Automotive News - January 28, 2008 - (Page 44) 44 • JANUARY 28, 2008 As industry retreated, so did Toyota’s stock price Hans Greimel hgreimel@crain.com news ANALYSIS Something just doesn’t add up when you look at Toyota’s stock price. It tumbled nonstop in 2007, losing nearly a quarter of its value. But at the same time, Toyota was leaping from sales record to sales record and booking record profits. It overtook Ford as the No. 2 automaker in the United States and has pulled virtually even with General Motors in the race for the world sales title. To assuage investors, the company even raised its midterm dividend by 30 percent. So what gives? In 2007, it turns out, Toyota was largely a victim of forces beyond its control: Widespread fear of a U.S. economic slowdown, the yen’s rising value against the dollar, a domestic auto market in steep decline, soaring gasoline prices worldwide. That all spooked investors not only away from Toyota but away from any carmaker with big exposure to the United States or Japan. Like a ship on the ebb tide, Toyota’s stock retreated with the industry. Time to buy? But lots of financial analysts say that now might be the time to take another look at Toyota shares. “I think it’s all an overreaction,” says Tatsuo Yoshida, a Tokyo-based analyst with UBS Warburg. “If you have a longer-term horizon, like a year or more, it’s a good time to accumulate.” He sees Toyota’s shares rocketing by 80 percent to ¥8,900 ($83.86) in the next 12 months. Just be wary over the first half-year or so as the U.S. subprime loan problem shakes out, he warns. Toyota sells 35 percent of its cars in North America. Toyota President Katsuaki Watanabe isn’t among the worrywarts. U.S. slowdown or not, he says, Toy- ota still will outperform its rivals and eke out a 1 percent sales gain to 2.64 million units in North America in 2008. And the real Toyota bulls say the United States is beside the point. Factor in the rest of the world, and Toyota is forecasting total sales to climb by 5.1 percent to 9.85 million units next year. The bar goes higher still in 2009, to 10.4 million. Toyota’s Watanabe: Toyota will eke out a 1 percent sales gain in North America in 2008. to tantalizing growth potential elsewhere. “Japan’s automobile industry is set to see a reduction in its reliance on the U.S., which has been the main source of expansion, and embark on its second growth phase as companies achieve globalized earnings structures,” he wrote in a report issued this month. Just look at Suzuki Motor Corp. It ranked fifth worldwide among automakers in the Automotive News/PricewaterhouseCoopers Total Shareholder Return rankings last year, way ahead of its Japanese compatriots. That was largely thanks to Suzuki’s unrelenting focus on India. Yet global conquest raises its own red flags for Toyota. Skeptics wonder whether the Japanese company can sustain expansion and maintain quality. New factory The company just opened a factory in St. Petersburg, Russia, and is planning two more in Woodstock, Ontario, and Blue Springs, Miss. Not only does that raise the specter of overcapacity, but it also could stretch the company’s engineering and managerial resources dangerously thin. Despite the potential quality problems, Koji Endo, an analyst with Credit Suisse in Tokyo, has a “buy” rating on Toyota, with a lofty target of ¥10,000 ($95.23). The catch: a three-year time frame. And it’s anybody’s guess when the buying will begin. “Personally, I think the downside is very limited,” Endo says. “But how cheap is cheap enough, we still don’t know.” c BRIC building To get there, Toyota’s not banking on the United States. Instead, it’s salivating over big-time growth potential in the so-called BRIC nations: Brazil, Russia, India and China. In China alone, Toyota thinks it will hit 1 million vehicles a year by the early 2010s. That’s up from around 400,000 in 2007. In fact, analyst Takaki Nakanishi of JPMorgan predicts Toyota will dial down its offerings in stagnating markets like the United States as it turns SHAREHOLDER VALUE REPORT VW, BorgWarner were tops in ’07 Lindsay Chappell lchappell@crain.com GLOBAL AUTOMAKERS Total shareholder return for largest global automakers; percentage change per period Q4 2007 10.9 1.5 0.3 –1.3 –2.4 –3.5 –4.1 –4.6 –5.3 –5.4 –8.3 –8.4 –13.8 –20.7 –31.6 One year –3.7 104.9 –11.6 23.7 21.4 10.0 61.8 55.7 7.1 1.3 –17.1 16.8 37.3 –10.4 –16.4 Three years 17.4 437.5 43.6 41.3 84.2 44.5 226.6 99.0 46.7 52.8 45.5 29.1 225.9 –50.5 –29.2 GLOBAL SUPPLIERS Total shareholder return for largest global suppliers; percentage change per period Q4 2007 1 2 3 4 5 6 7 8 9 10 11 12 13 Clarion Calsonic NHK Spring NSK Tokai Rika Denso BorgWarner Aisin Seiki Stanley Electric JTEKT Toyoda Gosei Plastic Omnium Akebono Brake Continental TSR Index 15 16 17 18 19 20 21 22 23 24 25 Goodyear Tire Sanden Johnson Controls Autoliv Faurecia Lear Visteon Michelin Tenneco Magna Rieter Bridgestone Showa GKN American Axle Valeo ArvinMeritor Cooper Tire TRW Delphi* Dana* 95.8 30.9 20.8 19.1 12.4 8.5 5.9 4.1 3.3 1.9 –2.2 –3.3 –4.1 –5.4 –6.0 –7.2 –7.6 –8.1 –11.2 –13.0 –13.8 –14.8 –14.9 –15.9 –16.5 –18.0 –19.7 –22.0 –22.5 –25.7 –26.1 –29.6 –31.6 –34.0 –68.2 –87.7 One year 63.1 –10.4 –10.7 8.9 25.7 4.9 65.4 28.0 26.3 –14.1 55.1 21.2 –35.5 14.9 7.0 34.4 18.1 27.5 –10.3 5.0 –6.3 –48.2 21.6 5.5 1.2 –13.3 –19.2 –41.4 6.5 0.6 1.5 –34.0 18.4 –18.1 –96.2 –98.3 Three years 13.6 –17.8 42.3 127.9 93.9 62.7 83.6 76.2 54.6 34.1 83.6 110.3 18.5 114.9 37.6 92.5 –6.9 78.2 17.9 –11.7 –52.9 –55.1 91.2 51.2 3.8 63.2 –4.9 –26.0 39.1 –33.6 8.5 –43.4 –16.6 2.3 –98.4 –99.9 Volkswagen AG doubled investors’ money in 2007, and the average publicly traded global auto parts supplier outperformed the Dow Jones Industrial Average for the year. And this in a year of falling sales and recession fears? The counterintuitive nature of stock markets reveals itself in this year’s Automotive News/PricewaterhouseCoopers Total Shareholder Value Index. Toyota Motor Corp. held the loser’s spot among automakers, even though it has pulled virtually even with General Motors for leadership in global sales and forecasts profits of $15 billion in the current fiscal year. Toyota’s performance resulted in a 17.1 percent decline in shareholder value. For the index, shareholder value is defined as the total of share price increases, dividends and other benefits that accrue to shareholders. Volkswagen’s vow to spend more than $42 billion improving fixed assets helped its total shareholder value grow nearly 105 percent in 2007. VW’s performance was aided by a cash infusion from stakeholder Porsche AG. Porsche itself ranked No. 2 in shareholder value for the year, rewarding its investors with a 61.8 percent increase for the year. Advanced technology propelled BorgWarner Inc. to the top of the year’s global supplier shareholder performance, according to the index. BorgWarner’s portfolio of emissions-cutting engine components has helped deliver rapid growth in Asian markets. Japan-based Clarion Corp. was a close second on the supplier list, thanks to its catalog of electronics and advanced components. Even including the double-digit negative performances of struggling Dana Corp., Delphi Corp. and Visteon Corp., the entire supplier roster averaged a 7 percent increase in shareholder value, compared with a 6.4 percent increase for the Dow Jones index in 2007. The roster includes suppliers in Europe and Japan, which generally are much healthier than big U.S. suppliers. Among the industry’s publicly traded auto retailers, there were no winners. Shareholders in the seven retail groups lost a third of their investment on average for the year, with Group 1 Automotive Inc. faring the worst. Its 53.4 percent decline in value was caused in part by lower same-store sales and Group 1’s exposure to the subprime lending crisis. c 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Nissan Motor Volkswagen Honda Suzuki Renault BMW Porsche Daimler AG Hyundai Motor TSR Index Toyota Motor Peugeot Fiat Ford Motor General Motors U.S. RETAIL GROUPS Total shareholder return for U.S. retail groups; percentage change per period Q4 2007 1 2 CarMax TSR Index 3 4 5 6 7 Sonic Automotive Lithia Motors AutoNation –2.7 –13.5 –18.7 –18.9 –19.5 Penske Automotive –13.4 One year –26.2 –24.9 –33.5 –32.1 –51.1 –35.6 –33.6 –53.4 Three years 27.4 22.9 –7.3 –17.1 –46.2 –28.5 15.6 –22.5 4 companies earn honors The Automotive News Shareholder Value Awards, presented by Automotive News and PricewaterhouseCoopers, were given last week at the Automotive News World Congress in Detroit. These companies were honored. No retailers posted positive returns in 2007, so no one-year shareholder award was given in that category. Best shareholder return in 2007 Automaker: Volkswagen Supplier: BorgWarner Best shareholder return for 2004-2007 Automaker: Volkswagen U.S. retailer: CarMax Supplier: NSK Asbury Automotive –23.1 Group 1 Automotive –28.9 THE BIG PICTURE 26 27 28 29 30 31 32 33 About shareholder return The data on this page represent the fourthquarter 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 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. Total shareholder return for automotive sectors; percentage change per period Q4 2007 –5.4 –13.5 –6.0 One year 1.3 –33.5 7.0 Three years 52.8 –7.3 37.6 Global automakers U.S. retail groups Global suppliers See our Web http://autonews.com
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