Automotive News - July 28, 2008 - (Page 33) JULY 28, 2008 • 33 Automaker tax break piggybacks on mortgage bill Harry Stoffer hstoffer@crain.com WASHINGTON — Pressure on Congress and the White House to address the home mortgage crisis has created an opportunity for the Detroit 3 and other money-losing companies to collect a long-sought tax break. The break is tucked inside a massive mortgage relief bill that is expected to become law within days. It would allow the Detroit 3 to benefit from tax credits they have accumulated but can’t collect because they don’t have taxable profits. The provision would enable companies to use credits they earned from r&d spending and from paying the federal Alternative Minimum Tax as if they were bonus depreciation allowances for new investment, according to the office of Sen. Debbie Stabenow, D-Mich., who sponsored the provision. But to cash in, the companies must initiate new spending on Ford Motor’s Bruce Andrews said the tax break gives “an incentive to those companies most in need of new investment.” equipment or facilities, industry officials said. The benefit is not a government giveaway, they asserted. Bruce Andrews, Ford Motor Co.’s vice president of governmental affairs, said in a statement that the provision gives “an incentive to those companies most in need of new investment.” He said it will “encourage economic growth and job retention here in the U.S.” The benefit is capped at $30 million. General Motors must make $300 million in new qualifying investments in the United States to use its credits for $30 million in bonus depreciation, said GM spokesman Greg Martin. Some suppliers also qualify for the break, an industry source said. Several times this year, auto industry allies in Congress tried unsuccessfully to enact the tax provision. Mortgage and credit market troubles made the housing bill a must-pass measure — and an ideal vehicle for the industry to tack on a tax break. The housing bill is designed to prevent more home foreclosures and shore up the federally sponsored mortgage giants Freddie Mac and Fannie Mae. The House has passed the measure, and the Senate was expected to approve the bill last weekend. President Bush has dropped a veto threat. c SHAREHOLDER RETURN REPORT Honda rides high in 2nd-quarter rankings Jim Henry autonews@crain.com GLOBAL AUTOMAKERS Total shareholder return for largest global automakers; percentage change per period Q2 2008 20.1 0.7 0.1 –5.2 –6.1 –10.2 –11.4 –15.2 –15.5 –15.9 –21.5 –26.9 –27.2 –27.9 –38.9 One year –2.3 82.3 –18.5 –23.6 –16.1 –23.8 –7.1 –13.3 –12.3 –48.9 –46.2 –43.5 –30.4 –32.9 –68.4 Three years 54.8 556.8 –2.1 45.2 54.4 11.8 102.8 26.8 112.3 –50.4 4.1 133.9 – 52.2 –61.8 GLOBAL SUPPLIERS Total shareholder return for largest global suppliers; percentage change per period Q2 2008 1 NSK 2 NHK Spring 3 Calsonic 4 Sanden 5 Denso 6 Continental 7 BorgWarner 8 ArvinMeritor 9 Stanley Electric 10 JTEKT 11 Autoliv 12 Bridgestone TSR Index 13 Rieter 15.9 12.7 10.8 10.7 6.8 3.6 3.4 0.4 –0.5 –2.4 –6.5 –8.7 –9.9 –11.4 –11.7 –14.2 –14.8 –17.6 –17.9 –19.0 –20.5 –20.7 –20.7 –21.1 –22.1 –25.3 –26.0 –29.2 –30.1 –30.9 –45.3 –47.1 –51.6 –60.7 One year –12.8 –15.1 0.1 5.9 –10.3 –25.4 4.0 –42.1 13.2 –10.7 –15.8 –26.7 –26.1 –35.4 –9.1 –36.9 –24.6 –24.2 –33.9 –46.4 –45.1 –22.6 –49.0 –40.2 5.0 37.7 –43.8 –47.5 –67.5 –48.7 –60.2 –70.8 –61.4 –72.2 Three years 87.9 0.5 –22.6 20.0 61.0 50.8 69.7 –24.2 58.5 25.0 15.2 –14.9 20.3 27.3 62.5 –19.3 59.6 –5.1 –10.7 –39.8 –39.3 35.1 –23.3 27.1 91.2 17.7 4.8 26.2 –56.4 19.7 –60.0 –54.0 –18.7 –65.3 Investors seem to know what they want in an automaker these days, and Honda appears to have it. According to PricewaterhouseCoopers’ latest Global Automotive Shareholder Value Index, companies returning the greatest value to shareholders: Are well-positioned with small cars and fuelefficient technology. Are successful in China. Have a global manufacturing footprint and, relatively speaking, are less dependent on the U.S. market. Those factors helped put Honda Motor Co. on top of the ranking of global automakers for the second quarter of this year. The survey of automakers, suppliers and publicly traded retail groups measures the growth in value of an investment over three time periods: the past quarter, the past year and the past three years. It includes the growth in market capitalization of a company, plus dividends, and assumes that all dividends are invested in additional shares. Of 14 global automakers rated in the report, Honda had the highest second-quarter return, at 20.1 percent, and the second-best one-year return. Honda easily outperformed the automaker index, which declined 11.4 percent. “Honda’s focus on flexible manufacturing plants, small cars and fuel-efficient powertrains has resulted in the company being the only one of North America’s six largest automakers expected to increase production during 2008,” according to the PricewaterhouseCoopers analysis. GM’s shares dipped below $10 this month, hitting a half-century low. But last week, the stock staged a comeback. There also has been an ominous rise in shortselling of GM stock. Shorting a stock amounts to a bet that the share price will go down. The investor borrows shares from a broker. Assuming the price does, in fact, go down, the investor buys shares at the lower price and uses them to replace the borrowed shares. The investor pockets the difference, less commissions. If the shares go up, the investor loses money. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Honda VW Nissan Toyota Suzuki BMW TSR Index Hyundai Porsche Ford Renault Fiat Peugeot Daimler AG GM Retailers suffer Investors representing 27 percent of GM’s readily available shares as of June 25 were shorting the stock, according to Securities and Exchange Commission data reported by the New York Stock Exchange. That figure was 21.3 percent only two weeks earlier, on June 10. In contrast, short investors held steady for Ford Motor Co. for the same period, at 14.2 percent. Readily available stock is defined as stock that is not held by insiders or by major stakeholders that own more than 5 percent of a company. PricewaterhouseCoopers spokesman Matt Roling said that as a general rule, short-selling investors are betting “that you’re going to have a drastic decline in share price, a perception that there’s an increased probability of bankruptcy.” As a group, automakers scored better than global parts suppliers. Retailers as a group fared worst in the auto sector, said PricewaterhouseCoopers. Among parts makers, the highest rated for the quarter was NSK Ltd., the Japanese bearings supplier, with a return of 15.9 percent. The company is expanding capacity in China and India. American Axle & Manufacturing Holdings Inc. had the worst quarterly return — down 60.7 percent, as it recovers from a strike. The one-quarter index for all suppliers in the survey declined 9.9 percent. U.S. RETAIL GROUPS Total shareholder return for U.S. retail groups; percentage change per period Q2 2008 1 2 3 4 5 6 7 Asbury Group 1 Auto PAG CarMax TSR Index AutoNation Sonic Automotive Lithia Motors –5.4 –14.9 –23.9 –26.8 –28.6 –33.6 –36.8 –50.8 One year –45.7 –49.7 –29.6 –44.1 –53.0 –62.0 –54.4 –79.8 Three years –9.1 –14.1 3.3 7.0 –33.1 –58.5 –35.5 –81.7 14 Aisin Seiki 15 Valeo 16 Johnson Controls 17 Akebono 18 Magna 19 Faurecia 20 Showa 21 Tokai Rika 22 TRW Auto 23 Plastic Omnium 24 Toyoda 25 Clarion 26 GKN 27 Michelin THE BIG PICTURE Total shareholder return for automotive sectors; percentage change per period Q2 2008 –9.9 –11.4 –28.6 One year –26.1 –7.1 –53.0 Three years 20.3 102.8 –33.1 28 Visteon 29 Goodyear Tire 30 Lear 31 Cooper Tire 32 Tenneco 33 American Axle GM in the cellar Struggling General Motors was last among automakers for all three time frames. GM’s total shareholder return plunged 38.9 percent in the second quarter, was down 68.4 percent in the past year and has declined 61.8 percent over the past three years. “As the largest U.S. automaker, GM has been the focal point of recent media attention regarding the current state of the U.S. economy and the auto industry at large,” said PricewaterhouseCoopers. This month, Merrill Lynch cut GM’s rating to “underperform” from “buy” and reduced GM’s share price target to $7 from $28. The Merrill Lynch note also said the idea of GM going bankrupt was “not impossible,” PricewaterhouseCoopers said. GM executives have said emphatically that the company has no plans to declare bankruptcy. Global suppliers Global automakers U.S. retail groups About shareholder return The data on this page represent the secondquarter update of the Automotive News/PricewaterhouseCoopers Total Shareholder Return Index. The Index is calculated separately for automakers, suppliers and retailers. Total shareholder return, considered the best indicator of shareholder value, shows the change in the value of an investment in a period. Each company on the Automotive News/PricewaterhouseCoopers Total Shareholder Return Index is measured using Lithia is lowest Retailers suffered from their dependence on the slumping United States, PricewaterhouseCoopers said. Lithia Motors ranked lowest among the seven publicly traded retailers, with a decline of 50.8 percent in the quarter. In part, that was because Lithia is heavily concentrated in Chrysler LLC franchises, which rely on a high mix of slow-selling pickups and SUVs, said PricewaterhouseCoopers. During the quarter, the index for the seven retailers fell 28.6 percent. c share price movement, stock splits or buybacks and reinvestment of any cash dividends. The calculation assumes all dividends are reinvested in additional stock. The index average is weighted by market capitalization — a company's share price multiplied by shares outstanding — so the performance of companies with larger market caps has a greater impact on the index. See our Web site for past total shareholder return stories. autonews.com http://autonews.com
Table of Contents Feed for the Digital Edition of Automotive News - July 28, 2008 Automotive News - July 28, 2008 A scared-stiff industry stomps on the brakes No-lease edict stuns Chrysler dealers Hummer: Bonuses, buyouts Amid the gloom, Mercury celebrates Ford banks on Mulally's small-car plan PACE awards open for innovative suppliers GM expands employee discount plan through July American Axle blames strike for big quarterly loss Mercedes expects U.S. sales to fall; B class may come in 2011 Chevy plans new U.S. subcompact by '11 GM or Reynolds? Dealers must decide now Ralph Kisiel Ghosn: It's wrong time for a new partner GM geniuses turned their auto dreams into realities Dealers fresh out of Mini Coopers Chrysler, Ford, Honda top NAACP report card GM alters bonus for dealers who outperform their region Automakers angle for Chrysler's idle engine plant Chrysler revokes franchises in Pa. Sonic-Mercedes case could allow big dealers to add stores Buick's new LaCrosse It's still true: Product is king Still a bad idea NHTSA's Nason is leaving some big jobs undone Don't advertise them until they're on sale Safety matters much more than mpg Chrysler's no 'fuel economy laggard' $4 gas won't turn the U.S. into Europe For Europeans, America still spells opportunity Challenges travel with OnStar to China Personnel Mexico sales rise 1.2% in June Picture this Europe's worst sales result? Toyota Kia spends big to launch Borrego Kia launches Borrego just as SUVs lose favor Detroit 3: Goodbye, bailouts Dealers Eaton: Supercharger sales will grow Fla. appeals panel overturns class status in Kia brake suit Audi certified push pays off Used-car rule goes to the shop for tuneup Big-truck prices take a tumble in June Automaker tax break piggybacks on mortgage bill Honda rides high in 2nd-quarter rankings Ford Credit takes a hit as truck values fall 100 years of the Tin Lizzie Lamborghini profit soars AutoNation net income falls GM names CFO for N.A. TI Automotive unit will move Mercedes to cut Ala. production Fleming was a consummate newspaperman Toyota plans to raise Prius output A dart for Smart Tesla gets good reviews at Bentley 422 hp — and, uh, easy at the pump Ford's 2nd qtr: The reddest ink ever Bill Gates joins the car-dealer club Detroit 3 should put Mini under the microscope What's a Gov. to drive? Automotive News - July 28, 2008 Automotive News - July 28, 2008 - Hummer: Bonuses, buyouts (Page 1) Automotive News - July 28, 2008 - Hummer: Bonuses, buyouts (Page 2) Automotive News - July 28, 2008 - American Axle blames strike for big quarterly loss (Page 3) Automotive News - July 28, 2008 - GM or Reynolds? Dealers must decide now Ralph Kisiel (Page 4) Automotive News - July 28, 2008 - GM or Reynolds? Dealers must decide now Ralph Kisiel (Page 5) Automotive News - July 28, 2008 - GM alters bonus for dealers who outperform their region (Page 6) Automotive News - July 28, 2008 - GM alters bonus for dealers who outperform their region (Page 7) Automotive News - July 28, 2008 - Buick's new LaCrosse (Page 8) Automotive News - July 28, 2008 - Buick's new LaCrosse (Page 9) Automotive News - July 28, 2008 - Buick's new LaCrosse (Page 10) Automotive News - July 28, 2008 - Buick's new LaCrosse (Page 11) Automotive News - July 28, 2008 - Chrysler's no 'fuel economy laggard' (Page 12) Automotive News - July 28, 2008 - Chrysler's no 'fuel economy laggard' (Page 13) Automotive News - July 28, 2008 - For Europeans, America still spells opportunity (Page 14) Automotive News - July 28, 2008 - For Europeans, America still spells opportunity (Page 15) Automotive News - July 28, 2008 - Personnel (Page 16) Automotive News - July 28, 2008 - Personnel (Page 17) Automotive News - July 28, 2008 - Picture this (Page 18) Automotive News - July 28, 2008 - Picture this (Page 19) Automotive News - July 28, 2008 - Europe's worst sales result? Toyota (Page 20) Automotive News - July 28, 2008 - Europe's worst sales result? Toyota (Page 21) Automotive News - July 28, 2008 - Detroit 3: Goodbye, bailouts (Page 22) Automotive News - July 28, 2008 - Dealers (Page 23) Automotive News - July 28, 2008 - Fla. appeals panel overturns class status in Kia brake suit (Page 24) Automotive News - July 28, 2008 - Fla. appeals panel overturns class status in Kia brake suit (Page 25) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 26) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 27) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 28) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 29) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 30) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 31) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 32) Automotive News - July 28, 2008 - Honda rides high in 2nd-quarter rankings (Page 33) Automotive News - July 28, 2008 - 100 years of the Tin Lizzie (Page 34) Automotive News - July 28, 2008 - Mercedes to cut Ala. production (Page 35) Automotive News - July 28, 2008 - Toyota plans to raise Prius output (Page 36) Automotive News - July 28, 2008 - Toyota plans to raise Prius output (Page 37) Automotive News - July 28, 2008 - What's a Gov. to drive? (Page 38) Automotive News - July 28, 2008 - What's a Gov. to drive? (Page 39) Automotive News - July 28, 2008 - What's a Gov. to drive? (Page 40) Automotive News - July 28, 2008 - What's a Gov. to drive? (Page 41) Automotive News - July 28, 2008 - What's a Gov. to drive? (Page 42)
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