China-Singapore Jingwei client, May 7th—The Wall Street Journal reported on the 7th that the severe vulnerability of American automakers in the face of the crisis was most clearly reflected in the first quarter of this year ’s results. . As the funding constraints caused by the epidemic-proof shutdown measures ease, concerns in this area will change, but they will not disappear.
According to reports, U.S. automakers began shutting down U.S. production on March 18, less than two weeks before the end of the first quarter. But such a short period of lockouts has cost these companies a high price. GM announced on Wednesday that its adjusted operating profit for the first fiscal quarter was $ 1.2 billion, down from $ 2.2 billion in the same period last year. Compared with its counterparts in Detroit, this is actually a very good result: Fiat Chrysler Automobiles barely break even, and Ford Motor Company is in a loss.
The report said that all three companies reported cash outflows. While these automakers continue to pay suppliers for spare parts, the Home Decree freezes their sales to dealers. Fiat Chrysler's operating capital outflow is particularly serious, with a total outflow of US $ 5.5 billion in the quarter. GM ’s capital outflow was unexpectedly small, at only US $ 900 million.
The impact of the above working capital, coupled with the limited fault tolerance caused by a large number of fixed costs, will exaggerate the performance of automakers whether during the downturn or during the upturn. In addition, car sales are known for their periodicity. When the economy is sluggish, consumers will postpone their purchases, making this business model of leveraged business worse.
The report pointed out that considering that the above-mentioned situation is only the damage caused in March or two weeks in March, April must be a very bad month for the three major American auto giants in Detroit. All three companies are raising funds in April: Ford Motor Corporation has issued $ 8 billion worth of bonds; Fiat Chrysler Automobile has launched a $ 3.5 billion bridge credit arrangement; and it has extended a $ 3.6 billion credit for connected vehicles The duration of the quota indicates that the company ’s resilience in the first quarter may not reflect the full picture.
However, after the Fed has provided strong support to the credit market, these car companies have obtained financing channels, and the gradual recovery of car sales as of April, these factors have played an important role in restoring investor confidence in the industry. Investors now seem to be turning their attention from the disastrous second quarter to the strong second half.
But investors have three reasons to be cautious. One is that some people hope that the policy of maintaining social distance will prompt people to abandon public transportation and buy cars, thereby boosting the use of vehicles. However, in the context of high unemployment, this trend may boost the used car market more than the new car market. The size of the US new car market is only about one tenth of the used car market.
Second, the success of the US auto industry in improving liquidity over the past six weeks will become a burden on the balance sheet. Even before the aforementioned financing in April, GM and Ford ’s debt burden in the first quarter has more than doubled.
The last reason is that this crisis may have different effects on different participants. According to an analysis by brokerage firm American Financial Group, Ford Motor Co., Ltd. in the first four months of this year, GM and Fiat Chrysler took nearly seven percentage points of market share in the full-size pickup field.
The report pointed out that for the three major US auto giants, such models are a lucrative business. This may also explain the reason for the poor performance of Ford Motor in the first quarter. In recent years, Ford has been the worst performing company among the top three auto giants in the United States. In a crisis, the weak tend to be thrown farther. (Sino-Singapore Jingwei APP)