosch CEO Volkmar Denner, who was trying explain why the supplier lost 44 percent in operating profit in 2019 compared to 2018.
Per Reuters:
Global automotive production is expected to fall for the third consecutive year, by 2.6 percent to 89 million vehicles in 2020, following a drop in demand in China, Europe and the U.S., the supplier said.
“It could well be that we have passed the peak of automotive production,” Bosch CEO Volkmar Denner said.
He also said he assumed the low level would remain constant and did not expected an increase in global automotive production before 2025, while the market would shrink by 10 million units in 2020 compared with 2017.
It looks like we first used the phrase “peak car” on this website in January 2013, which was over seven years ago now. Since then, well, let’s just say things haven’t changed all that much for enthusiasts, even if there have been some seismic changes in the industry, like Ford giving up on cars altogether. But you still basically have the complete menu available to you in 2020, and I wouldn’t be surprised if that was the case seven years from now.
3rd Gear: It’s A Big Day For Tesla
The company will report its full-year 2019 earnings after the close of stock markets today, and after Tesla’s stock has been on a tear as of late, analysts will be closely watching how well Tesla did, or how well it will say it did. The company is in the midst of a good run, with the Model 3 selling well and its China factory up and running, but as always with Tesla, it’s hard to trust that the good times will last.
From a Bloomberg wire report not yet online:
Tesla’s ability to maintain its profit margins as it starts selling more and more of its lower-priced Model 3 sedans has long been a concern among investors and analysts. With production ramping up fast, the market will be looking for clues on how the company plans to arrest the margin erosion that would accompany the bigger volumes.
In the last three months of 2019, Tesla delivered 112,000 cars to customers, bringing the total number for the year to 367,500 vehicles. For 2020, [Morgan Stanley analyst Adam Jonas] expects the company to set up a forecast of 498,000 units, while Roth Capital Partners’ Craig Irwin anticipates that Tesla will deliver 460,000. Irwin, who sees Tesla shares as “egregiously overvalued” and also has a sell rating, said the market could be expecting a delivery forecast of about 500,000 to 600,000.
You can expect positive profit results to boost Tesla’s stock even further, and less than positive news to stunt the rally. As of this writing, Tesla’s market capitalization is sitting at $102 billion, well more than General Motors and Ford combined. If it stays there, CEO Elon Musk is in for a giant payday, meaning that he has every incentive to keep the stock price as high as possible.
4th Gear: Fiat Chrysler To Idle A Jeep Plant
It will be the third such idling in less than a year at the production plant in Belvidere, Illinois, according to Bloomberg. The plant, which makes the Cherokee, will shut down for a week starting February 17. FCA anticipates a slowing of SUV sales this year, and it’s not alone.
From Bloomberg:
Five of the six largest North American automakers are expected to dial back production in the first quarter, researcher LMC automotive said earlier this month. Most analysts are projecting industry sales to dip below 17 million units for the first time in six years as consumers struggle to afford new vehicles. The average price paid for a new car or truck is approaching $35,000.
The fate of the Belvidere plant was the subject of speculation during Fiat Chrysler’s labor negotiations last year with the UAW. The union’s new contract with FCA calls for a $55 million investment in the factory. Cherokee production is slated to continue. Next-generation safety features will be added to the Cherokee in 2020, according to details of the union’s new labor pact.
5th Gear: Nissan’s Workforce Is Getting Smaller In The U.S.
Nissan has over 20,000 hourly and salaried employees in the U.S., but falling sales mean that number will be decreasing, according to Automotive News. Buyouts will be offered to employees 52 or older, the company disclosed yesterday. Nissan declined to say whether it would lay employees off if enough did not take the buyout, but if I were a Nissan employee, I would expect that.
From Auto News:
Nissan North America’s U.S. sales tumbled 9.9 percent to 1.35 million vehicles last year, in an overall market that fell 1.2 percent. The automaker’s U.S. market share, meanwhile, dropped to 7.9 percent last year, from 8.6 percent the prior year, according to the Automotive News Data Center.
Some of that is the result of a calculated effort to wean the brand off of fleet sales.
This is the second round of recent voluntary buyouts at Nissan North America. Last year, the company offered buyouts to hundreds of salaried employees in the U.S. and additionally announced plans for 700 job cuts at its plant in Canton, Miss. But the number of layoffs dropped to 380 following attrition and a voluntary separation program.
Nissan late last year said it would cut employee travel budgets by 50 percent and put the entire U.S. organization on two days of unpaid furlough in early January.
Reuters reported on Tuesday that parent company Nissan Motor Co. is set to eliminate at least 4,300 white-collar jobs and shut two manufacturing sites as part of broader plans to add at least 480 billion yen ($4.4 billion) to its bottom line by 2023.
The broader trend lines for Nissan remain in the shitter.
Reverse: Cars? Cars!
Neutral: Peak Car?
Again, we’ve been throwing around the idea of Peak Car for a few years now, but do you think we might finally be there or are we past it already? I start to believe it when people with skin in the game start to say it.