GM, Ford, Chrysler VS Toyota, Honda, Nissan
07-06-2003, 01:02 AM
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GM, Ford, Chrysler VS Toyota, Honda, Nissan
GM and Ford pump out cars, but investors bet on Toyota
By Alan Ohnsman / Bloomberg News
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General Motors Corp., Ford Motor Co. and DaimlerChrysler AG have long been known in the U.S. as "The Big Three." The three automakers worth most to investors, though, are in Japan.
Toyota Motor Corp., which ranks third in global units sold behind General Motors and Ford, and fourth in revenue after the U.S. Big Three, is No. 1 in market value -- and profit.
Toyota's $94.5 billion stock market value is more than General Motors, Ford, DaimlerChrysler and Volkswagen AG combined. Honda Motor Co. and Nissan Motor Co., both based in Tokyo, are each worth $16 billion more than Detroit-based General Motors.
Investors say they value Japan's three biggest automakers more for a simple reason: they earn more and are likely to continue doing so. While General Motors and Ford pursue volume sales, investors say they're more attracted by the profits of the Japanese companies, whose efficiency and higher rank in quality surveys make their cars cheaper to build and easier to sell.
"Measured against any global manufacturer, not just within the auto industry, Toyota has strong fundamentals and high profit," said Ken Yamada, senior analyst for Kayne Anderson Rudnick Investment Management LLC in Los Angeles, which manages $9 billion, including Toyota shares.
In the year ended March 31, Toyota earned $5.88 in net income for every $100 of sales. Honda, eighth in units sold, kept $5.35. Nissan, ninth in units, earned $7.23. Volkswagen, fourth in units, earned $2.36. By contrast, General Motors made $1.57 and Ford 61 cents in the same four-quarter period.
The profit gap with Japan exists largely because the U.S. automakers face larger pension obligations, offer bigger rebates to lure buyers, operate less-efficient factories and haven't penetrated as many world markets with a single vehicle.
Global Growth
Toyota, for example, was able to make Corolla the best- selling passenger car in the world.
"It's growing in most if not all regions of the world," Morgan Stanley analyst Stephen Girsky said of Toyota. "It all comes down to putting out a product that people want to buy."
Globally, General Motors, Ford and DaimlerChrysler hold about 33 percent of the market in units sold while Toyota, Honda and Nissan have 20 percent, according to the trade magazine Automotive News.
In North America, the world's largest car market, General Motors and Ford continue to enhance customer rebates and incentives. General Motors cut an average of $3,916 per vehicle from sticker prices last month, and Ford offered $3,624 off, according to CNW Marketing Research Inc. in Bandon, Oregon. The Japanese cut less: Toyota $2,259, Nissan $1,509 and Honda $1,022.
Product vs Incentives
"The Japanese have taken the right approach emphasizing product over incentives," said Steven Kus, a vice president at RBC Dain Rauscher Corp. who helps manage $250 million, including General Motors, Ford and Toyota shares. "It remains a grinding price war (for U.S. automakers), and margins will continue to suffer."
General Motors and Ford rank first and second in annual revenue as well as units sold. They need the cash. The amounts they must pour into sagging pension funds dwarf those of Japanese rivals. General Motors' global pension obligation at the end of 2002 was $92.2 billion. Toyota's pension obligation as of March 2002 -- the latest data from the company -- was about $13 billion. Japan's national health system eases the burden on the Japanese manufacturers.
It took General Motors' factory-floor workers an average of 26.1 hours to build a car in 2002, 46 percent longer than their counterparts at top-rated Nissan, according to a comparison of North American plants by Troy, Michigan-based Harbour & Associates. Honda is rated second-most efficient, followed by Mitsubishi Motors Corp. and Toyota.
Union Approval
The Japanese have newer factories, younger workers and lower labor costs in North America than their U.S. counterparts. They also have simpler designs, so their plants produce more than one model on a single assembly line. Ford opened its first North American factory with this kind of flexibility in Norfolk, Virginia, on Tuesday.
Though Ford wants to close four U.S. factories, it won't be able to unless it gains union approval in contract talks that begin in July. The company said 18 months ago that it wanted to stop production at the four plants.
The United Auto Workers union has been reluctant to back moves that cut its membership. UAW contracts that expire in September also require General Motors, Ford and Chrysler to continue paying at least 90 percent of workers' take-home wages for jobs that are eliminated.
'Too Much Capacity'
"There's just too much capacity (among U.S. automakers), and that's not changing," said Jim Glickenhaus, a partner at Glickenhaus & Co., which manages $1 billion and stopped investing in shares of U.S.-based automakers in the 1990s.
The U.S. automakers are likely to seek concessions on health care and pension costs in next month's contract talks. Prudential Securities Inc. analyst Michael Bruynesteyn estimates that General Motors' pension and retiree health expenses add $1,360 to the cost of each U.S. vehicle, compared with $107 for Honda.
General Motors says it's moving to solve key problems.
"There's an overhang on the stock because of the pension and health-care liabilities -- that's why we're working to resolve those as soon as possible," company spokesman Jerry Dubrowski said.
Chief Executive Officer Rick Wagoner says he's not focusing on General Motors' share price.
"If you worry about raising the stock price, you just drive yourself crazy," Wagoner told reporters following a speech in Detroit on Wednesday. "You've got to focus on running the business right, generating cash -- it'll come back."
Shares Decline
Ford spokeswoman Marcey Evans pointed to the company's January 2002 plan to close plants, cut jobs and update models.
In the year ended March 31, General Motors' shares fell 44 percent and Ford's 54 percent, more than the 26 percent decline in the Standard & Poor's 500 Index. In the same period, Toyota's 28 percent drop and Honda's 27 percent slide were in line with the Nikkei's 28 percent decline. Shares of Nissan, which was near bankruptcy before restructuring in 1999, fell 16 percent.
Investor concern about the U.S. automakers is also reflected in their bonds. General Motors' 6.86 percent, 10-year bonds maturing in 2012 yield 319 basis points more than an equivalent U.S. Treasury, for example. Toyota's 5.5 percent, 10-year bond maturing in 2008 yields 44 basis points more than a 10-year Treasury. Toyota's narrower yield spread indicates that investors see less risk of default.
'Excellent Operations'
Robert Scharar, president of FCA Corp., which manages about $1 billion, including Toyota, Honda, Nissan shares in its Commonwealth Japan mutual fund, ticks off the reasons he likes those companies: good relations with distributors, high ratings from consumers, and a decent chance to sell more cars in the growing Asian market.
"They are excellent in their operations and in their products," Scharar says.
Nissan's shares have fared better lately partly because Chief Executive Officer Carlos Ghosn cut costs by negotiating long-term parts contracts with suppliers that locked in lower prices, closed some older plants in Japan and sold unneeded assets, including real estate and a rocket-fuel company.
Nissan also is using standard platforms to build multiple models on a single assembly line. The company's fourth North American factory, a $1.4 billion plant that opened May 27 in Canton, Mississippi, will turn out five new truck and car models within eight months.
'Object of Emotion'
"We consider our product something which is not a commodity, which is something that has to be the object of emotion, a high level of emotion, and represent a high level of value on the market," the Brazilian-born Ghosn said in an interview.
Net income at Toyota, based in Aichi Prefecture, was $7.75 billion in its fiscal year ended March 31, the most ever for an automaker, surpassing the $7.2 billion Ford earned in 1999. Nissan reported profit of $4.06 billion for the same period, followed by Honda at $3.50 billion.
By comparison, General Motors earned $2.99 billion and Ford $1.01 billion in the four quarters ended in March.
"GM produces a lot of cars and has extremely high revenues, but it just doesn't earn a very high return on money invested in the business," said Christian Olesen, an analyst at New York management consultant Stern Stewart & Co.
Toyota's return on capital, a ratio that shows how well a company uses money, was 6.2 percent, Honda's 9.7 percent and Nissan's 9.7 percent for 2002, according to Stern Stewart data. General Motors' ratio was 3.1 percent and Ford's 3.3 percent.
Investors have paid attention. Among all types of companies, ranked by currency-adjusted market value, Toyota stands at No. 26, Honda 97 and Nissan 98, Bloomberg data shows. General Motors ranked No. 193 and Ford 196.
No. 1 was General Electric Co.'s $309.6 billion.
General Motors hasn't been the top-ranked automaker in market value since 1985, when both Ford and Toyota moved ahead of it. Ford fell from the top three after 1999, and Stuttgart, Germany- based DaimlerChrysler last ranked among the top three by value in 2001.
At the end of last year, General Motors ranked fifth by market value, worth $20.7 billion, just ahead of $19.9 billion for Germany's Bayerische Motoren Werke AG's, which sold an eighth as many vehicles. Ford was the seventh-most-valuable automaker, worth $17 billion.
Nissan's market value rebounded from $7.3 billion in December 1998 to $35.2 billion in December 2002.
European carmakers Renault SA, Volkswagen, Peugeot SA and Fiat SPA all have current market values below $14 billion.
http://www.detnews.com/2003/autosins...tos-191339.htm
By Alan Ohnsman / Bloomberg News
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Send this story to a friend
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General Motors Corp., Ford Motor Co. and DaimlerChrysler AG have long been known in the U.S. as "The Big Three." The three automakers worth most to investors, though, are in Japan.
Toyota Motor Corp., which ranks third in global units sold behind General Motors and Ford, and fourth in revenue after the U.S. Big Three, is No. 1 in market value -- and profit.
Toyota's $94.5 billion stock market value is more than General Motors, Ford, DaimlerChrysler and Volkswagen AG combined. Honda Motor Co. and Nissan Motor Co., both based in Tokyo, are each worth $16 billion more than Detroit-based General Motors.
Investors say they value Japan's three biggest automakers more for a simple reason: they earn more and are likely to continue doing so. While General Motors and Ford pursue volume sales, investors say they're more attracted by the profits of the Japanese companies, whose efficiency and higher rank in quality surveys make their cars cheaper to build and easier to sell.
"Measured against any global manufacturer, not just within the auto industry, Toyota has strong fundamentals and high profit," said Ken Yamada, senior analyst for Kayne Anderson Rudnick Investment Management LLC in Los Angeles, which manages $9 billion, including Toyota shares.
In the year ended March 31, Toyota earned $5.88 in net income for every $100 of sales. Honda, eighth in units sold, kept $5.35. Nissan, ninth in units, earned $7.23. Volkswagen, fourth in units, earned $2.36. By contrast, General Motors made $1.57 and Ford 61 cents in the same four-quarter period.
The profit gap with Japan exists largely because the U.S. automakers face larger pension obligations, offer bigger rebates to lure buyers, operate less-efficient factories and haven't penetrated as many world markets with a single vehicle.
Global Growth
Toyota, for example, was able to make Corolla the best- selling passenger car in the world.
"It's growing in most if not all regions of the world," Morgan Stanley analyst Stephen Girsky said of Toyota. "It all comes down to putting out a product that people want to buy."
Globally, General Motors, Ford and DaimlerChrysler hold about 33 percent of the market in units sold while Toyota, Honda and Nissan have 20 percent, according to the trade magazine Automotive News.
In North America, the world's largest car market, General Motors and Ford continue to enhance customer rebates and incentives. General Motors cut an average of $3,916 per vehicle from sticker prices last month, and Ford offered $3,624 off, according to CNW Marketing Research Inc. in Bandon, Oregon. The Japanese cut less: Toyota $2,259, Nissan $1,509 and Honda $1,022.
Product vs Incentives
"The Japanese have taken the right approach emphasizing product over incentives," said Steven Kus, a vice president at RBC Dain Rauscher Corp. who helps manage $250 million, including General Motors, Ford and Toyota shares. "It remains a grinding price war (for U.S. automakers), and margins will continue to suffer."
General Motors and Ford rank first and second in annual revenue as well as units sold. They need the cash. The amounts they must pour into sagging pension funds dwarf those of Japanese rivals. General Motors' global pension obligation at the end of 2002 was $92.2 billion. Toyota's pension obligation as of March 2002 -- the latest data from the company -- was about $13 billion. Japan's national health system eases the burden on the Japanese manufacturers.
It took General Motors' factory-floor workers an average of 26.1 hours to build a car in 2002, 46 percent longer than their counterparts at top-rated Nissan, according to a comparison of North American plants by Troy, Michigan-based Harbour & Associates. Honda is rated second-most efficient, followed by Mitsubishi Motors Corp. and Toyota.
Union Approval
The Japanese have newer factories, younger workers and lower labor costs in North America than their U.S. counterparts. They also have simpler designs, so their plants produce more than one model on a single assembly line. Ford opened its first North American factory with this kind of flexibility in Norfolk, Virginia, on Tuesday.
Though Ford wants to close four U.S. factories, it won't be able to unless it gains union approval in contract talks that begin in July. The company said 18 months ago that it wanted to stop production at the four plants.
The United Auto Workers union has been reluctant to back moves that cut its membership. UAW contracts that expire in September also require General Motors, Ford and Chrysler to continue paying at least 90 percent of workers' take-home wages for jobs that are eliminated.
'Too Much Capacity'
"There's just too much capacity (among U.S. automakers), and that's not changing," said Jim Glickenhaus, a partner at Glickenhaus & Co., which manages $1 billion and stopped investing in shares of U.S.-based automakers in the 1990s.
The U.S. automakers are likely to seek concessions on health care and pension costs in next month's contract talks. Prudential Securities Inc. analyst Michael Bruynesteyn estimates that General Motors' pension and retiree health expenses add $1,360 to the cost of each U.S. vehicle, compared with $107 for Honda.
General Motors says it's moving to solve key problems.
"There's an overhang on the stock because of the pension and health-care liabilities -- that's why we're working to resolve those as soon as possible," company spokesman Jerry Dubrowski said.
Chief Executive Officer Rick Wagoner says he's not focusing on General Motors' share price.
"If you worry about raising the stock price, you just drive yourself crazy," Wagoner told reporters following a speech in Detroit on Wednesday. "You've got to focus on running the business right, generating cash -- it'll come back."
Shares Decline
Ford spokeswoman Marcey Evans pointed to the company's January 2002 plan to close plants, cut jobs and update models.
In the year ended March 31, General Motors' shares fell 44 percent and Ford's 54 percent, more than the 26 percent decline in the Standard & Poor's 500 Index. In the same period, Toyota's 28 percent drop and Honda's 27 percent slide were in line with the Nikkei's 28 percent decline. Shares of Nissan, which was near bankruptcy before restructuring in 1999, fell 16 percent.
Investor concern about the U.S. automakers is also reflected in their bonds. General Motors' 6.86 percent, 10-year bonds maturing in 2012 yield 319 basis points more than an equivalent U.S. Treasury, for example. Toyota's 5.5 percent, 10-year bond maturing in 2008 yields 44 basis points more than a 10-year Treasury. Toyota's narrower yield spread indicates that investors see less risk of default.
'Excellent Operations'
Robert Scharar, president of FCA Corp., which manages about $1 billion, including Toyota, Honda, Nissan shares in its Commonwealth Japan mutual fund, ticks off the reasons he likes those companies: good relations with distributors, high ratings from consumers, and a decent chance to sell more cars in the growing Asian market.
"They are excellent in their operations and in their products," Scharar says.
Nissan's shares have fared better lately partly because Chief Executive Officer Carlos Ghosn cut costs by negotiating long-term parts contracts with suppliers that locked in lower prices, closed some older plants in Japan and sold unneeded assets, including real estate and a rocket-fuel company.
Nissan also is using standard platforms to build multiple models on a single assembly line. The company's fourth North American factory, a $1.4 billion plant that opened May 27 in Canton, Mississippi, will turn out five new truck and car models within eight months.
'Object of Emotion'
"We consider our product something which is not a commodity, which is something that has to be the object of emotion, a high level of emotion, and represent a high level of value on the market," the Brazilian-born Ghosn said in an interview.
Net income at Toyota, based in Aichi Prefecture, was $7.75 billion in its fiscal year ended March 31, the most ever for an automaker, surpassing the $7.2 billion Ford earned in 1999. Nissan reported profit of $4.06 billion for the same period, followed by Honda at $3.50 billion.
By comparison, General Motors earned $2.99 billion and Ford $1.01 billion in the four quarters ended in March.
"GM produces a lot of cars and has extremely high revenues, but it just doesn't earn a very high return on money invested in the business," said Christian Olesen, an analyst at New York management consultant Stern Stewart & Co.
Toyota's return on capital, a ratio that shows how well a company uses money, was 6.2 percent, Honda's 9.7 percent and Nissan's 9.7 percent for 2002, according to Stern Stewart data. General Motors' ratio was 3.1 percent and Ford's 3.3 percent.
Investors have paid attention. Among all types of companies, ranked by currency-adjusted market value, Toyota stands at No. 26, Honda 97 and Nissan 98, Bloomberg data shows. General Motors ranked No. 193 and Ford 196.
No. 1 was General Electric Co.'s $309.6 billion.
General Motors hasn't been the top-ranked automaker in market value since 1985, when both Ford and Toyota moved ahead of it. Ford fell from the top three after 1999, and Stuttgart, Germany- based DaimlerChrysler last ranked among the top three by value in 2001.
At the end of last year, General Motors ranked fifth by market value, worth $20.7 billion, just ahead of $19.9 billion for Germany's Bayerische Motoren Werke AG's, which sold an eighth as many vehicles. Ford was the seventh-most-valuable automaker, worth $17 billion.
Nissan's market value rebounded from $7.3 billion in December 1998 to $35.2 billion in December 2002.
European carmakers Renault SA, Volkswagen, Peugeot SA and Fiat SPA all have current market values below $14 billion.
http://www.detnews.com/2003/autosins...tos-191339.htm
07-06-2003, 11:28 AM
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Investors like to see any company operate efficiently. That's what the Japanese are killing domestic mfgs in. There is so much waste with domestic car production. They are still feeling the crunch of the 1970's when the unions became more powerfull than the companies. I have no problem with unions for the right reasons, but paying the floor sweeper 25/hr while he's getting stoned in the bathroom is just plain rediculous (stuff like that really happened with the big three in the 70's). GM has cleaned some of the issues up, but those contracts are binding. I believe a line worker should get a decent wage, but there is no reason to pay someone stamping two sheets of metal together 20/hr and give him a pension better than teachers or cops. Any monkey can stamp sheet metal when a computer does everything and all you have to do is place the two sheets together. When Detroit can get pay, pension, and benefit finances in line with other world manufacturers, and invest the profits back into their cars insted of the CEO and boards pockets, only then will they be able to compete with Honda, Toyota, and the like. They need to increase quality at the same time decrease the time it takes to produce a car.