Automotive News - February 18, 2008 - (Page 17)

FEBRUARY 18, 2008 • 17 Lear investor: No regrets about blocking buyout 6 months later, market is down, but prospects are up David Barkholz dbarkholz@crain.com DETROIT — Six months after investor Carl Icahn made an unsuccessful bid for Lear Corp., Pzena Investment Management LLC sticks by its decision to oppose the buyout, despite today’s lower price for Lear’s stock. Pzena, a New York investment management firm, owns about 6.7 million shares of Lear, or roughly 8.7 percent of the common shares. The supplier’s stock price is trading about $6 below Icahn’s initial offer of $36 a share. But Lear has exceeded sales and earnings expectations the past two quarters, says Caroline Cai, Pzena auto analyst. And most parts-supplier shares are down over that time because of a down market and sagging North American auto sales, she said. “We’re quite happy that we decided to hold on to a business that we believe will realize its full valuation down the road,” Cai said. Lear, of suburban Detroit, is one of the world’s largest makers of automotive seats and vehicle electrical systems. Since the failed Icahn buyout, the company has continued to restructure and benefit from the divesti- An analyst says Carl Icahn, left, probably could have had Lear for about $45 a share. ture of its money-losing interior trim business. That unit posted 2006 losses of $161 million before interest, income taxes and special charges. Lear closed 2007 on a roll. For the year, it posted net income of $241.5 million, or $3.09 a share, compared with a net loss of $707.5 million, or $10.31 a share, in 2006. Since the beginning of 2007, Lear has won more than $1 billion in new business — a plus that will keep sales about flat at $15 billion in 2008 despite slumping sales by its key Detroit 3 customers, says Kevin Tynan, auto analyst for Argus Research Inc., of New York. Lear shareholders were insulted by Icahn’s $36 a share offer, or $2.9 billion, because it represented a minuscule premium to the market price, Tynan said. At the time, Lear stock was trading at $34.67 a share. While Tynan said Pzena’s $60 a share estimate of Lear’s long-term price prospects was high, he said Icahn probably could have bought Lear if he had offered about $45 a share. c Citizenship Northwood University in Midland, Mich., honored 10 auto dealers with its Dealer Education Awards at a ceremony on Feb. 10 in conjunction with the National Automobile Dealers Association convention in San Francisco. The following dealers were honored for their contributions to public or private education: Kurt Biebighaeuser of Autohaus Biebighaeuser GmbH in Battenberg/Eder, Germany Becky Dodson of Autoplex Automotive in Amarillo, Texas Alfred Dosch of Bundesfachschule, Calw, Germany ■ 25 with Chevrolet Lee Baird, left, of Baird Inc. in Ripon, Wis., receives a 25-year award for Chevrolet from Scott Mueller, General Motors’ Wisconsin zone manager. Donald Milosch of Palace Chrysler-Jeep and Milosch Dodge in Lake Orion, Mich. Robert Nemer of Nemer Chrysler-Dodge in Queensbury, N.Y. Richard Patterson of RRR Automotive in Vienna, Va. James Poffenbaugh of Poffenbaugh Ford-LincolnMercury in St. Cloud, Fla. Randy Sopp of Sopp Chevrolet in Bell, Calif. Thomas Thelen of Thelen Auto Group in Bay City, Mich. Kenneth Vance of Ken Vance Motors Inc. in Eau Claire, Wis. Milestones Randolph Hayes of Ralph Hayes Toyota in Anderson, S.C., received a 40-year award for Toyota from Southeast Toyota Distributors LLC. ■ 40 with Toyota Wilfrid Piekarski, left, of Toyota of Nashua in Nashua, N.H., receives a 40-year award for Toyota from Christopher Cento, Toyota Motor Sales U.S.A.’s Boston regional general manager. GM CFO is mum on more aid to Delphi Without help, the supplier may languish in Ch. 11 David Barkholz dbarkholz@crain.com Delphi’s dilemma Delphi is having trouble raising $3.7 billion in bank loans to finance its exit from Chapter 11 protection. Tight credit markets are the culprit. Here are its alternatives. Continue efforts to obtain the money from banks Ask General Motors to lend it the money Remain in Chapter 11 bankruptcy protection until the borrowing environment improves Will General Motors rescue Delphi? GM CFO Fritz Henderson would not speculate. The parts maker has shed most of its U.S. plants and work force and shifted production overseas. It predominantly will be an electronics maker when it emerges, with annual sales of about $20 billion. That is about $5 billion less than when it entered Chapter 11 protection. In 2006, its $24.40 billion in worldwide parts sales to carmakers made it second only to Robert Bosch GmbH among automotive suppliers, according to the Automotive News list of top 100 global original-equipment parts suppliers. In a normal credit environment, Delphi would have raised the money easily, Ludtke said. Management may have erred in not lining up financing commitments in early 2007 before markets turned, he said. Companies such as Dana Corp. and Federal-Mogul Corp. emerged from restructuring in the past quarter because they had financing plans in place earlier, he said. Investors had expected Delphi to ask former parent GM to lend it part of the exit financing if Delphi ran into trouble getting money from banks. Williams declined to say whether Delphi was pursuing that strategy. DETROIT — General Motors CFO Fritz Henderson declined to speculate on whether the automaker will rescue Delphi Corp.’s sagging effort to raise $3.7 billion in exit financing to leave Chapter 11 protection. “You’re taking me into a realm of speculation. I’m not prepared to do that today,” Henderson said last week in response to an analyst’s question during a GM earnings call. Without GM’s aid, Delphi may be stuck in Chapter 11 for a lot longer than expected. It filed for Chapter 11 reorganization in October 2005. GM’s stake GM continues to have a major stake in Delphi’s health. Delphi remains GM’s biggest supplier; about 25 percent of Delphi’s sales are to GM. What’s more, GM expects to receive $1.5 billion in cash and notes from proceeds of the exit financing to cover costs that GM incurred as part of the Delphi restructuring. That reorganization included the GM-financed buyout of more than 20,000 UAW workers. GM also stands to get $1 billion in preferred shares as equity in a reorganized Delphi. Delphi’s restructuring has been costly for GM. In 2007, GM said it recorded $2.09 billion in pretax adjustments related to Delphi’s restructuring and for pension benefits to Delphi retirees and employees. In 2006, GM recorded a $5.5 billion charge related to the supplier’s restructuring. c Richard Truett contributed to this report Behind schedule The parts maker is weeks behind schedule in raising the $3.7 billion in exit financing it needs to operate outside Chapter 11 protection. Tight credit markets are making banks reluctant to lend Delphi the money. If it can’t obtain the bank loans or GM doesn’t again step up to bail out Delphi, the supplier may have to spend several more months in Chapter 11 reorganization. That is an expensive proposition; legal and professional fees run about $10 million a month. Also, some prospective customers are reluctant to do business with companies operating in Chapter 11 protection. “If need be, Delphi will continue restructuring in bankruptcy, but it’s more expensive,” says Kirk Ludtke, senior vice president with CRT Capital Group LLC in Stamford, Conn. Delphi had hoped to have the loans by Feb. 5. Delphi spokesman Lindsey Williams said Monday, Feb. 11, that the company remains committed to leaving Chapter 11 this quarter. He would not say how much of the exit financing Delphi has lined up. http://www.redflagrulescompliance.com http://www.redflagrulescompliance.com

Table of Contents Feed for the Digital Edition of Automotive News - February 18, 2008

Ford cuts equipment combinations on '09s Lenders shun subprime market Toyota dealers test satellite service centers Despite cost, more carmakers use laminated glass Merger produces turnaround firm Chrysler would shut to move Plastech work Jeep accessories: Mo' for Mopar Auctions: Repos are rising Automakers face more child safety rules Supplier Personnel Family-owned stores could be tough sell for consolidation What would lineup be with brands under single roof? Mercedes will pay $9.5 million to settle suit Beru revamps strategy to boost profits, growth Jaguar: Dealers take 10,000 customer deposits for XF sedans Chrysler exec: Performance segment will survive Mahindra to offer hybrids in U.S. Mazda ad agency hires VW and Mini creative whiz Icy weather and perhaps boredom chill roadster sales GM, Saturn: What's after Reynolds? Ford: Mid-sized model year for mid-sized cars Kia's new American boss: Let's boost sales Rolls gets sporty Luxury brands push to meet demand in Russia Dealer is makers' best voice in D.C. Get real, Kia, Hyundai Face it, Detroit: Trimming dealers will be expensive GM has confidence in the Chevy Volt It's no wonder auto sales are declining A workable idea: GM dealer buyouts It's deja vu again with reborn 2CV Nothing beats face to face There's a person behind that e-mail Buying cars online makes perfect sense Bush seeks to save 2008-11 CAFE rules Personnel Lear investor: No regrets about blocking buyout GM CFO is mum on more aid to Delphi Dealers Road to tomorrow is paved with plastics Council aims to keep Ford current on environmental issues VW ponders Phaeton's U.S. flop, may try again McGuffie is Covisint's president In hydrogen race, Mazda seeks quicker route Suit seeks to enforce title-washing remedy Suppliers to the 2008 Buick Enclave Mercedes, Audi warn dealers: No sales for export Sykora wants CAFE flexibility Minority dealers see tough times in 2008 Arlena Sawyers Toyota goal: Create stress-free store NADA's Taylor predicts 15.7 million U.S. sales this year Honda widens support for dealer ad groups Jay's jabs Survival 101: Get lean, work harder Microsoft will test dealership system Farley wants market-by-market sales strategy Entertaining the troops Report: Detroit 3 cutbacks curb rental-fleet sales Dilts: High interest rates hurt industry GM asks for dealer assistance on quality On the Record Fisker: We're close to making plug-in car J.D. Power exec: Internet leads are slipping away Minority auto group nears 2 deals Garmin makes navigation technology deal Tenneco wins Ford work B-P-G focuses on new product push Volvo offers cash to thin the herd Cadillac challenges dealers to boost sales Chevrolet can stay No. 1, if it will fight GM will push a green marketing message Saturn is expected to be GM's growth brand Certified used sales help Honda dealer profits Hummer counts on pickup to perk sales Mazda will boost marketing budget, unveil Mazda6 Saab dealers to get new vehicles Toyota wants even better customer loyalty Infiniti stresses profits and customer satisfaction Mitsubishi CEO sets tough U.S. sales goal Nissan exec: New models will boost per-store sales Suzuki dealers cheer return of incentives Ford to boost dealer margins Jag dealers anxiously await the XF Ford executives vague about Mercury future Subaru dealers want diesels, hybrids Acura upscale shift inspires 'great faith in the future' BMW readies national loaner-car program Land Rover: Future upbeat, unclear VW dealers get vehicles on wish list Chrysler dealers OK with consolidation plan Mercedes pushes dealership standards Porsche shrinks as luxury segment lapses Large Hyundai dealers get more room to roam Execs' exit stuns Kia dealers Ford recalls 180,000 trucks over door part, fuel hose GM posts massive loss; eyes N.A. profits by 2011 Big-truck sales fall 33.5% in Jan. WTO rips China's tariffs on imported auto parts Fiesta will rejoin the party in the U.S. UAW's Valentine to Delphi: Hands off our pensions Rx for dealership flux: NFL draft + Mideast bazaar Toyota gets the boot in Mexico Nissan triples female managers Silverado hits a million, rolls on

Automotive News - February 18, 2008

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