1st Gear: Questions From Investors
This morning Fiat Chrysler reported a $1.9 billion profit in 2016. Earnings are good, driven by cheap gas and surging SUV and truck sales.
But as this Detroit Free Press story—published yesterday before that number was posted—explains, FCA will have some long-term troubles convincing Wall Street investors and analysts that it is worthy of their attention and money.
Issues ranging from a pending investigation by the U.S. Environmental Protection Agency into Fiat Chrysler’s diesel-emissions violations, CEO Sergio Marchionne’s recent meeting with President Donald Trump, the outlook for changes to the North American Free Trade Agreement and the automaker’s sweeping restructuring plan all will likely be viewed as more important than the company’s improving profits.
The automaker has told analysts it expects to earn a net profit of more than $2.5 billion (2.3 billion euro) before any special charges, such as restructuring costs. That would be a big improvement over the $1.8 billion (1.7 billion euro) the automaker made in 2015 after special charges for recalls and restructuring.
Investors appear to be betting that the automaker is on the cusp of delivering on a plan to boost profit margins and thrive under the Trump administration. The automaker’s stock price has soared 72%, from $6.30 per share on Oct. 21 to $10.88 per share Tuesday — much larger gains than crosstown rivals Ford and General Motors.
In general the “Big Three” U.S. automakers have had a hard time convincing Wall Street of their strength, but FCA may have the hardest time of any of them for those reasons.
2nd Gear: Ford Profits Down But Good
How did Ford do overall in 2016? Even better than FCA, posting its second-best year in nearly two decades. It’s a drop in net income from 2015 but still solid overall. Via The Detroit News:
The Dearborn automaker, however, reported adjusted pre-tax income of $10.4 billion for the year, $200 million higher than its previous guidance, and the second best year since 2000.
The company last week in a regulatory filing said it had expected the accounting change — that tallies pension gains and losses in the year they happened — to cut net income by $2 billion.
“We achieved a solid 2016 net income of $4.6 billion, as well as an adjusted pre-tax company profit of $10.4 billion, which was our second best ever — building on the all-time record we had set the year before,” Ford President and CEO Mark Fields said in a statement. “This underscores the substantial progress we are making in expanding our business to be an auto and a mobility company.”
3rd Gear: This Is Fine, Everything Is Fine
A year ago Volkswagen hired a new compliance chief from Daimler to help it deal with the fallout of Dieselgate. That person is gone, already, reports Reuters:
The compliance chief brought in to help Volkswagen (VOWG_p.DE) recover from its emissions scandal is leaving the management board at the end of this month following differences of opinion over her role, the German carmaker said on Thursday.
Volkswagen (VW) said Christine Hohmann-Dennhardt, hired just over a year ago from rival Daimler (DAIGn.DE), was leaving the board by mutual consent, confirming a report in the Handelsblatt newspaper.
She was leaving the board “due to differences in their understanding of responsibilities and future operating structures within the function she leads”, VW said in a statement, without being more specific.
That must have been a tough job anyway.
4th Gear: When Do The ‘Foreign’ Makes Face Trump?
As we addressed in yesterday’s Morning Shift, it sometimes seems as if President Donald Trump has a 1975-level of understanding about the auto industry, given he invited the CEOS of Ford, General Motors and FCA to breakfast to talk domestic manufacturing—but not “foreign” OEMs with substantial manufacturing bases in America, like Hyundai, BMW, Honda or Toyota. From The Detroit News:
Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. — the three largest automakers by U.S. sales headquartered in other countries — each confirmed to The Detroit News this week that their officials were not invited to the meeting of automotive minds that included Fields, General Motors Co. Chairman and CEO Mary Barra and Fiat Chrysler Automobiles NV CEO Sergio Marchionne.
“Nissan has positive working relationships with governments and leaders around the world, and given the importance of the U.S. market for our business, we look forward to a continued productive relationship in the United States,” Nissan said in response to questions.
South Korean automaker Hyundai Motor Co. also confirmed it was not invited to the meeting. Hyundai, which touts that it sells about 60 percent of its vehicles in the United States, employs thousands of people domestically. It includes about 3,500 in its manufacturing operations.
[...] The White House declined to directly answer if Trump plans to hold a meeting with leaders from foreign automakers, saying officials will let The News “know when we have something to report.”
Hmmm.
5th Gear: Were The VW Fines A Deterrent To Emissions Cheating?
Environmental Protection Agency Office of Transportation and Air Quality Director Christopher Grundler said he thinks so in a wide-ranging interview with Reuters, but he and his team seem to be preparing for a revision to those tough emissions standards established by the last administration:
Asked if the EPA under President Donald Trump could reverse the Obama administration’s decision to finalize the 2022-25 vehicle greenhouse gas emissions limits in its final days, Grundler noted that EPA nominee Scott Pruitt told a Senate panel earlier this month he would review the decision.
“We will be prepared to brief him and his team on the work we did,” Grundler said, noting that a new EPA administrator can revisit a regulation but must follow the same process.
Reverse: Them Duke Boys
Neutral: What Does FCA Need To Do To Convince Investors?
In fact, what do all the American automakers need to do?
This story has been updated.