Last week saw global leaders from industry, finance and politics meet at the annual Davos event. High on the agenda of course, the sluggishness of pan-global economic growth, exempting the good news from China and the 'great expectations' of North America.
Given the financial and structural economic woes of much of Europe – with the national credit down-grading of France heightening fears about 'core contagion' and correlated delay in the EU's eventual rebound – the 'big picture' raison d'etre of the event has been EU solution seeking. Thus it may be argued that the event's focus continues to be about the here and now, but such supposed short-termism - which is actually in the long-term interest – has been the recurrent theme ever since 2008.
The global grand schemes of yesteryear have seemingly become marginalised, and perhaps none more so than the high-ideal ecological ambitions made almost sacrosanct by the 1997 Kyoto Protocol, even if not ratified by the major players and so formalised. Nonetheless, intent for change was there, and the eco-challenge still sits in the political background, even if superceded by fiscal and now nationalist concerns within the EU.
Recent years and associated hard times of late have understandably led to reticence amongst policy-makers and capital markets participants to optimistically push for drastic eco-orientated transformation. High costs, wavering confidence and often increasingly delayed or possibly ethereal ROI timelines (at domestic and state levels) means that the whole arena, ideology and discipline of 'Environmental Economics' has come under the 'pressure of pragmatism' as never expected in the 30 years prior to 2008; given the 'golden era' characteristics of that period.
[NB However, there have been exceptions, as discussed in a previous post, the Mayor of London introduced the LEZ (Low Emissions Zone) as of 01.01.2012 effectively banning older, heavy diesel engined vehicles from London streets].
Nonetheless, whilst scheduled programmes of change have been seen, the participants at Davos well recognise that it is in the midst of such daily and weekly turmoil that the art of grand schema is most required, and that is presently directly at economic need, over and above ecological.
However, that is not to say the two are mutually exclusive, indeed crafting the former need properly can actually propogate the later, by creating a more fertile soil for future growth.
It is this outlook of optimism, for turning challenges into opportunities, that the title of this year's Davos event chimes: 'The Great Transformation: Shaping New Models.'
The very fact that this title was chosen - each year's title generated by reading in between the lines of general consensus - points to the evident understanding of a much altered 'power-broking' basis in the global economy between East and West, aswell as recognition that the ecological challenge whilst presently in the background is forever with us as living standards across the globe rise.
Within this broad context, the emergence of the EU economic now sets 'conditional demands' for adapted and wholly new socio-economic 'progress paths' to be nationally, regionally and internationally constructed.
The fact that China's representation at Davos was lesser than expected indicates that China is subtly demonstrating its potential power to relieve EU woes, whilst also allowing it to remotely view a less guarded US – Euro relationship as would have otherwise been the case.
Contrasting such real-politik was CNN News' typical popularist manner of questioning Davos participants as to whether leaders were “ahead or behind the curve” regards the EU crisis; using the austerity of a basic flip-chart and re-orientated WEC logo as the base for its version of 'pin the tail on the donkey'. Mixed opinion returned. The IMF's MD & Chair Christine Lagard set out two positions – slightly ahead and slightly behind the apex of the curve – to illustrate both intention and reality. A similar dual depiction with far greater distance was given by Prof. Nuriel Rubini.
This the difference of perception (or rather of outward presentation) of these two individuals perhaps unsurprising given their respective backgrounds. Yet it outwardly suggests that the 'EU problem' is a long term one, and may only be fixed by ongoing phases of structural reform which thus attract broad-base liquidity injections for many years to come. That time scale also driven by inter-regional political complexity and the subtle tussle between cash injections provided by intentional ongoing Euro devaluation (QE), provision by the international capital markets and any 'saviour' offerings by China and other SWF's latterly returning to the table who would presumably only truly leverage their US$ FX reserves (from export income and petro-dollars) once the Euro has reached parity with the US$ - a small trickle flow of money until then.
Yet, the very notion of 'the curve' euphemistically used by CNN is a misnomer. The reality being that a multi-speed Europe must best manage divergent slopes of much muted prosperity, economic flat-lining and very real medium term watershed decline.
At worst this inescapable reality impels the eventual collapse of the Euro, as many doom-mongers predict. Yet a return to individual national currencies would be relatively chaotic, and would logically lead to each 'un-coupled' nation seeking ever greater competitive advantage over its preceding neighbour through ever greater devaluation efforts; notably via nation based QE and literal (old fashioned) currency printing to re-inject liquidity and consumer spending, as opposed to routing less visible but arguably more powerful liquidity through the investment disciplines of the banking industry.
In contrast, a best outcome scenario would be that the divergent fortunes of EU members allows Germany to take a greater lead, and with broad plan agreement by 'fellow-step' neighbours, providing for the slow remoulding of industrial and commercial Europe. This has been criticised as creating little more than an EU of 'Little Germanys', but would undeniably provide for far sounder national economic platforms, and indeed socially may well instil the German traits of caution, learning and self responsibility.
Importantly, any solution that sees the EU retain its shape would require a coordinated effort amongst members to allow the Eurozone to subtly massage the Euro's global valuation relative to future global conditions. Done so by in a pro-cyclical manner, able to leverage the fundamental economic differences between EU countries. Thus using the now emerged growth disparity gap to locate specific activities vis a vis the global competition in the most promising locations throughout Europe. This then in a similar vein to the FDI investments seen in 'New Entry' EU countries over the last decade or so. So in effect creating captive deflationary and inflationary zones suited to specific goods and service sectors.
If indeed a long-term hybrid '2-speed Europe' can be sustained to the benefit of investors seeking ROI from specifically aligned commercial and industrial sectors, the peoples of retained member state countries would gain from such Ricardo-esque re-orientation of geographically based core competencies; whilst in the interim benefiting from the support of German commercial assistance, the funnelling of EU and ECB monies via the ESM and ESFS aswell as the IMF.
Critically this route of 'twin Europe' plays to the best of both worlds, allowing member states the freedom of self-directed re-conceptualisation - if fundamentally watertight as a building bloc of a renewed Europe - aswell as the broad political support network to achieve realistic change. All at a lower cost than 'dropping out' altogether and so becoming reliant upon the demands of what would be seen as voracious free capital markets, which in themselves have a remit to allot investment capital on strict investment terms, even given the rhetoric of socio-consciousness.
[NB This creation of a dual-aspect 'Hybridized Europe' would then recreate a similar economic base to that of Europe in the post-WW1 & post-WW2 periods. Yet this time the spectre of Communism replaced by far a greater sensitivity by the 'hand in hand' power-brokers of Capitalism to social needs; a very real necessity given the sea-change of populist attitudes Thus perhaps closer to a re-run of Victorian Britain in which leading-light industrialists literally physically built a better world for employees, and privately directed philanthropic funds acted in the broad human interest, both initiatives arguably more effective in creating the 'public good' than state-run organisations which today across Europe have arguably little financial accountability to the populace and little in the manner of measurable 'social output' results. Such 'Conscientious Captalism' was a precursor to later state-run education, health etc programmes, and may today become an evolved successor on a far greater scale].
Such an economic hybridization of Europe might very well require differentiated dual pricing structures of basic goods and services to the public consumer between the EU's struggling periphery and the less impoverished core. This to avoid the type of real-world (inflationary) pricing pain experienced by the then periphery countries when the Euro came into being in 1999, and affect only consumer staples such as food, utilities and typically non-taxed critical goods such as children's clothing etc.
This would in turn provide for new employment roles within the state to ensure that basic prices of foodstuffs, petroleum etc were maintained, so eradicating profiteering and that black market 'arbitrage' between ('cheap') periphery and ('expensive') core was prohibited.
Yes, such a economic development path for the whole EU region need not have historical overtones of great division, as seen previously with Eastern and Western Europe. A freedom of movement for goods and people (though with certain economic strictures) would stay engrained, and there would be no physical barriers or militaristic checkpoints beyond those needed to maintain national security, and the emergence of electronic tagging, IT and the 'connected world' means that law enforcement can be far more subtle. Less intrusive and indeed effective.
Any such details would need very careful assessment, but the primary issue at hand is that the inescapable reality of a long term 2-speed Europe is accepted as the true state of play by all members within the region. Instead of – as seems presently the case – the denial of the new EU economic picture and the associated political infighting which presently post-pones a credible economic solution to the good of all, most notably each nation's peoples.
On the surface a 2-speed Europe looks to be a momentous failure but it must be recognised that the past good fortunes of the periphery countries through the 1990s and 2000s was built upon use of 'credit supercharging' by respective governments to grow state employment, by firms seeking to utilise the then lower labour costs, and by banks lending on a property bubble. Exempting portions of Italian and Spanish industry, little of that apparent growth was tangible industrial productivity of real use to the the nation, EU region or indeed world at large.
To this end, unlike EM growth in Asia, the Mid-East or South America, the EU's periphery lived well inside a more or less self-contained universe. But that universe is now recognised as little more
than a black-whole that is presently still unquantifiable in true value terms by many, including most importantly the investment community.
Thus a very real fundamental change is necessarily required so as to regenerate those economies via truly productive activities that can be both self-consumed and exported elsewhere.
And to this end, the automotive arena across Southern Europe – primarily in Italy & Spain - should take this rare opportunity for fundamental review of its global positioning and recognise the benefits of 'whole-sale' (ie value-chain) reconstruction, so as to step into the future by creating a true “Tier 0.5” production hub that can feed the multitude of European brands.
As has proven throughout history and especially over the last two decades, the present over-matured - and thus often value destructive - sector business model has increasingly relied upon industry consolidation (ie GM Opel-Vauxhall, FIAT Group,VW Group, PSA Group), the sale of intrinsically uncompetitive companies to foreign newcomers (ie Volvo to Geely and now SAAB to possibly either China Youngman, Turkish Brightwell or India's Mahindra) and the increasing deployment of shared platform projects underpinning seperately skinned and badged cars.
Unquestionably the economics of European production by 'empire VMs' has come under question time and time again. The only companies able to escape seemingly the German trio of VW, BMW and Daimler through brand and geographic expansion and capture of premium and luxury markets worldwide. Yet even they look to JVs to lessen new vehicle project and production costs to maintain profit margins. It is well recognised that FIAT-Chrysler's CEO Sergio Marchionne seeks to partner with another European VM so as to grow scale and thus lessen overall input costs for his Italian-American company. And moreover, the world of contract manufacturing grew ever larger, especially in low and medium volume segments such as Porsche's use of Valmet and BMW use of Magna Steyr.
In business, history and convention states a 'circular' paradigm: that profitability leads to expansion and that expansion leads to profitability. Given the web-like character of the auto industry's value chain, and the intent to maintain as powerful grasp on the value-chain as possible, the willingness to divest of prime manufacturing activity – even when highly questionable since only economically viable during boom periods – has been hard to challenge; international VMs seeking to maintain global presence, use profitability from other regions to bolster Europe, always an executive's insistence that “European operations can be turned around” (rhetoric the BoD wants to hear) and as last resort, the ability to sink costs into Europe so as to bolster further the profits of other better performing regional divisions.
This then the convention
Yet, on paper there is another way forward, one which the fragmentation of the EU into a 2-speed economic bloc offers. That of mass scale contract manufacturing of platforms, module sets, sub-structures and whole vehicles to 'service' many of Europe's VMs. Ostensibly moving the Jv manufacturing model forward a logical step to create a true full-scale Tier 0.5 production category and arena; something oft discussed amongst the investment community and auto-executives, but rarely actioned given massive ramifications across business, investment and society
However, changed times call for changed behaviour, and though against conventional wisdom investment-auto-motives believes that Southern Europe may be ripe for such an auto-sector introduction that can induce scale efficiencies which drive profits for both Tier 0.5 opoerator and the VM client base. Indeed such an intrinsic change could well act as the bedrock for new productive growth across the region.
Further to previous posts regards the Norther Europe Eco-Tech Rainbow, and the expansion of Northern Africa's components and assemblies production capabilities, investment-auto-motives envisages 3 horizontal bands of automotive activity across the EU and MENA region. Respectively Northern Europe to offer R&D, Design & New Product Development (and end-point vehicle production by those companies able to exhibit profitability), Southern Europe to offer mass scale contract manufacturing industry (ie Tier 0.5), and North Africa to grow from Tier 2 base into fully fledged Tier 1 production base at world quality levels, thus able to 'feed' Italy, Spain et al.
Under the banner of 'Conscientious Capitalism' those corporations that have both strong operational and strategic fundamentals should be uninhibited to maintain business as usual, yet those that have proven themselves to be either 'stagnant' or indeed 'value destructive' (and have been reliant upon state aid via cash injections or policy-led market manipulation) should pro-actively seek alternative paths that a 2-speed Europe can offer, so that convincing profitability can once again be achieved
The basic theorum of massively extending the use of contract manufacturing from a Souther EU production hub, echoes similar “change sentiment” for the industry proffered in the book “Time for a Model Change” in which the authors argued the reason for 'industry unbundling'
(AD 2004 / G. Maxton & J. Wormald / Cambridge University Press)
(see Post Script)
The time has surely come for the leaders of European investment banks and leaders of automotive operations to highlight the need to devise pragmatic paths for “auto sector hybridisation” between VMs and a new Tier 0.5 hub. The recent inescapable and long-horizon events within the EU creating a 2-speed region mean that such an opportunity can be seized.
In short the EU's own 'economic hybridization' promotes the basis of 'business model hybridization' and so 'industrial hybridization'; one in which the fundamentally strong VMs march onward and the weaker participants become part of 'new model shift' companies.
Time then for the true 0.5 Tier corporations to come to the fore, either from wholly newly developed synergistic portfolio companies held by private equity, or from the collective margins of VM based contract manufacture, or from expansion of present Tier 0.5 operators, or the onward coalescing of the Tier 1 supply companies morphing into that arena.
Needless to say that such change toward a hybridized region and aligned hybridized industry would almost expectantly lead to the development and popularisation of eco-sensitive hybrid vehicles.
Post Script -
'The primary message of “Time for a Model Change' is - the need to re-create the conventional auto sector, with a central strand that sees vehicles being developed by a sector that operates on a horizontal level relative to vehicle segment type rather than the historic, conventional model by which volume manufacturers seek to build vertical (ie pyramidal) empires. These typically brand based - in an understandable desire to achieve both scale (at the mainstream level) to ensure low-price platform efficiencies, and the desire for premium and luxury production to gain stratified higher margins on increasingly exclusive reduced output.
Monday, 30 January 2012
Monday, 23 January 2012
Micro Level Trends - American Manufacturers – Sizing-Up US Growth in a Vehicle Down-Sizing Age
Perhaps never in the history of US have its two most over-used phrases been so juxtaposed. “Its the economy, stupid” and “ the business of America is business” highlight the present near schizophrenic conditions that exist, a now engrained cautious attitude given the midst of fiscal and social upheaval of the nation, versus the rote conditioning of American business and populace to be optimistic and ambitious.
A recent front-page of Economist newspaper starkly depicts the present picture with the headline “America's Next CEO?”, referring to the results of the Presidential primaries across New Hampshire and South Carolina (poll rating) for the Republicans which show Mitt Romney as current favourite.
On paper, his background of ex-management consultant and ex-Governor looks to bolster the 'assets' side of a euphemistic personal balance sheet. But with the election a year away, the electorate will have noted President Obama's recent Asiatic focus to boost growth, US military presence in the region historically the precursor to strengthened trans-Pacific economic ties; this time however having to power-broke its way vis a vis China and a loss of previous 'reach' from S.Korea.
That combination of current economic fragility sat beside retained global aspiration is no better viewed than at the recent 2012 Detroit Auto Show. Though the state of Michigan has long lost its prowess as auto manufacturing powerhouse relative to the Japanese, Koreans, Chinese and of course the 'trans-plant' states in the “deep south”.
Yet for all the soulful remonstrations of the city's very real decline - by the likes of urban music artist Eminem - Detroit still endeavours to present itself as the vanguard of the global automotive sector as the new year gets under way.
And it is a very much needed show of confidence.
GM's stock price, though improved recently sits at $25, is well below its $33 IPO offering price; the IPO timed to ride previous market peak. Chrysler parent FIAT recognises the need to attract new capital into the US company from the markets, a necessary evolution, but made all the more prescient given FIAT's own concerns about the economic stagnation of Europe and its cash-burning effect upon the overall group balance sheet. And Ford has no doubt most disappointingly seen its stock price fall from its year ago high at near $19 to a present $12.50 due to the retraction of market confidence because of the macro-effects of the EU and global slow-down rather than company fundamentals.
Thus the Detroit trio all face capitalisation challenges.
However, as well recognised, 2011 (on a monthly YtD basis) did bring a glimpse of light for all in the US by way of the improved TIV demand figures, shoppers on Main Street seemingly more upbeat in the short-term than Wall Street traders besieged by the red price boards and 'Occupy Wall Street'.
Whilst 2009 gave 10.4m units sold, and 2010 gave 11.6 units, 2011 is expected to offer approximately 12.5m units. As for 2012, the market pollsters JD Power and sales outlet AutoNation seem agreed on a total of 14m units. That may at first appear a case of wishful thinking and pro-active sentiment boosting. Yet with Detroit's Big 3 sales expected to suffer on a world-wide basis, there may be reason to believe that the GM, Ford and Chrysler will be forced to grow US sales as an off-set to lost foreign demand. That typically means that new and refreshed products which attract dealer footfall are coupled with cross the board yet subtly offered sales incentives to seal deals and reach what may be ambitious state and country-wide sales targets.
With this as Detroit's very real global and national back-drop, the underlying message of NAIAS (North American International Auto Show) at Cobo Hall Рjust ended - was that although the philosophical broadcast is as 'international' as ever, the pragmatic communiqu̩ is directed toward American buyers and dealers.
In order to excite consumers – and indeed Wall Street analysts – supposed 'concept cars' were rolled-out which intentionally bore more than a passing resemblance to current models so as to try and demonstrate their inherent progressiveness. But in reality – as is so often the case at this point in the economic cycle – are intended as image boosters to current models.
GM offered a compact sports study named the Chevrolet Miray (apparently meaning “future”) from its development centre in Korea, intended to simultaneously highlight the resurgence of the down-sized car – to befit the necessary global fit that enables scale efficiencies - and critical nudging of its sizeable presence in SE Asia's leading economy, with reach across the region. Also under the 'concept' name but seemingly more acutely related to the platform engineering of standard cars were the 2 items shown: the 'Code 130R' in the guise of a downsized Camaro 3-box coupe using Japanese German and Italian surfacing with all-american badging; and the 'Tru 140S', seemingly inspired by the 'organo' wedge-shaped Hondas of recent years. Both cars designed to fight against the 'import' market from Europe and Japan, but made more affordable for the targeted 'Millenium' (youth) consumer, which in reality translates as more affordable 'interpretations' of class leading foreign products for not just the youth but all consumers. An understandable design-policy driven by the strategic aim to build volume by capturing non-GM buyers from other VMs.
In a more candid effort to sell cars Ford offered stylised versions of its standard product range, including special editions of Fiesta, Focus, Taurus and Mustang in respectively, ST, ST-R, SHO and 'Laguna Seca' and 'Shelby GT500' guises. The company then, perhaps without the same pressure as GM to appear concomitantly global and future facing so as to buoy its market capital value, has followed previous US centric stance seen with 'Bold Moves' some years ago by wielding a set of obviously pragmatic 'showroom sellers' which are intended to draw general dealer interest. The new model introductions of course included 2012 versions of the general model range, but most interesting is the mid-size sedan Fusion, which is to be made available in a Plug-In Hybrid format. The investor website Motleyfool.com well recognised its – of course along with its peers - potential as the 'real-world' viable challenger to Tesla's Model S vehicle; this especially so if produced in Lincoln guise as Lincoln itself undergoes another brand overhaul. This aided by the new MKZ shown.
Chrysler showed the 700C concept, its contemporary take on a modern 'one-box' mini-van; a segment it essentially invented and captured in the mid 1980s after initial exploration with Renault (leading to Espace). Just as the Chrysler Town & Country and Dodge Caravan were – along with small sedan Neon – corporate saviours, so FIAT and Chrysler management seem keen to be seen to re-deploy pages from the history books, and target what appears an out of favour segment that lost its popularity given the 'soccer mom' tag and influx of SUVs and Cross-Overs. By way of more mainstream 'concept' efforts there is the Dodge Charger Redline. But of major interest was the Dodge Dart, the first US vehicle to be directly derived from a FIAT platform, the Alfa Romeo Giulietta. The re-engineering of Dodge with Alfa's sporting prowess should re-inject the brand with lost ride & handling characteristics, and with a $16,000 base price will be an attractive market contender. Importantly, FIAT-Chrysler used the show to display its 1.4L Multi-Air engine, which by historical American standards, and popular perception, a small power unit. However, it is being promoted through its use in the FIAT 500 to try and alter that perception so then able to be planned into later US market FIAT and Chrysler products. Furthermore FIAT used NAIAS to introduce the Maserati Kubang premium cross-over seeking to mimic Porsche's success with Cayenne.
From foreign stables, Toyota spotlighted the NS4 concept, a Camry sized Plug-In Hybrid sedan which intentionally spring-boards aesthetically from Honda's Hydrogen FCX Clarity concept of 2009, including its metallic deep red body colour, so subtly massaging public memory to Toyota's advantage. Toyota also debuts the LC-LF, a successor to its previously well received Lexus SC convertible. Honda itself provides a taste of the next generation NSX sportscar, badged in the US as Acura, and with the remit to kick-start what has been lost interest in the pseudo-premium marque that must switch its own centre of gravity from more recent SUV orientated vehicles to sedans, coupes etc. Whilst Daimler gave the idiosyncratic Smart For-US, trying to grow appeal of its micro-car marque.
This provides a basic view of the US market and US product outlook. However, given the bearish worldwide picture -exempting the surprising 8.9% growth in China in Q4 2011 – investors have great expectations that America can pull itself from the mire. To this end the recently experienced positive consumer traction in autos will be (nigh on) expected to continue as the theory of a self-sustaining America allows itself to kick-start its own upturn.
Yet that 'wished confidence' of a brighter era must be supported by evidence of top-line earnings improvement coupled with lean efficiency cost absorption within an organisation thus providing for appealing profitability and so investment incentive.
GM -
The reborn GM has (like Ford) the benefit of true global reach, but perhaps as never before have its 2 prime markets of China and the US been so important. The apparent 'soft landing' in China allowed GM to see its sales increase by 8.3%, ostensibly in line with general country growth.
In its first full year as a resurrected company, its FY 2010 revenue was $135.6bn, EBIT of $7.0bn, net Operating Cashflow of $6.6bn and FCF of $2.4 (having repaid $4.0bn to pension plans) and EPS of $2.89.
In 2011,
Q1 offered (net) revenue of $36.2bn (up $4.7bn YoY), an (adjusted) EBIT of $2.0, an Operating Income of $0.9bn (down from $1.2bn) and an EPS of $1.77 (up from $0.55), FCF dropped to $-0.9bn (from $1.0bn as a result of finance sourcing change that cost $2.5bn) and showed Automotive Liquidity of $36.5bn, with increased use of credit facilities (worth $5.9bn), this $42.2 set against Debt Obligations of $31.7bn.
Production was 2.32m units.
Q2 gave (net) revenue of $39.4bn (from $33.2bn), an (adjusted) EBIT of $3.0bn (from $2.0bn) and an EPS of $1.54 (from $0.85). FCF was up to $3.8bn (from $2.8bn), and Total Automotive Liquidity was $33.8 at hand and a further $$5.9 available via credit facilities. This total of 39.7bn set against Debt Obligations of $31bn.
Production reached 2.4m units
Q3 provided for (net) revenue of $36.7bn (vs $34.1bn a year earlier), an EBIT of $2.2bn (vs 2.3bn), net income for stockholders of $1.7bn (vs 2.0bn) and an EPS of $1.03 (vs $1.20). Operating cashflow reached $1.8bn and FCF from Autos equalled $0.3bn (from $1.4bn). Total Autos Liquidity equalled $33.0bn at hand with $5.9bn retained credit facility. This $38.8bn set against reduced Debt Obligations of $27.9bn, giving Net Liquidity of $10.9bn
Production dropped to 2.22m units.
As stated no Q4 figures presently available, though the BoD states a Q4 similar to that of Q4 2010
The company's earnings chart sets show that GMNA did near all the 'heavy lifting' in Q3, GMIO (Int Ops) showing reduced income, GM Financial assisting, GMSA (S.America) showing virtually no income and GME (Europe) showing a welcome reduction in losses, but still in the red. This the outcome from slow-down in global deliveries from 2.32m units in Q2 to 2.24m units in Q3.
GM has put effort behind its desire to decrease reliance on incentives, but results have been seasonally sporadic, with in the 16 months to Oct 2011, only 3 months of the series actually showing notable positive difference relative to the industry average 'give away' value, its own re-aligned pricing helping to beat internal targets.
This, looks to be part of the reason that Automotive Cash Generation shrank to $1.8bn in Q3 2011 from $2.4bn a year earlier, this broadly affecting Automotive FCF with the hike in YoY CapEx costs for the quarter from $1.2bn to $1.5bn, thus showing FCF heavily declining from $1.4bn to $0.3bn.
To re-quote the official statement “the company does not expect to achieve its target to break even on an EBIT-adjusted basis before restructuring charges in Europe, due to deteriorating economic conditions”. This then of little surprise. The IR department provides a general quote from Dan Ammann (CFO) “GM continues to execute the plan we outlined for investors in 2010...That includes investing in our products, further strengthening our balance sheet, generating cash and profits each quarter, and maintaining our low break-even level. The next level of performance will come as we systematically eliminate complexity and cost throughout the organization.”
Whatever the rhetoric, GM recognises that investors will need to be assured that the drop in stock-price (since IPO) can be off-set by the attraction of dividends. To this end the 2011 cumulative quarterly EPS rates (though not dividend rates)of Q1 $1.77, Q2 $1.52, Q3 $1.03, so far providing $4.32 will need to show a Q4 EPS of $1.44 to maintain an annualised average, and so theoretical attributable earnings to stock holders. If so, the notional “EPS Yield” generated relative to the $33 IPO price would show a 17% EPS return for 2011, and on the recent $24 price a 24% “EPS Yield”.
The prime aspect investors must watch is that whilst North America appears the most fertile and immediate sales ground, with the Q3 2011 numbers showing 96% of revenue came from NA, the exact methods GM uses for extracting additional value from the region must come under scrutiny. Just as the need must be to rebalance the international earnings contribution, so as not to put all the GM eggs in one basket.
Ford -
FY 2010 saw annual revenue of $129bn (vs $116.2bn in 2009), an EBIT of $7.15bn (vs $2.6bn) and a no paid EPS policy (relinquished in Q1 2012). Total Automotive Cash was $20.5bn (vs 24.9bn) with net (post Debt) sum of $1.4bn (vs $-8.7bn in 2009).
In 2011,
Q1 provided for revenue of $33.1bn (vs $5bn a year previous), an EBIT of $2.83bn (vs $0.82bn) and an unpaid EPS of $0.61 (vs $0.11). Total Automotive Cash stood at $21.3bn (vs $20.5bn), which after Debt Obligations stood at $4.7bn (up from $1.4bn) after debt reductions. Total Liquidity (inc marketable securities etc) stood at $30.7bn (from $27.9bn)
Production was 1.4m units (from 1.25m)
Operating Margin stood at 7.7% (vs 6.2% the preceding year) for the total company, though Ford NA offered 10.3% (vs 8.9%)
Q2 gave revenue of $35.5bn (vs $4.2bn), an EBIT of $2.9bn (vs $-0.06bn) and an EPS of $0.65 (vs $0.03).. Gross Automotive Cash stood at $22bn (vs $0.1bn) with net Cash at $8.0bn (vs $13.4bn).
Total Liquidity stood at $32.2bn
Production was 1.52m units (up from 1.42m)
Operating Margin was 7.0% (down from 9.1% preceding year)
Q3 offered revenue of $33.1bn (vs $4.1bn), an EBIT of $1.94bn (vs $0.111bn) and an EPS of $0.41 (vs $0.02). Gross Cash was $20.8bn (vs $-0.3bn) against Debt Obligations of $12.7bn, thus net Cash of $8.1bn (vs $10.7bn), with Total Liquidity inc credit lines at $31.0bn.
Total Liquidity stood at $31bn
Production was 1.34m units (vs 1.25m preceding year)
Operating Margin was 4.8% (from 6.2%)
Q4 along with FY2011 results to be presented on 27.01.2012..
With the same global market dynamic as GM, it was Ford's N.American operations which gave the greatest boost to revenue and profitability. However, whereas GM saw 96% of its revenue stem from NA, Ford sees only 58%, a far more balanced sales base, even if theoretically prone to ongoing international economic turmoil. The fact that Ford was able to enjoy that contribution in what has been a dire year for International Operations highlights what appears a leanly run ship.
Continuing to use the notional “EPS Yield” calculation, Ford saw EPS earnings of Q1 $0.61, Q2 $0.65 and Q3 $0.41, providing an average of $0.55 that investors would expect to see in Q4. However, as known, Ford decided to halt dividends through 2011 so as to buoy its cash cushion and maintain 'deep pockets' that could support CapEx projects, Working Capital needs and other obligations. That decision undoubtedly surpressed Ford's stock value, its current $12 or so seemingly reflective of that reality in tandem with previous bear-market sentiment, but some might argue that basic corporate fundamentals are brighter than recognised. As to how much the re-initiation of dividends at what is a notably cautious rate affects sentiment remains to be seen.
Chrysler
FY 2010 saw revenue of $41.95bn, a modified EBIT of $763m and Net Loss of $-652m, Cash at Hand of $7.34bn with Gross Debt of $13.12bn, giving Net Debt of $5.77bn
In 2011,
Q1 provided for revenue of $13.1bn (vs $9.7bn in the former year), a modified EBIT of $477m (vs $143 previously), [a modified EBITDA of $1.17bn (vs $787m)], a Net Income of $116m (vs $197m, so first reported profit), Cash at Hand of $9.9bn (vs $7.3bn), Gross Debt of $13.2bn (up from $11.2bn) and so Net Debt of $3.3bn (down from $3.8bn). FCF of $2.5bn (vs $1.6bn)
Total Liquidity was not stated.
Sales Total of 394,000 units (vs 334,000 units)
Operating Margin of 3.6% (vs 1.5% a year earlier)
Q2 gave net revenue of $13.7bn (vs $10.5bn), a modified EBIT of $507m (vs $183m), [a modified EBITDA of $1.3bn (vs $855m)], a Net Loss of $-370m (vs $-172m), Cash at Hand of $10.2bn (vs $9.9bn), and Net Debt of $2.1bn (vs $3.4bn). FCF of $174m (vs $491m),
Total Liquidity was not stated, Debt Obligations $12.3bn ($10.7bn of which is payable in 2016+).
Operating Margin of 3.7% (vs 1.7% a year earlier)
Sales Total of 486,000 units (vs 407,000 previously)
Q3 offered net revenue of $13.06bn (vs $11bn), a modified EBIT of $483m (from $244m) [a modified EBITDA of $1.1bn (vs $937m)], a Net Profit of $212m (vs $-84m), Cash at Hand of $9.45bn (vs $8.2bn), Net Debt of $2.9bn (vs $2.1bn). FCF of $-699m (vs $32m)
Total Liquidity was not stated, Debt Obligations $12.3bn (vs $12bn), Net Debt of $-2.86 (vs $-2.1bn).
Sales Total of 496,000 units (vs 401,000)
Operating Margin of 3.7% (from2.2%)
Q4 and FY results due on 1st February 2012, with the Revised Guidance at Q3 giving:
shipments at over 2m, net revenues over $55bn, modified EBIT of $2bn [modified EBITDA of $4.8bn], adjusted Net Income of approx $0.6bn andf FCF over $1.2bn
As an unlisted company – presently awaiting the right timing for a new IPO – Chrysler has little in the way of investor pressures, now that large portions of the tax-payer funded bail-out have been repaid, and the financial and technical gate-ways for FIAT's expansionary ownership of the corporation have been reached. But to generate a successful IPO, FIAT-Chrysler must demonstrate itself as a strategically strong and well positioned car company. Recent events in Europe have to a degree scuppered what had even previously been a tentative merging of empires. Chrysler's compact car future is effectively reliant upon FIAT platforms (which now need a 3rd partner to drive down costs, eliminate EU production overcapacity and generate credible regional earnings). This a sizable but realistically achievable challenge to be seen to be on track ahead of the US corporations own IPO.
Conclusion
The Detroit show's spotlighting of mainstream models in new model year and supposed 'concept' guises demonstrates the 'Big 3' need to generate showroom footfall and public interest converted into sales.
Yet the strategic positioning of the different firms – GM, Ford and Chrysler – largely reflects their 'playbook' positions seen in the past when re-emerging from recessionary times.
GM's play has historically been, and continues to be price-led, its large cash cushion of $10.9bn in Net Liquidity very probably used to maintain its strength at the coalface by continuing to offer the lowest RRP pricing of the Big 3 in each vehicle segment, and probably the biggest discounts and incentives on its vehicles. Thus, although GM seniors talk of a new company with new attitude, the tack it will take to generate market-share and ensure factories run at high capacity rates looks to be conventional.
Ford was the first to undertake corporate shrinkage during the early part of last decade, the sale of Volvo demonstrating the last vestiges of a yesteryear age that included PAG etc. That downsizing and the undertaking of its biggest 'mortgage' borrowing was part of the rationale to create the 'One Ford' of today, keenly focused on global platform/module set leverage and life extension of platforms to ensure what may be the industry's leading rates of CapEx amortisation. However, its strategic position appears 'historically normal', today setting itself out as the 'technologist' car company (eg SYNC etc) where car content and intelligence is decreed as the blue ovals USP in its mainstream markets, both at home and internationally. But once where historically the 'new era USP' was as the vanguard in styling, today with a need to satiate a broad cultural span of global consumers the maturity of middle of the road design is bolstered by efforts toward mainstream segment technology leadership
Chrysler finds itself in a curiously familiar position to that of the late 1970s and early 1980s, having to rise phoenix-like from what has been a very prolonged and concerning time, where its products where becoming very long in the tooth and its multi-brands appeal rapidly diminishing in brand equity. FIAT's parentage is of course seeking to alter that and the efforts thus far appear a mix of hit (ie new Dodge Dart) and miss (ie Chrysler badged Lancia's in Europe, and the FIAT badged Freemont SUV). Yet success is not yet assured, especially as European sales collapse especially so in Italy as it faces enormous economic strains. So the new onus is on Chrysler to help - along with FIAT's slowing but still potent South American operations - to buoy the parent company, by striking hard and fast in the US homeland. It will need to “pull a rabbit out of a hat” and re-create the new buzz it did in the mid and late 1980s. That was achieved back then with a venturesome daring spirit of the new. Today it must exploit the technical and financial advantages of 'pre-packaged' platforms yet recreate that lost spark seen 30 years ago, only periodically seen since, and distinctly lacking in recent years, offering little more than hackneyed 'Detroit Spin'.
To end, the attached table (top right) provides a brief but meaningful overview of the Big 3's current performance and financial positions; as viewed by :
- Worldwide Regional Production
- Revenue
- N. American Revenue as % of Global Whole
- N. American Operating Margin
- Total Liquidity Available vs Total Debt
- Net Liquidity Available
These very basic measures provide a much needed clarity as both global investors and Detroit looks to this emergent period of 'American Expectation'.
Once upon a time the Mako Shark Corvette, the mid-mounted Mustang and hi-tail Superbird reigned supreme in Detroit. Today, necessarily so, it is all about the numbers.
A recent front-page of Economist newspaper starkly depicts the present picture with the headline “America's Next CEO?”, referring to the results of the Presidential primaries across New Hampshire and South Carolina (poll rating) for the Republicans which show Mitt Romney as current favourite.
On paper, his background of ex-management consultant and ex-Governor looks to bolster the 'assets' side of a euphemistic personal balance sheet. But with the election a year away, the electorate will have noted President Obama's recent Asiatic focus to boost growth, US military presence in the region historically the precursor to strengthened trans-Pacific economic ties; this time however having to power-broke its way vis a vis China and a loss of previous 'reach' from S.Korea.
That combination of current economic fragility sat beside retained global aspiration is no better viewed than at the recent 2012 Detroit Auto Show. Though the state of Michigan has long lost its prowess as auto manufacturing powerhouse relative to the Japanese, Koreans, Chinese and of course the 'trans-plant' states in the “deep south”.
Yet for all the soulful remonstrations of the city's very real decline - by the likes of urban music artist Eminem - Detroit still endeavours to present itself as the vanguard of the global automotive sector as the new year gets under way.
And it is a very much needed show of confidence.
GM's stock price, though improved recently sits at $25, is well below its $33 IPO offering price; the IPO timed to ride previous market peak. Chrysler parent FIAT recognises the need to attract new capital into the US company from the markets, a necessary evolution, but made all the more prescient given FIAT's own concerns about the economic stagnation of Europe and its cash-burning effect upon the overall group balance sheet. And Ford has no doubt most disappointingly seen its stock price fall from its year ago high at near $19 to a present $12.50 due to the retraction of market confidence because of the macro-effects of the EU and global slow-down rather than company fundamentals.
Thus the Detroit trio all face capitalisation challenges.
However, as well recognised, 2011 (on a monthly YtD basis) did bring a glimpse of light for all in the US by way of the improved TIV demand figures, shoppers on Main Street seemingly more upbeat in the short-term than Wall Street traders besieged by the red price boards and 'Occupy Wall Street'.
Whilst 2009 gave 10.4m units sold, and 2010 gave 11.6 units, 2011 is expected to offer approximately 12.5m units. As for 2012, the market pollsters JD Power and sales outlet AutoNation seem agreed on a total of 14m units. That may at first appear a case of wishful thinking and pro-active sentiment boosting. Yet with Detroit's Big 3 sales expected to suffer on a world-wide basis, there may be reason to believe that the GM, Ford and Chrysler will be forced to grow US sales as an off-set to lost foreign demand. That typically means that new and refreshed products which attract dealer footfall are coupled with cross the board yet subtly offered sales incentives to seal deals and reach what may be ambitious state and country-wide sales targets.
With this as Detroit's very real global and national back-drop, the underlying message of NAIAS (North American International Auto Show) at Cobo Hall Рjust ended - was that although the philosophical broadcast is as 'international' as ever, the pragmatic communiqu̩ is directed toward American buyers and dealers.
In order to excite consumers – and indeed Wall Street analysts – supposed 'concept cars' were rolled-out which intentionally bore more than a passing resemblance to current models so as to try and demonstrate their inherent progressiveness. But in reality – as is so often the case at this point in the economic cycle – are intended as image boosters to current models.
GM offered a compact sports study named the Chevrolet Miray (apparently meaning “future”) from its development centre in Korea, intended to simultaneously highlight the resurgence of the down-sized car – to befit the necessary global fit that enables scale efficiencies - and critical nudging of its sizeable presence in SE Asia's leading economy, with reach across the region. Also under the 'concept' name but seemingly more acutely related to the platform engineering of standard cars were the 2 items shown: the 'Code 130R' in the guise of a downsized Camaro 3-box coupe using Japanese German and Italian surfacing with all-american badging; and the 'Tru 140S', seemingly inspired by the 'organo' wedge-shaped Hondas of recent years. Both cars designed to fight against the 'import' market from Europe and Japan, but made more affordable for the targeted 'Millenium' (youth) consumer, which in reality translates as more affordable 'interpretations' of class leading foreign products for not just the youth but all consumers. An understandable design-policy driven by the strategic aim to build volume by capturing non-GM buyers from other VMs.
In a more candid effort to sell cars Ford offered stylised versions of its standard product range, including special editions of Fiesta, Focus, Taurus and Mustang in respectively, ST, ST-R, SHO and 'Laguna Seca' and 'Shelby GT500' guises. The company then, perhaps without the same pressure as GM to appear concomitantly global and future facing so as to buoy its market capital value, has followed previous US centric stance seen with 'Bold Moves' some years ago by wielding a set of obviously pragmatic 'showroom sellers' which are intended to draw general dealer interest. The new model introductions of course included 2012 versions of the general model range, but most interesting is the mid-size sedan Fusion, which is to be made available in a Plug-In Hybrid format. The investor website Motleyfool.com well recognised its – of course along with its peers - potential as the 'real-world' viable challenger to Tesla's Model S vehicle; this especially so if produced in Lincoln guise as Lincoln itself undergoes another brand overhaul. This aided by the new MKZ shown.
Chrysler showed the 700C concept, its contemporary take on a modern 'one-box' mini-van; a segment it essentially invented and captured in the mid 1980s after initial exploration with Renault (leading to Espace). Just as the Chrysler Town & Country and Dodge Caravan were – along with small sedan Neon – corporate saviours, so FIAT and Chrysler management seem keen to be seen to re-deploy pages from the history books, and target what appears an out of favour segment that lost its popularity given the 'soccer mom' tag and influx of SUVs and Cross-Overs. By way of more mainstream 'concept' efforts there is the Dodge Charger Redline. But of major interest was the Dodge Dart, the first US vehicle to be directly derived from a FIAT platform, the Alfa Romeo Giulietta. The re-engineering of Dodge with Alfa's sporting prowess should re-inject the brand with lost ride & handling characteristics, and with a $16,000 base price will be an attractive market contender. Importantly, FIAT-Chrysler used the show to display its 1.4L Multi-Air engine, which by historical American standards, and popular perception, a small power unit. However, it is being promoted through its use in the FIAT 500 to try and alter that perception so then able to be planned into later US market FIAT and Chrysler products. Furthermore FIAT used NAIAS to introduce the Maserati Kubang premium cross-over seeking to mimic Porsche's success with Cayenne.
From foreign stables, Toyota spotlighted the NS4 concept, a Camry sized Plug-In Hybrid sedan which intentionally spring-boards aesthetically from Honda's Hydrogen FCX Clarity concept of 2009, including its metallic deep red body colour, so subtly massaging public memory to Toyota's advantage. Toyota also debuts the LC-LF, a successor to its previously well received Lexus SC convertible. Honda itself provides a taste of the next generation NSX sportscar, badged in the US as Acura, and with the remit to kick-start what has been lost interest in the pseudo-premium marque that must switch its own centre of gravity from more recent SUV orientated vehicles to sedans, coupes etc. Whilst Daimler gave the idiosyncratic Smart For-US, trying to grow appeal of its micro-car marque.
This provides a basic view of the US market and US product outlook. However, given the bearish worldwide picture -exempting the surprising 8.9% growth in China in Q4 2011 – investors have great expectations that America can pull itself from the mire. To this end the recently experienced positive consumer traction in autos will be (nigh on) expected to continue as the theory of a self-sustaining America allows itself to kick-start its own upturn.
Yet that 'wished confidence' of a brighter era must be supported by evidence of top-line earnings improvement coupled with lean efficiency cost absorption within an organisation thus providing for appealing profitability and so investment incentive.
GM -
The reborn GM has (like Ford) the benefit of true global reach, but perhaps as never before have its 2 prime markets of China and the US been so important. The apparent 'soft landing' in China allowed GM to see its sales increase by 8.3%, ostensibly in line with general country growth.
In its first full year as a resurrected company, its FY 2010 revenue was $135.6bn, EBIT of $7.0bn, net Operating Cashflow of $6.6bn and FCF of $2.4 (having repaid $4.0bn to pension plans) and EPS of $2.89.
In 2011,
Q1 offered (net) revenue of $36.2bn (up $4.7bn YoY), an (adjusted) EBIT of $2.0, an Operating Income of $0.9bn (down from $1.2bn) and an EPS of $1.77 (up from $0.55), FCF dropped to $-0.9bn (from $1.0bn as a result of finance sourcing change that cost $2.5bn) and showed Automotive Liquidity of $36.5bn, with increased use of credit facilities (worth $5.9bn), this $42.2 set against Debt Obligations of $31.7bn.
Production was 2.32m units.
Q2 gave (net) revenue of $39.4bn (from $33.2bn), an (adjusted) EBIT of $3.0bn (from $2.0bn) and an EPS of $1.54 (from $0.85). FCF was up to $3.8bn (from $2.8bn), and Total Automotive Liquidity was $33.8 at hand and a further $$5.9 available via credit facilities. This total of 39.7bn set against Debt Obligations of $31bn.
Production reached 2.4m units
Q3 provided for (net) revenue of $36.7bn (vs $34.1bn a year earlier), an EBIT of $2.2bn (vs 2.3bn), net income for stockholders of $1.7bn (vs 2.0bn) and an EPS of $1.03 (vs $1.20). Operating cashflow reached $1.8bn and FCF from Autos equalled $0.3bn (from $1.4bn). Total Autos Liquidity equalled $33.0bn at hand with $5.9bn retained credit facility. This $38.8bn set against reduced Debt Obligations of $27.9bn, giving Net Liquidity of $10.9bn
Production dropped to 2.22m units.
As stated no Q4 figures presently available, though the BoD states a Q4 similar to that of Q4 2010
The company's earnings chart sets show that GMNA did near all the 'heavy lifting' in Q3, GMIO (Int Ops) showing reduced income, GM Financial assisting, GMSA (S.America) showing virtually no income and GME (Europe) showing a welcome reduction in losses, but still in the red. This the outcome from slow-down in global deliveries from 2.32m units in Q2 to 2.24m units in Q3.
GM has put effort behind its desire to decrease reliance on incentives, but results have been seasonally sporadic, with in the 16 months to Oct 2011, only 3 months of the series actually showing notable positive difference relative to the industry average 'give away' value, its own re-aligned pricing helping to beat internal targets.
This, looks to be part of the reason that Automotive Cash Generation shrank to $1.8bn in Q3 2011 from $2.4bn a year earlier, this broadly affecting Automotive FCF with the hike in YoY CapEx costs for the quarter from $1.2bn to $1.5bn, thus showing FCF heavily declining from $1.4bn to $0.3bn.
To re-quote the official statement “the company does not expect to achieve its target to break even on an EBIT-adjusted basis before restructuring charges in Europe, due to deteriorating economic conditions”. This then of little surprise. The IR department provides a general quote from Dan Ammann (CFO) “GM continues to execute the plan we outlined for investors in 2010...That includes investing in our products, further strengthening our balance sheet, generating cash and profits each quarter, and maintaining our low break-even level. The next level of performance will come as we systematically eliminate complexity and cost throughout the organization.”
Whatever the rhetoric, GM recognises that investors will need to be assured that the drop in stock-price (since IPO) can be off-set by the attraction of dividends. To this end the 2011 cumulative quarterly EPS rates (though not dividend rates)of Q1 $1.77, Q2 $1.52, Q3 $1.03, so far providing $4.32 will need to show a Q4 EPS of $1.44 to maintain an annualised average, and so theoretical attributable earnings to stock holders. If so, the notional “EPS Yield” generated relative to the $33 IPO price would show a 17% EPS return for 2011, and on the recent $24 price a 24% “EPS Yield”.
The prime aspect investors must watch is that whilst North America appears the most fertile and immediate sales ground, with the Q3 2011 numbers showing 96% of revenue came from NA, the exact methods GM uses for extracting additional value from the region must come under scrutiny. Just as the need must be to rebalance the international earnings contribution, so as not to put all the GM eggs in one basket.
Ford -
FY 2010 saw annual revenue of $129bn (vs $116.2bn in 2009), an EBIT of $7.15bn (vs $2.6bn) and a no paid EPS policy (relinquished in Q1 2012). Total Automotive Cash was $20.5bn (vs 24.9bn) with net (post Debt) sum of $1.4bn (vs $-8.7bn in 2009).
In 2011,
Q1 provided for revenue of $33.1bn (vs $5bn a year previous), an EBIT of $2.83bn (vs $0.82bn) and an unpaid EPS of $0.61 (vs $0.11). Total Automotive Cash stood at $21.3bn (vs $20.5bn), which after Debt Obligations stood at $4.7bn (up from $1.4bn) after debt reductions. Total Liquidity (inc marketable securities etc) stood at $30.7bn (from $27.9bn)
Production was 1.4m units (from 1.25m)
Operating Margin stood at 7.7% (vs 6.2% the preceding year) for the total company, though Ford NA offered 10.3% (vs 8.9%)
Q2 gave revenue of $35.5bn (vs $4.2bn), an EBIT of $2.9bn (vs $-0.06bn) and an EPS of $0.65 (vs $0.03).. Gross Automotive Cash stood at $22bn (vs $0.1bn) with net Cash at $8.0bn (vs $13.4bn).
Total Liquidity stood at $32.2bn
Production was 1.52m units (up from 1.42m)
Operating Margin was 7.0% (down from 9.1% preceding year)
Q3 offered revenue of $33.1bn (vs $4.1bn), an EBIT of $1.94bn (vs $0.111bn) and an EPS of $0.41 (vs $0.02). Gross Cash was $20.8bn (vs $-0.3bn) against Debt Obligations of $12.7bn, thus net Cash of $8.1bn (vs $10.7bn), with Total Liquidity inc credit lines at $31.0bn.
Total Liquidity stood at $31bn
Production was 1.34m units (vs 1.25m preceding year)
Operating Margin was 4.8% (from 6.2%)
Q4 along with FY2011 results to be presented on 27.01.2012..
With the same global market dynamic as GM, it was Ford's N.American operations which gave the greatest boost to revenue and profitability. However, whereas GM saw 96% of its revenue stem from NA, Ford sees only 58%, a far more balanced sales base, even if theoretically prone to ongoing international economic turmoil. The fact that Ford was able to enjoy that contribution in what has been a dire year for International Operations highlights what appears a leanly run ship.
Continuing to use the notional “EPS Yield” calculation, Ford saw EPS earnings of Q1 $0.61, Q2 $0.65 and Q3 $0.41, providing an average of $0.55 that investors would expect to see in Q4. However, as known, Ford decided to halt dividends through 2011 so as to buoy its cash cushion and maintain 'deep pockets' that could support CapEx projects, Working Capital needs and other obligations. That decision undoubtedly surpressed Ford's stock value, its current $12 or so seemingly reflective of that reality in tandem with previous bear-market sentiment, but some might argue that basic corporate fundamentals are brighter than recognised. As to how much the re-initiation of dividends at what is a notably cautious rate affects sentiment remains to be seen.
Chrysler
FY 2010 saw revenue of $41.95bn, a modified EBIT of $763m and Net Loss of $-652m, Cash at Hand of $7.34bn with Gross Debt of $13.12bn, giving Net Debt of $5.77bn
In 2011,
Q1 provided for revenue of $13.1bn (vs $9.7bn in the former year), a modified EBIT of $477m (vs $143 previously), [a modified EBITDA of $1.17bn (vs $787m)], a Net Income of $116m (vs $197m, so first reported profit), Cash at Hand of $9.9bn (vs $7.3bn), Gross Debt of $13.2bn (up from $11.2bn) and so Net Debt of $3.3bn (down from $3.8bn). FCF of $2.5bn (vs $1.6bn)
Total Liquidity was not stated.
Sales Total of 394,000 units (vs 334,000 units)
Operating Margin of 3.6% (vs 1.5% a year earlier)
Q2 gave net revenue of $13.7bn (vs $10.5bn), a modified EBIT of $507m (vs $183m), [a modified EBITDA of $1.3bn (vs $855m)], a Net Loss of $-370m (vs $-172m), Cash at Hand of $10.2bn (vs $9.9bn), and Net Debt of $2.1bn (vs $3.4bn). FCF of $174m (vs $491m),
Total Liquidity was not stated, Debt Obligations $12.3bn ($10.7bn of which is payable in 2016+).
Operating Margin of 3.7% (vs 1.7% a year earlier)
Sales Total of 486,000 units (vs 407,000 previously)
Q3 offered net revenue of $13.06bn (vs $11bn), a modified EBIT of $483m (from $244m) [a modified EBITDA of $1.1bn (vs $937m)], a Net Profit of $212m (vs $-84m), Cash at Hand of $9.45bn (vs $8.2bn), Net Debt of $2.9bn (vs $2.1bn). FCF of $-699m (vs $32m)
Total Liquidity was not stated, Debt Obligations $12.3bn (vs $12bn), Net Debt of $-2.86 (vs $-2.1bn).
Sales Total of 496,000 units (vs 401,000)
Operating Margin of 3.7% (from2.2%)
Q4 and FY results due on 1st February 2012, with the Revised Guidance at Q3 giving:
shipments at over 2m, net revenues over $55bn, modified EBIT of $2bn [modified EBITDA of $4.8bn], adjusted Net Income of approx $0.6bn andf FCF over $1.2bn
As an unlisted company – presently awaiting the right timing for a new IPO – Chrysler has little in the way of investor pressures, now that large portions of the tax-payer funded bail-out have been repaid, and the financial and technical gate-ways for FIAT's expansionary ownership of the corporation have been reached. But to generate a successful IPO, FIAT-Chrysler must demonstrate itself as a strategically strong and well positioned car company. Recent events in Europe have to a degree scuppered what had even previously been a tentative merging of empires. Chrysler's compact car future is effectively reliant upon FIAT platforms (which now need a 3rd partner to drive down costs, eliminate EU production overcapacity and generate credible regional earnings). This a sizable but realistically achievable challenge to be seen to be on track ahead of the US corporations own IPO.
Conclusion
The Detroit show's spotlighting of mainstream models in new model year and supposed 'concept' guises demonstrates the 'Big 3' need to generate showroom footfall and public interest converted into sales.
Yet the strategic positioning of the different firms – GM, Ford and Chrysler – largely reflects their 'playbook' positions seen in the past when re-emerging from recessionary times.
GM's play has historically been, and continues to be price-led, its large cash cushion of $10.9bn in Net Liquidity very probably used to maintain its strength at the coalface by continuing to offer the lowest RRP pricing of the Big 3 in each vehicle segment, and probably the biggest discounts and incentives on its vehicles. Thus, although GM seniors talk of a new company with new attitude, the tack it will take to generate market-share and ensure factories run at high capacity rates looks to be conventional.
Ford was the first to undertake corporate shrinkage during the early part of last decade, the sale of Volvo demonstrating the last vestiges of a yesteryear age that included PAG etc. That downsizing and the undertaking of its biggest 'mortgage' borrowing was part of the rationale to create the 'One Ford' of today, keenly focused on global platform/module set leverage and life extension of platforms to ensure what may be the industry's leading rates of CapEx amortisation. However, its strategic position appears 'historically normal', today setting itself out as the 'technologist' car company (eg SYNC etc) where car content and intelligence is decreed as the blue ovals USP in its mainstream markets, both at home and internationally. But once where historically the 'new era USP' was as the vanguard in styling, today with a need to satiate a broad cultural span of global consumers the maturity of middle of the road design is bolstered by efforts toward mainstream segment technology leadership
Chrysler finds itself in a curiously familiar position to that of the late 1970s and early 1980s, having to rise phoenix-like from what has been a very prolonged and concerning time, where its products where becoming very long in the tooth and its multi-brands appeal rapidly diminishing in brand equity. FIAT's parentage is of course seeking to alter that and the efforts thus far appear a mix of hit (ie new Dodge Dart) and miss (ie Chrysler badged Lancia's in Europe, and the FIAT badged Freemont SUV). Yet success is not yet assured, especially as European sales collapse especially so in Italy as it faces enormous economic strains. So the new onus is on Chrysler to help - along with FIAT's slowing but still potent South American operations - to buoy the parent company, by striking hard and fast in the US homeland. It will need to “pull a rabbit out of a hat” and re-create the new buzz it did in the mid and late 1980s. That was achieved back then with a venturesome daring spirit of the new. Today it must exploit the technical and financial advantages of 'pre-packaged' platforms yet recreate that lost spark seen 30 years ago, only periodically seen since, and distinctly lacking in recent years, offering little more than hackneyed 'Detroit Spin'.
To end, the attached table (top right) provides a brief but meaningful overview of the Big 3's current performance and financial positions; as viewed by :
- Worldwide Regional Production
- Revenue
- N. American Revenue as % of Global Whole
- N. American Operating Margin
- Total Liquidity Available vs Total Debt
- Net Liquidity Available
These very basic measures provide a much needed clarity as both global investors and Detroit looks to this emergent period of 'American Expectation'.
Once upon a time the Mako Shark Corvette, the mid-mounted Mustang and hi-tail Superbird reigned supreme in Detroit. Today, necessarily so, it is all about the numbers.
Saturday, 14 January 2012
Macro Level Trends – London's LEZ – Providing Economic Imperative from a Public Good
The beginning of the new year saw the Mayor of London's office introduce a new city-wide policy heavily discouraging the use of older, larger and more polluting vehicles within the city limits – now known as the LEZ (Low Emissions Zone). Delivered by Transport for London, the initiative is part of the Air Quality Strategy, seeking to cleanse the general breathable low level atmosphere, and so continue to avoid any potential build-up of low-level smog seen in other metro areas worldwide, such as Los Angeles or Beijing.
To quote official statements...“implementing the measures in the Mayor's strategy is expected to reduce PM10 emissions (tiny airborne particles generated principally by road transport) in central London by about a third by 2015, compared to 2008 levels. These new measures will play a significant role in the delivery of these targets”.
Since 3rd January those diesel vehicles 10 years old or more and rated at (at & above) 3.5 tons will face a heavy (£100 per day charge) for entering the LEZ. The policy aimed directly at those vans, trucks, mini-buses and coaches that do not comply to Euro3 or Euro 4 emissions standards. Furthermore, vehicles presently affected by the LEZ – lorries, buses & coaches - must now meet stricter emissions standards, set at the Euro IV standard for particulate matter; otherwise facing a £200 daily charge or risking a £1,000 fine.
There has been criticism that the policy unfairly disadvantages the small tradesman at a time of fiscal fragility for most businesses, websites such as 'HonestJohn' says that...“Obviously, this will have a major effect on small tradesmen using older vans, small lorries and pick-ups. Effectively anyone wanting any kind of job done on their house, flat or commercial premises within the LEZ will have to subsidise the purchase of newer vehicles by the tradesmen they call in”.
Yet, from the unbiased sidelines, this looks to be a knee-jerk reaction to the scheme, voices raised in an understandable yet overtly automatic manner. Of course some trades people use older vehicles, especially those who operate as one man bands or small companies, but of these investment-auto-motives suspects that only a small percentage run vehicles rated at 3.5 tons or greater. Look at the streets of London and the majority of small trades people use vans classified as LCVs- ie under the weight limit prescribed – in the form of the plethora of 'white vans' available from Ford, Vauxhall, Renault, PSA, FIAT, VW, Mercedes, Nissan, Toyota and Hyundai. These the long preferred choice of carpenters, plumbers, electricians and decorators given their easier manouvrability in town and the importance of lower fuel and running costs.
Undeniably, there will be business hit, the likes of scaffolding companies and roofing companies particularly given the hefty weights of steel poles and clay tiles that must be carried on what are usually flat-bed large trucks. Yet many of those companies are not the 'victimised' small trader, but typically because of sector consolidation, larger enterprises that should be better able to afford the CapEx costs of small fleet vehicle replacement; this especially the case given the government's push for initial economic re-generation spending in the construction industry.
Instead many of the vehicles in question appear to be owned or leased by major multinationals such as UPS, DHL etc in the delivery and logistics arena, companies which ordinarily 'write-down' CapEx devaluation from new on a 3, 5, or 7 year time-frame, or run by government agencies spanning Police, Ambulance, Fire, NHS and Social Services which have a natural imperative for policy driven renewal, either through 'farmed-out' fleet contracting (as has been the case with the Fire Brigade) or through self-managed fleets which can re-distribute older vehicles elsewhere in the country; such efforts assisted by the imperative of part-privatisation of the service, such as the Royal Mail.
Transport for London estimates that 94 per cent of the vehicles that will be affected already meet the new standards. This may or may not be an over-optimistic figure, leaving only 6% exposed, but view London's streets and it seems a rarity to see a 3.5 ton vehicle over 10 years old in the hands of the 'victimised' small trader.
Instead, conversely to the reactive rhetoric, it is believed that many of the central London (and broad city-bound) vehicles that are affected are seemingly owned by either major corporations, and medium sized companies able to undertake vehicle renewal if necessary, or by state entities which must accord to policy.
However, there are those who run such vehicles at the notional margins of the visible spectrum who are affected and will find the matter of vehicle renewal a more onerous prospect. 70,000 vehicles are run by smaller business catering for people moving, primarily schools, organisations and charities These special cases have been given a longer period in which to renew or decide not to replace their vehicles.
[NB Suggestions by TfL that such vehicles can be modified, whilst technically feasible to offer extended life-time use, are practically unaffordable given the costs of exhaust filtration and re-circulation systems) relative to vehicle value].
Even so, recognising the scheme's unintended consequences at the margins, those 'regionally exported' 70,000 vehicles, plus the seemingly small number that exist in private commercial hands, will critically allow for the improved broad supply of vehicles across the UK. That additional supply when set against what is likely to be a present static demand level for 3.5 ton vehicles will have the automatic market effect of actually lowering the price of these vans, trucks and mini-buses. That in turn allows single traders and small firms the ability to replace their own older vehicles (15-20 years old) with younger 10, 11, 12, 13, 14 year old 'ex-London' vehicles. So 'man a van' operators and low-priced van rental firms operating ageing stock can benefit with replacement vehicles that churn-out lower emissions and have greater fuel efficiency capabilities for lower cost per mile running.
Relative to London itself, the LEV scheme obviously promotes fiscal energisation by necessitating new 'demand pull', which in effect spans London and the wider UK economy.
This across:
- New Public & Private Vehicle Demand in London
- Vehicle Development & Coach-Fitting Demand from Regional Auto-Sector Suppliers
In the public realm, the new London Bus (NB4L) - although partly criticised by investment-auto-motives in its execution – saw welcome investment funds spent in its conception, development and build both on the Mainland with research establishments such as MIRA, aswell as importantly in County Antrim (Northern Ireland) where the winning contractors 'Wrightbus' are situated.
[NB Wrightbus are a family-owned and managed company that operates very much in the Mittelstand manner as recently advocated by Sir Anthony Bamford of JCB (similarly family run)]
Within that NB4L scheme a fleet of 300 hybrid buses will be operational by the end of 2012. Although the standard diesel only bus, set to enter service in February, is reported to emit under half the CO2 and NOx gases of previous generation diesel buses. Thus whilst the aesthetics may not be as wholly desired to truly replace the iconic Routemaster, the technological leap forward in using clean diesel and hybrid technology must be applauded. Furthermore, a zero-polluting hydrogen bus route is expected to operate through central London, though realistically more in the manner of a Mayoral flagship technology demonstrator than prospective scale-able transport solution.
The immediate beneficiaries of the LEV policy are of course those Medium-sized Commercial Vehicles (MCV) Dealers that offer both new and used (typically 3, 4, 5 year old) trucks, vans and mini-buses. The major corporate operators – often with buoyant cash reserves – can replace their fleet as necessary with all new vehicles typically ordered from the crop of major European producers. They in turn can benefit from the de-valuing Euro to negotiate good pricing on such purchases, the UK MCV dealers themselves having to balance margins per vehicle versus the improved volumes generated by the demand wave. Those intra-London government agencies and borough councils - if critically leveraging a combined 'cooperative buying' ability – will be able to gain sliding scale product discounts depending upon order numbers.
In short at 'the front end' of the process, it appears a 'win-win' for purchasers and dealers.
The benefits also appear down-stream, amongst the many UK based specialist coach-builders and body-fitters, those firms contracted to modify and 'fit-out' standard panel vans and cab-chassis variants (ie orders without rear body section; cab only). This then, the 'Phase 2' aspect of much MCV procurement, whence the base vehicle itself must be adapted to be fit for purpose, those tasks ranging from private utility company vans (ie electricity supply, water supply, telecoms supply) to the likes of Ambulances, Social Service passenger vehicles, TfL services such as 'Dial-A'Ride' for the elderly, infirm and non-abled, through to operators such as The AA, The RAC and GreenFlag breakdown & recovery companies;plus whole host of others.
This historically is a lucrative business for such vehicle body-builders, modifiers and fitters, a sub-sector typically very much aligned to economic cycles and fundamentals, but now seen as assisted by London's new 'Public Good' policy
Yet given the high labour content of this work, such companies are traditionally located well away from London in the lower-cost periphery of the country, areas which have suffered with the necessary withdrawal of state-based or government funded job creation schemes and have typically higher than national average unemployment levels.
Thus this seemingly London-centric policy, in reality has far wider positive economic ripples benefiting outlying areas.
[NB In order to assist the de-pollution of the urban centres and suburban street, it would serve well to have a rethink regards the use of road humps otherwise known as 'sleeping policemen'. Their widespread use whilst seeming to slow traffic may actually be causing greater pollutional harm with the fact that drivers are required to 'pull-away' from near stop after each hump, causing 'engine strain' when typically in second gear and so greater emissions.
investment-auto-motives suggests that a cobble-like Belgian Pavé be introduced instead to help slow traffic speeds, especially in conservation areas and roads of historic importance where such a surface would have previously been the case (ie where housing is of Georgian, Regency and Victorian age). The suggestion that such a pavé could be laid in a grid of cambered 'trays' so aiding removal when utility companies remove the road surface for underground pipe and cable work.
Larger SUV / 4x4s can obviously 'over-ride' the pavé, but this is already the case with present and intended road-humps. However, since such vehicles facing are increasingly socially disliked in British cities, their presence will gradually diminish, leaving conventional cars and small SUVs to better respect slow-area roads].
To quote official statements...“implementing the measures in the Mayor's strategy is expected to reduce PM10 emissions (tiny airborne particles generated principally by road transport) in central London by about a third by 2015, compared to 2008 levels. These new measures will play a significant role in the delivery of these targets”.
Since 3rd January those diesel vehicles 10 years old or more and rated at (at & above) 3.5 tons will face a heavy (£100 per day charge) for entering the LEZ. The policy aimed directly at those vans, trucks, mini-buses and coaches that do not comply to Euro3 or Euro 4 emissions standards. Furthermore, vehicles presently affected by the LEZ – lorries, buses & coaches - must now meet stricter emissions standards, set at the Euro IV standard for particulate matter; otherwise facing a £200 daily charge or risking a £1,000 fine.
There has been criticism that the policy unfairly disadvantages the small tradesman at a time of fiscal fragility for most businesses, websites such as 'HonestJohn' says that...“Obviously, this will have a major effect on small tradesmen using older vans, small lorries and pick-ups. Effectively anyone wanting any kind of job done on their house, flat or commercial premises within the LEZ will have to subsidise the purchase of newer vehicles by the tradesmen they call in”.
Yet, from the unbiased sidelines, this looks to be a knee-jerk reaction to the scheme, voices raised in an understandable yet overtly automatic manner. Of course some trades people use older vehicles, especially those who operate as one man bands or small companies, but of these investment-auto-motives suspects that only a small percentage run vehicles rated at 3.5 tons or greater. Look at the streets of London and the majority of small trades people use vans classified as LCVs- ie under the weight limit prescribed – in the form of the plethora of 'white vans' available from Ford, Vauxhall, Renault, PSA, FIAT, VW, Mercedes, Nissan, Toyota and Hyundai. These the long preferred choice of carpenters, plumbers, electricians and decorators given their easier manouvrability in town and the importance of lower fuel and running costs.
Undeniably, there will be business hit, the likes of scaffolding companies and roofing companies particularly given the hefty weights of steel poles and clay tiles that must be carried on what are usually flat-bed large trucks. Yet many of those companies are not the 'victimised' small trader, but typically because of sector consolidation, larger enterprises that should be better able to afford the CapEx costs of small fleet vehicle replacement; this especially the case given the government's push for initial economic re-generation spending in the construction industry.
Instead many of the vehicles in question appear to be owned or leased by major multinationals such as UPS, DHL etc in the delivery and logistics arena, companies which ordinarily 'write-down' CapEx devaluation from new on a 3, 5, or 7 year time-frame, or run by government agencies spanning Police, Ambulance, Fire, NHS and Social Services which have a natural imperative for policy driven renewal, either through 'farmed-out' fleet contracting (as has been the case with the Fire Brigade) or through self-managed fleets which can re-distribute older vehicles elsewhere in the country; such efforts assisted by the imperative of part-privatisation of the service, such as the Royal Mail.
Transport for London estimates that 94 per cent of the vehicles that will be affected already meet the new standards. This may or may not be an over-optimistic figure, leaving only 6% exposed, but view London's streets and it seems a rarity to see a 3.5 ton vehicle over 10 years old in the hands of the 'victimised' small trader.
Instead, conversely to the reactive rhetoric, it is believed that many of the central London (and broad city-bound) vehicles that are affected are seemingly owned by either major corporations, and medium sized companies able to undertake vehicle renewal if necessary, or by state entities which must accord to policy.
However, there are those who run such vehicles at the notional margins of the visible spectrum who are affected and will find the matter of vehicle renewal a more onerous prospect. 70,000 vehicles are run by smaller business catering for people moving, primarily schools, organisations and charities These special cases have been given a longer period in which to renew or decide not to replace their vehicles.
[NB Suggestions by TfL that such vehicles can be modified, whilst technically feasible to offer extended life-time use, are practically unaffordable given the costs of exhaust filtration and re-circulation systems) relative to vehicle value].
Even so, recognising the scheme's unintended consequences at the margins, those 'regionally exported' 70,000 vehicles, plus the seemingly small number that exist in private commercial hands, will critically allow for the improved broad supply of vehicles across the UK. That additional supply when set against what is likely to be a present static demand level for 3.5 ton vehicles will have the automatic market effect of actually lowering the price of these vans, trucks and mini-buses. That in turn allows single traders and small firms the ability to replace their own older vehicles (15-20 years old) with younger 10, 11, 12, 13, 14 year old 'ex-London' vehicles. So 'man a van' operators and low-priced van rental firms operating ageing stock can benefit with replacement vehicles that churn-out lower emissions and have greater fuel efficiency capabilities for lower cost per mile running.
Relative to London itself, the LEV scheme obviously promotes fiscal energisation by necessitating new 'demand pull', which in effect spans London and the wider UK economy.
This across:
- New Public & Private Vehicle Demand in London
- Vehicle Development & Coach-Fitting Demand from Regional Auto-Sector Suppliers
In the public realm, the new London Bus (NB4L) - although partly criticised by investment-auto-motives in its execution – saw welcome investment funds spent in its conception, development and build both on the Mainland with research establishments such as MIRA, aswell as importantly in County Antrim (Northern Ireland) where the winning contractors 'Wrightbus' are situated.
[NB Wrightbus are a family-owned and managed company that operates very much in the Mittelstand manner as recently advocated by Sir Anthony Bamford of JCB (similarly family run)]
Within that NB4L scheme a fleet of 300 hybrid buses will be operational by the end of 2012. Although the standard diesel only bus, set to enter service in February, is reported to emit under half the CO2 and NOx gases of previous generation diesel buses. Thus whilst the aesthetics may not be as wholly desired to truly replace the iconic Routemaster, the technological leap forward in using clean diesel and hybrid technology must be applauded. Furthermore, a zero-polluting hydrogen bus route is expected to operate through central London, though realistically more in the manner of a Mayoral flagship technology demonstrator than prospective scale-able transport solution.
The immediate beneficiaries of the LEV policy are of course those Medium-sized Commercial Vehicles (MCV) Dealers that offer both new and used (typically 3, 4, 5 year old) trucks, vans and mini-buses. The major corporate operators – often with buoyant cash reserves – can replace their fleet as necessary with all new vehicles typically ordered from the crop of major European producers. They in turn can benefit from the de-valuing Euro to negotiate good pricing on such purchases, the UK MCV dealers themselves having to balance margins per vehicle versus the improved volumes generated by the demand wave. Those intra-London government agencies and borough councils - if critically leveraging a combined 'cooperative buying' ability – will be able to gain sliding scale product discounts depending upon order numbers.
In short at 'the front end' of the process, it appears a 'win-win' for purchasers and dealers.
The benefits also appear down-stream, amongst the many UK based specialist coach-builders and body-fitters, those firms contracted to modify and 'fit-out' standard panel vans and cab-chassis variants (ie orders without rear body section; cab only). This then, the 'Phase 2' aspect of much MCV procurement, whence the base vehicle itself must be adapted to be fit for purpose, those tasks ranging from private utility company vans (ie electricity supply, water supply, telecoms supply) to the likes of Ambulances, Social Service passenger vehicles, TfL services such as 'Dial-A'Ride' for the elderly, infirm and non-abled, through to operators such as The AA, The RAC and GreenFlag breakdown & recovery companies;plus whole host of others.
This historically is a lucrative business for such vehicle body-builders, modifiers and fitters, a sub-sector typically very much aligned to economic cycles and fundamentals, but now seen as assisted by London's new 'Public Good' policy
Yet given the high labour content of this work, such companies are traditionally located well away from London in the lower-cost periphery of the country, areas which have suffered with the necessary withdrawal of state-based or government funded job creation schemes and have typically higher than national average unemployment levels.
Thus this seemingly London-centric policy, in reality has far wider positive economic ripples benefiting outlying areas.
[NB In order to assist the de-pollution of the urban centres and suburban street, it would serve well to have a rethink regards the use of road humps otherwise known as 'sleeping policemen'. Their widespread use whilst seeming to slow traffic may actually be causing greater pollutional harm with the fact that drivers are required to 'pull-away' from near stop after each hump, causing 'engine strain' when typically in second gear and so greater emissions.
investment-auto-motives suggests that a cobble-like Belgian Pavé be introduced instead to help slow traffic speeds, especially in conservation areas and roads of historic importance where such a surface would have previously been the case (ie where housing is of Georgian, Regency and Victorian age). The suggestion that such a pavé could be laid in a grid of cambered 'trays' so aiding removal when utility companies remove the road surface for underground pipe and cable work.
Larger SUV / 4x4s can obviously 'over-ride' the pavé, but this is already the case with present and intended road-humps. However, since such vehicles facing are increasingly socially disliked in British cities, their presence will gradually diminish, leaving conventional cars and small SUVs to better respect slow-area roads].
Friday, 6 January 2012
The 2012 Web-Log Format
Since 2007 the format and content of investment-auto-motive's web-log has sought to evolve, altering periodically in length and structure so as to provide different perspectives and interpretations of current affairs and specific cases within the automotive investment realm.
Ranging from the delivery of insightful analysis regards the shifting patterns of commercialism, business ownership and strategic interests within the sector itself and complementary 'feed-in' sectors.
Spanning organic enterprise growth, M&A and strategic bloc-buy-ins, to independent analysis of specific companies, the synergistic company portfolios held by asset keen investment holding companies, the market and commercial dynamics of various global-wide geographic regions, and the identification of the near, medium and long-term investment opportunities to be had for hedge funds seeking short-term plays, institutional investors reviewing their stock and bond interests and indeed private equity seeking macro-trend aligned new interests when building new portfolios.
[NB The latter was yesterday exemplified by investment-auto-motives' prompting for PE to review the full market and investment potential of the UK camping sector, with specific long-term interest in the potential for eco-technology transfer between the auto-camping fringes, leisure parks and into mainstream building habitation. The prompt was for involvement by a high profile figure, Deborah Meaden of 'Dragon's Den' TV programme the most obvious choice given her leisure park involvement.
Interestingly, yesterday (06.01.2012) the FT's front page reported that fellow “Dragon” Peter Jones – amongst other bidders - has taken an interest in the 'pre-pack' administration of Blacks Leisure, the outdoor-leisure orientated company, which over-exposed itself to high street clothing retail.
As noted, unlike competitor bidders, Jones has no similar retail store group into which Blacks can be naturally integrated, thus it is hoped that if successful he is able to 'reverse integrate' Blacks Leisure into other areas of the camping based mini-economy].
However, the prime intent of this post is to state that the future web-log posts throughout 2012 will take a different tack to those preceding. 2010 and 2011 presented what by web-log standards were 'heavyweight' dissections of trends (macro and micro), regional or sector-specific vehicle markets and the players therein; both within the sector and those investor parties that seek value and growth extraction from the sector worldwide.
The investment-auto-motive posts of 2012 will still seek to have a similar breadth and depth, across the world and across the myriad of sub-sectors; but instead such heavyweight dissection – often running to thousands of words, which to the reader is time-consuming - the 2012 aim will be to provide comment which is lighter, viewed as more easily accessible, though by typical web-log standards maintains much needed gravitas regards subject understanding, opinion forming and conclusion.
Critically as stated previously, investment-auto-motives will continue to meld the 'micro' aspects of automotive investment with the 'macro', so as to concentrate the 3 vital aspects of sector and company fundamentals, regional and global capital market dynamics and investor sentiment conditions.
Even though 2012 appears fragile for much of the world there will undoubtedly be success stories therein. The investment ethos remains: to ascertain, track and measure those rising opportunities.
Ranging from the delivery of insightful analysis regards the shifting patterns of commercialism, business ownership and strategic interests within the sector itself and complementary 'feed-in' sectors.
Spanning organic enterprise growth, M&A and strategic bloc-buy-ins, to independent analysis of specific companies, the synergistic company portfolios held by asset keen investment holding companies, the market and commercial dynamics of various global-wide geographic regions, and the identification of the near, medium and long-term investment opportunities to be had for hedge funds seeking short-term plays, institutional investors reviewing their stock and bond interests and indeed private equity seeking macro-trend aligned new interests when building new portfolios.
[NB The latter was yesterday exemplified by investment-auto-motives' prompting for PE to review the full market and investment potential of the UK camping sector, with specific long-term interest in the potential for eco-technology transfer between the auto-camping fringes, leisure parks and into mainstream building habitation. The prompt was for involvement by a high profile figure, Deborah Meaden of 'Dragon's Den' TV programme the most obvious choice given her leisure park involvement.
Interestingly, yesterday (06.01.2012) the FT's front page reported that fellow “Dragon” Peter Jones – amongst other bidders - has taken an interest in the 'pre-pack' administration of Blacks Leisure, the outdoor-leisure orientated company, which over-exposed itself to high street clothing retail.
As noted, unlike competitor bidders, Jones has no similar retail store group into which Blacks can be naturally integrated, thus it is hoped that if successful he is able to 'reverse integrate' Blacks Leisure into other areas of the camping based mini-economy].
However, the prime intent of this post is to state that the future web-log posts throughout 2012 will take a different tack to those preceding. 2010 and 2011 presented what by web-log standards were 'heavyweight' dissections of trends (macro and micro), regional or sector-specific vehicle markets and the players therein; both within the sector and those investor parties that seek value and growth extraction from the sector worldwide.
The investment-auto-motive posts of 2012 will still seek to have a similar breadth and depth, across the world and across the myriad of sub-sectors; but instead such heavyweight dissection – often running to thousands of words, which to the reader is time-consuming - the 2012 aim will be to provide comment which is lighter, viewed as more easily accessible, though by typical web-log standards maintains much needed gravitas regards subject understanding, opinion forming and conclusion.
Critically as stated previously, investment-auto-motives will continue to meld the 'micro' aspects of automotive investment with the 'macro', so as to concentrate the 3 vital aspects of sector and company fundamentals, regional and global capital market dynamics and investor sentiment conditions.
Even though 2012 appears fragile for much of the world there will undoubtedly be success stories therein. The investment ethos remains: to ascertain, track and measure those rising opportunities.
Friday, 30 December 2011
New Year's Message - 2012
2011 has for the world at large been a time of angst. Economic and social shifts have fundamentally altered the western world as was known. Whilst the EM regions, and China specifically have witnessed a new lower growth era, a seeming about turn from previous heady highs, yet adding much needed GDP equality and social stability in the course of doing so.
Efforts to try and stop a systemic seizure of European capital markets as a result of the sovereign debt crisis resulted in a seemingly desperately slow roll-out of meetings between national leaders to create a tenable plan. As meetings flailed so capital markets lurched, in turn pressuring the very cost-bases of most arguably 'over-inflated' EU countries relative to broad world commercial cost structures. Yet that re-balancing process is unavoidably lengthy, and the decimated trading levels generated a near Euro funds seizure after what has been 20 years of ever flowing liquidity. As seen, the ECB stepped-in with its E489bn 3-year soft-rate loan, for the 523 banks seeking assistance, yet even that long-awaited injection failed to steady the market. As a result Euro belief is still tenuous, and a subsequent long-term drop in the Euro's value the only true remedy for the blighted periphery countries, and a welcome FX incentive for high-value exporters, especially of course Germany.
The US perhaps politically overplays the homeland impact of European woes, perhaps doing so to subtly highlight what it may believe as itself as the well placed, natural recipient of investor angst elsewhere around the globe. Since the bursting of its financially driven credit bubble, its own corporates were well placed to benefit from previously buoyant export demand of many of its products and services, whilst having been first in the relative 'race to the bottom', may now be able to regenerate the domestic economy via home-grown policy initiatives at Fed and state level. Not quite in the manner of the work-camps seen after the 1929-33 Great Depression - which concentrated low-cost labour efforts – but in today in a more 'networked' manner of its broad and varied labour force. This in turn to kick-start investor appetite, CapEx renewal, inter-company activity and thus in the medium term to renewed stable consumer demand.
Societal attitudes in the West have expectantly altered, given recent failure of economic policy-makers to recognise the fault-lines created by untrammelled market exuberance; indeed the seeming blind avarice of corporate and personal egos in certain quarters.
The high profile, though somewhat misdirected, efforts of the 'Occupy' Wall Street', other US city 'sit-ins' and the 'St Pauls Protest' in London, personified like little else in the past the “time for change” simmering anger; and by virtue of their very existence probably acted as emotional transmission vehicles for the wider populace, so possibly avoiding larger episodes of more destructive unvented national unrest.
The growth of such a disparity of wealth between what is described the priveliged elite and the broad masses was made almost reminiscent of Victorian times, yet unlike those times whilst there is an undeniable underclass throughout the US and Europe, life for most has been increasinglt prosperous and comfortable, though those benefits obviously traded against a loss of personal time as workloads rise and increased personal and family stress as a result.
Ironically it was exactly such a trade-off – though to far greater extent than the average person – that those “money-(wo)men” made in their own lives, swapping much of the autonomous control of their own lives for a seemingly glamourous jet-setting lifestyle which in reality shackles them near 24-7 to a punishing corporate schedule that rarely sets one free from the boardroom table, internal and external meetings, a heavily orientated social life, and of course never-ending pressures that most 'average' people would view as anything but a 'life'.
Yet, those 'masters of the universe' will have their shoes filled in turn by their underlings seeking the apparent heady heights that provide large expense accounts, a private bathroom and the ability to purchase the dream the lifestyle.
The Financial Crisis may well be laid at the feet of those miscreant 'others' but the desire for professional, personal and social success will not disappear; such leanings seem interwoven into the DNA of many human beings, and unfortunately, when the economy once again starts to thrive, so will the drive of those who seek status and / or personal satisfaction. The platitudes of today will in time be forgotten and a new cycle will begin. This is very necessary, and 'animal spirits' undoubtedly have their role, but must be tempered by individuals' questioning themselves, and by a rebalanced value system in society that broadens its own definition and recognition of achievement.
Whilst the finance truism writ large by ex-Citi's Chuck Prince largely remains world that “as long as the music is playing, you've got to get up and dance”, it is perhaps prescient that it was the child's eyes and unfettered 'mature' mind of Alice (in Wonderland) who questioned the wisdom of such unthinking participation, when she sang the Lobster Quadrill.
For it was she, who under pressure from her 'betters' (the adults) to sing another song accompanied by the seemingly inescapable fervent tick-tocking of the metronome, not only stopped the 'clock', but sang “Will you, won't you join the dance?”.
"Will you walk a little faster?" Said a whiting to a snail
There's a porpoise close behind us
And he's treading on my tail.
See how eagerly the lobster and the turtles all advance.
They are waiting on the shingle.
Will you come and join the dance.
Will you, won't you,
Will you, won't you,
join the dance?
Ultimately, the New Year Message at the beginning of a very fragile 2012 must surely be about questioning the expectancies of professional, personal and social participation, and creating conditions for a more worthy and satisfying 'dance' for one and all.
Efforts to try and stop a systemic seizure of European capital markets as a result of the sovereign debt crisis resulted in a seemingly desperately slow roll-out of meetings between national leaders to create a tenable plan. As meetings flailed so capital markets lurched, in turn pressuring the very cost-bases of most arguably 'over-inflated' EU countries relative to broad world commercial cost structures. Yet that re-balancing process is unavoidably lengthy, and the decimated trading levels generated a near Euro funds seizure after what has been 20 years of ever flowing liquidity. As seen, the ECB stepped-in with its E489bn 3-year soft-rate loan, for the 523 banks seeking assistance, yet even that long-awaited injection failed to steady the market. As a result Euro belief is still tenuous, and a subsequent long-term drop in the Euro's value the only true remedy for the blighted periphery countries, and a welcome FX incentive for high-value exporters, especially of course Germany.
The US perhaps politically overplays the homeland impact of European woes, perhaps doing so to subtly highlight what it may believe as itself as the well placed, natural recipient of investor angst elsewhere around the globe. Since the bursting of its financially driven credit bubble, its own corporates were well placed to benefit from previously buoyant export demand of many of its products and services, whilst having been first in the relative 'race to the bottom', may now be able to regenerate the domestic economy via home-grown policy initiatives at Fed and state level. Not quite in the manner of the work-camps seen after the 1929-33 Great Depression - which concentrated low-cost labour efforts – but in today in a more 'networked' manner of its broad and varied labour force. This in turn to kick-start investor appetite, CapEx renewal, inter-company activity and thus in the medium term to renewed stable consumer demand.
Societal attitudes in the West have expectantly altered, given recent failure of economic policy-makers to recognise the fault-lines created by untrammelled market exuberance; indeed the seeming blind avarice of corporate and personal egos in certain quarters.
The high profile, though somewhat misdirected, efforts of the 'Occupy' Wall Street', other US city 'sit-ins' and the 'St Pauls Protest' in London, personified like little else in the past the “time for change” simmering anger; and by virtue of their very existence probably acted as emotional transmission vehicles for the wider populace, so possibly avoiding larger episodes of more destructive unvented national unrest.
The growth of such a disparity of wealth between what is described the priveliged elite and the broad masses was made almost reminiscent of Victorian times, yet unlike those times whilst there is an undeniable underclass throughout the US and Europe, life for most has been increasinglt prosperous and comfortable, though those benefits obviously traded against a loss of personal time as workloads rise and increased personal and family stress as a result.
Ironically it was exactly such a trade-off – though to far greater extent than the average person – that those “money-(wo)men” made in their own lives, swapping much of the autonomous control of their own lives for a seemingly glamourous jet-setting lifestyle which in reality shackles them near 24-7 to a punishing corporate schedule that rarely sets one free from the boardroom table, internal and external meetings, a heavily orientated social life, and of course never-ending pressures that most 'average' people would view as anything but a 'life'.
Yet, those 'masters of the universe' will have their shoes filled in turn by their underlings seeking the apparent heady heights that provide large expense accounts, a private bathroom and the ability to purchase the dream the lifestyle.
The Financial Crisis may well be laid at the feet of those miscreant 'others' but the desire for professional, personal and social success will not disappear; such leanings seem interwoven into the DNA of many human beings, and unfortunately, when the economy once again starts to thrive, so will the drive of those who seek status and / or personal satisfaction. The platitudes of today will in time be forgotten and a new cycle will begin. This is very necessary, and 'animal spirits' undoubtedly have their role, but must be tempered by individuals' questioning themselves, and by a rebalanced value system in society that broadens its own definition and recognition of achievement.
Whilst the finance truism writ large by ex-Citi's Chuck Prince largely remains world that “as long as the music is playing, you've got to get up and dance”, it is perhaps prescient that it was the child's eyes and unfettered 'mature' mind of Alice (in Wonderland) who questioned the wisdom of such unthinking participation, when she sang the Lobster Quadrill.
For it was she, who under pressure from her 'betters' (the adults) to sing another song accompanied by the seemingly inescapable fervent tick-tocking of the metronome, not only stopped the 'clock', but sang “Will you, won't you join the dance?”.
"Will you walk a little faster?" Said a whiting to a snail
There's a porpoise close behind us
And he's treading on my tail.
See how eagerly the lobster and the turtles all advance.
They are waiting on the shingle.
Will you come and join the dance.
Will you, won't you,
Will you, won't you,
join the dance?
Ultimately, the New Year Message at the beginning of a very fragile 2012 must surely be about questioning the expectancies of professional, personal and social participation, and creating conditions for a more worthy and satisfying 'dance' for one and all.
Friday, 16 December 2011
Christmas Message
It is hoped that all who have read the investment-auto-motives' web log essays / reports / notes posted in 2011 have found them absorbing, insightful and enjoyable.
Although directed at the higher echelons of investment banking, private equity, automotive industry and government, it is hoped that others throughout such organisations, and indeed into academia, are also able to digest the various macro and micro orientated topics, presented with as much overlap as possible to provide a contextual map for specific company, auto-industry sub-sector or regional locale.
Besides an obvious shop-window for investment-auto-motives' advisory capabilities, the intention is that practising professionals in the aforementioned arenas, and those younger but equally ambitious, are able to gain snap-shots of the myriad of automotive activities that spans the world.
Activities which act as the critical central economic generator, which draw in capital from far and wide, often via FDI, and in turn helps to raise the living standards of millions that work inside the auto-industry at some point in its value chain, but also those situated in complementary arenas. Whether that be in the primary and secondary levels of broad industry (mining & processing), the insurance sector, the (criticised but essential) oil industry, or the ever expanding world of IT, as all vehicles become more 'intelligent', And indeed within the leisure sector, from the ethereal of screen-based game-play to the reality of drawing overtly competitive drivers into organised track-day events and so removing potential danger from public roads, to the world of motor-camping as described in the last post.
But of course each and every region and country has differing demands from the automobile, the infrastructure that services the car, van, bus and truck, and the commercial environment that surrounds such personal and mass transit mobility.
The demise of the auto has been recanted time and time again, and whilst undoubtedly in certain regions car use may appeared to have peaked resulting from the interplay of rush-hour 'grid-lock' and fiscally constrained times, as a global whole the 21st century looks to be a new golden era for the vehicle – in all forms and propulsion methods – as nations and peoples work towards and thus expect a better tomorrow for one and all.
Thus, it is very much hoped that: all across the Islamic world enjoyed the Eid-Milad-un-Nabi celebrations in February, all across India (of whatever faith) enjoyed Diwali celebrations in October, all across Asia enjoyed the very recent Buddhist Bodhi Day celebrations.
And of course it is hoped that all those of Christian faith across the world - from the masses of Brazil to the minority in China – enjoy a “Very Merry Christmas” and “Fortuitous New Year”
“Judge a (wo)man or a tribe not by name, colour or creed, but by intention, action and deed”
The final words of the year, that would well guide all countries and faiths, are provided by the wisdom of Confucius:
“The ancients, when they wished to exemplify illustrious virtue throughout the empire, first ordered well their states. Desiring to order well their states, they first regulated their families. Wishing to regulate their families, they first cultivated themselves. Wishing to cultivate themselves they first rectified their purposes. Wishing to rectify their purposes, they first sought to think sincerely. Wishing to think sincerely, they first extended their knowledge as widely as possible. This they did by investigation of things...
...By investigation of things, their knowledge became extensive; their knowledge being extensive, their thoughts became sincere, their thoughts being sincere, their purposes were rectified, they cultivated themselves; they being cultivated, their families were regulated, their families being regulated, their states were rightly governed; their states being rightly governed, the empire was thereby tranquil and prosperous”.
Whilst investment-auto-motives propounds “The Art of Work” via its post-cards, these Confucian words offer “The Art of Living”.
This then is perhaps the true Christmas Message to one and all.
The investment-auto-motives web log will return on 8th January.
Although directed at the higher echelons of investment banking, private equity, automotive industry and government, it is hoped that others throughout such organisations, and indeed into academia, are also able to digest the various macro and micro orientated topics, presented with as much overlap as possible to provide a contextual map for specific company, auto-industry sub-sector or regional locale.
Besides an obvious shop-window for investment-auto-motives' advisory capabilities, the intention is that practising professionals in the aforementioned arenas, and those younger but equally ambitious, are able to gain snap-shots of the myriad of automotive activities that spans the world.
Activities which act as the critical central economic generator, which draw in capital from far and wide, often via FDI, and in turn helps to raise the living standards of millions that work inside the auto-industry at some point in its value chain, but also those situated in complementary arenas. Whether that be in the primary and secondary levels of broad industry (mining & processing), the insurance sector, the (criticised but essential) oil industry, or the ever expanding world of IT, as all vehicles become more 'intelligent', And indeed within the leisure sector, from the ethereal of screen-based game-play to the reality of drawing overtly competitive drivers into organised track-day events and so removing potential danger from public roads, to the world of motor-camping as described in the last post.
But of course each and every region and country has differing demands from the automobile, the infrastructure that services the car, van, bus and truck, and the commercial environment that surrounds such personal and mass transit mobility.
The demise of the auto has been recanted time and time again, and whilst undoubtedly in certain regions car use may appeared to have peaked resulting from the interplay of rush-hour 'grid-lock' and fiscally constrained times, as a global whole the 21st century looks to be a new golden era for the vehicle – in all forms and propulsion methods – as nations and peoples work towards and thus expect a better tomorrow for one and all.
Thus, it is very much hoped that: all across the Islamic world enjoyed the Eid-Milad-un-Nabi celebrations in February, all across India (of whatever faith) enjoyed Diwali celebrations in October, all across Asia enjoyed the very recent Buddhist Bodhi Day celebrations.
And of course it is hoped that all those of Christian faith across the world - from the masses of Brazil to the minority in China – enjoy a “Very Merry Christmas” and “Fortuitous New Year”
“Judge a (wo)man or a tribe not by name, colour or creed, but by intention, action and deed”
The final words of the year, that would well guide all countries and faiths, are provided by the wisdom of Confucius:
“The ancients, when they wished to exemplify illustrious virtue throughout the empire, first ordered well their states. Desiring to order well their states, they first regulated their families. Wishing to regulate their families, they first cultivated themselves. Wishing to cultivate themselves they first rectified their purposes. Wishing to rectify their purposes, they first sought to think sincerely. Wishing to think sincerely, they first extended their knowledge as widely as possible. This they did by investigation of things...
...By investigation of things, their knowledge became extensive; their knowledge being extensive, their thoughts became sincere, their thoughts being sincere, their purposes were rectified, they cultivated themselves; they being cultivated, their families were regulated, their families being regulated, their states were rightly governed; their states being rightly governed, the empire was thereby tranquil and prosperous”.
Whilst investment-auto-motives propounds “The Art of Work” via its post-cards, these Confucian words offer “The Art of Living”.
This then is perhaps the true Christmas Message to one and all.
The investment-auto-motives web log will return on 8th January.
Saturday, 10 December 2011
Micro Level Trends – UK Niche Industry (Part 3) – National Economic Revitalisation via Miles of Smiles
PART 3
Having reviewed in Part 1 the general dynamics of a resurgent motor-caravanning market, altered through changing socio-demographics and commercial reaction, and in Part 2 an overview of the UK's traditional camper-van & motor-home producers, set in the context of foreign competition and the competitive advantage of technology advancement.
This final section looks at the possible opportunity for the UK to initiate a path toward improved nation-wide economic well-being assisted by ecologically orientated technological solutions.
Very basically, such efforts would consist of the following:
- Improved fortunes for the sector at large by becoming greater aligned to social change.
- A new era of marque differentiation & focus via technical innovation
- Opportunity for an “Eco-Tech Ripple” toward seasonal-use and mainstream housing sectors.
- Exploitation of the Camping Economy as Eco-Tech 'Starter Motor'
- Stepped Programme of Eco-Tech Scale-Up for National Economic Re-Vitalisation
Market Connection -
As noted in Part 1, the last 10-15 years has witnessed two fundamental shifts: initially that of social change, and latterly that of economic shift.
The change in social dynamics during what was an economic boom period through the 1990s & 2000s included a broadening of lifestyle and lifetime experiences , especially amongst the middle-class young who could interweave a long period of international travel (usually 'back-packing' but also increasing NGO work) with their post-poned undertaking of 'expected' higher education & career. Whereas their parents may have interpreted 'travel aspirations' as an alternative 2-week package holiday, or the hope of cruise-boat holidays or long-trips when in retirement, 'GenYers' recognised the irresponsibility of youth as the time to undertake their own cultural and hedonistic 'Grand Tours' of Asiana and South America. Thus, by historical standards, the younger generation's expectancies reached an all time high, buoyed by the golden years of western economic fortune.
However, the 2008 Financial Crisis, the subsequent heavy economic downturn and resulting 'New Norm' of socio-economic instability, has created a seizmic shift in cross-generational perceptions. The undermined long-term financial security of even middle-class families has 're-set' what had been a 'travel sponsoring' mindset for their children, and for parents and child alike the now necessarily hiked financial cost of securing a personal future from higher education means that 'gap year' global travel ambitions look ever more diminished.
Hence a situation where the youth – and indeed not so young - of the UK have been molded toward the expectations of 'wunderlust', but are now forced to recalibrate ideas about what is realistically achievable within far tighter budgetary constraints.
The emergence of this socio-economic re-orientation – whilst no doubt noted - needs to be far better understood by the players within the UK motor-caravan sector; which for very good reason of its own, has been focused on the well established traditional market which caters to middle-aged and 'grey-market' clients who though 'middle of the road' and highly conventional had the benefit of stable employment and solid pensions supporting their relatively high disposable spending in this arena.
It must be recognised that such people still represent the major core of the sector, a core which still looks to set to have a remaining 20 – 30 year life-span and which will undoubtedly continue to be the commercial 'bread & butter' with propensity for relatively 'elastic spending'. So a continued prime market which UK producers will need to attract and satisfy.
And undoubtedly, in time many of those “Gen-Y globe-trotters” will become as (comparatively) conventional as their parents, time and much altered 'life-agenda' diminishing their previous youthful exuberance, and with it an increasing preference for the conservative. Yet because of the increasingly heavy influence of a fashion-orientated, media-driven society, successive generations of people appears to retain / adopt aspects of this youth-centric culture, albeit for the 30-something, 40-something, 50-something and even 60-something, in a more diluted manner.
Thus it is not surprising that whilst the influence of fashion and change was perhaps more obvious half a century ago with different generations clearly de-lineated by clothing, activities and attitudes, the far more heavily media engrained late 20th & early 21st century society. The plethora of media forms via a plethora of media devices has resulted in a form of “human programming” which has fundamentally changed people's lifestyles and interaction behavior.
This now endemic media-centric social shift then must be recognised along with the previously mentioned 'travel-bound' ideology and the economically constrained 'New Norm'.
And it is these 3 major trends that will increasingly affect the motor-caravan sector, and thus must be better understood by sector players and their financiers, so as to evolve in identifying and creating the opportunities to be had, and as importantly, navigate headwinds and avoid potential pitfalls.
To this end investment-auto-motives suggests that the National Caravan Council (and similar sector bodies) funds a meaningful sector research project - structured primarily toward the macro-level 'PESTEL' in nature - into the future of the industry, with special reference to the sociological and technological..
This to be done using either a portion of subscriptions monies paid to the NCC (and other similar trade bodies) if substantive enough, or by the creation of a special project fund. It is viewed that perhaps the most pragmatic course would be to create a 3-stepped programme to run over a number of years.
Step 1 – The work undertaken by the NCC itself if possible for cost efficiency reasons and the advantages of such an 'organic' exploratory process. Although recognising that its own limited capabilities may lead to what may be considered “lower value” research methods, analytical work and final conclusions / recommendations, it would be a useful cost-effective start-point.
Step 2 – Having determined a research base, thereafter, to ascertain “mid-value” recommendations the NCC could perhaps commission a higher-cost, higher-value project via academia. For example, the Cardiff Business School's 'Centre for Automotive Industry Research', or others as most appropriate relative to sector familiarity, research capability and familiarity with the technological and the sociological. Degree level students may not offer the insight required, whilst PhD students typically require long-length (multi-year) projects to substantiate their award. Thus perhaps the best option is to offer the project to a university which can weave a 6-month to 12-month project into the typical 'real-world' case study work undertaken by MA/MSc students. Given the results of Step 1, this approach should provide for useful yet still cost-effective insights.
Step 3 – Ultimately as an optional later stage possibility, if NCC members all agree that previous research has been fruitful and seek to continue in the quest for future sector learning, what should be “high-value” insights may be gained from the use of premium commercial research agencies, such as those used by major car manufacturers. This would undoubtedly lean toward the sociological (technical R&D tends to be undertaken in-house or with academis by VMs) but should identify important “utility / demographic / psychographic” conclusions about the mindsets of various consumer types within the motor-caravan world.
To this end, investment-auto-motives suggests a 3 year programme using each of these steps for cost-efficient 'step by step' picture building might prove most effective. It will ensure that the vital importance of 'Market Connection' is maintained and better understood.
New Era of Marque Differentiation via Technical Innovation -
Given its relatively narrow audience, it is no surprise that this niche sector of the auto-industry does not hold a level of popular esteem equal to that of the legendary British car manufacturers of today or indeed yesteryear.
Motor car manufacturers, the premium marques included, have undoubtedly suffered during historic economic downturns. However, by virtue of the ubiquitousness of the car and their innate standing as symbols of status, meant that the apparent best names – through better company management or marque reverence or indeed both – have been able to withstand economic headwinds; companies taken over as necessary by foreign interests.
In stark contrast, the fact that motor-caravanning has typically always been 'under the societal radar' here in Britain, connected to a previously a small band of participants and only really popularised as the butt of jokes regards summer-time road congestion, it is not so surprising that a major divergence of general knowledge exists between car and motor-caravan. This divergence appears far smaller on the European continent and of course in the USA, given the wider propensity to enjoy such vehicles.
Furthermore, perhaps even more so than tow-caravans, the motor-caravan brand suffers from the fact that the marque itself is viewed as a secondary element compared to the on the road 'visual supremacy' of the base vehicle from the VM van manufacturer; whether VW, Mercedes, Renault, Peugeot / Citroen, FIAT or Ford.
If a camper-van conversion the visual change is to be seen but rarely recognised unless adorned with striking brand graphics, which goes against the typically conservative buyer preference for subtlety and visual convention, and especially obvious on the smaller available body-side of a windowed van.
If a motor-home often the actual model name graphic on the body-side tends to take precedence over the converter company logo or main brand, which may be seen on the front grille and rear as a far smaller 'unseen' badge. The apparent UK preference for periodic change in model names, done to update the range and maintain competitiveness, therefore disrupts even a certain model-line from establishing itself over time.
This then different from the HYMER case study in which its model-line identification remains 'in perpetuity' thus reflecting the standard long-lived nomenclature used on German cars. A long-lived name on necessarily changing product adds gravitas and credibility, as opposed to arguably a more short-termist approach where immediate PR-led market gain is captured by publicised model name change.
Thus we see that the actual name of the converter company itself – notionally the primary brand – has historically been required to 'take a back-seat' resulting from buyer preference and/or model marketing initiatives.
Yet, as previously seen with Winnebago, Airstream or HYMER, this can be overcome to provide strong and direct market connection when the product demonstrates itself as technically superior (ideally both functionally and visually) and is additionally supported by the usual strong customer service quotient the sector demands.
Technical innovation then has proven itself to offer major competitive advantage, when it can be demonstrated as both functionally beneficial and when presented as socially symbolic and so accepted as consumer desired.
Airstream's use of aluminium for its caravan bodies from the 1930s onwards not only had direct links to aero-tech systems, but therein was direct connection to the innate idea of mechanically enabled social progress and betterment. The material itself was also highly evident in the construction of road-side Diners along the then new US highway system, so there was an immediate literal reflection between these two totems of social progress. And the fact that until then roads and roadsides were comparatively deserted meant that the consumer impact for Airstream products 'set in the new age and new sea' was all the greater.
The UK, Europe and Northern America today are far more complex social and sales environments in which sector players must work. So, the 'blank sheet' technical leap that Airstream enjoyed by transforming consumer tastes from old-style wooden & fibre-board caravans toward aluminium structured and aluminium panelled caravans, is not so easily open to manufacturers today. The idea of moving from today's CMC sheet plastic and hand-lay fibre-glass for motor-home body-sides to the 'leap-frog' equivalent of utilising carbon-fibre is wholly unrealistic given the massive pricing gulf between the materials.
Yet that does not mean that other technical advances cannot be made in design, structure, and the utility of fittings, just as has been the case in the past.
The best known example is HYMER's 'PUAL system' of body-side construction / bonding. Introduced some decades ago it is a sandwich mix of outer-skin aluminium, foam core and board interior-skin. Besides negating general water ingress, the system is known to have good insulational properties, steady temperature control and so avoids condensation issues. The producer's own advertisements state that “the 35mm of PUAL wall thickness provides a performance equivalent to an 800mm thickness of standard brick. This innovation has been copied by others in one form or another, though seemingly not quite up to the PUAL standard.
The company also sought to gain advantage by then offering the space-saving innovation of a “pull-down” double-bed, often situated above the driver's cab area, so utilising what is otherwise 'dead-space' and so leaving much of the rear saloon for day-time habitation space. This an innovation thereafter copied by others.
The last renowned innovation from HYMER was the introduction of twin level flooring, effectively creating a sandwich floor which could be used to package both the vehicle's heating systems and provide for expansive under-floor storage areas to stow away camping ancilleries and other low use items such as suitcases etc, which would otherwise clutter the living area of the van.
The “Eco-Tech Ripple” -
It is such intelligent technology and space-planning solutions, borne from the very necessary needs of heat preservation and energy-use reduction aswell as the maximisation of space utilisation, that has over the few decades had such an impact in the more progressive areas of building construction..
Not surprisingly, it has been the commercial building world, with a necessary fiscal imperative for all stake-holders; the new building (land) owners, the building constructors and of course the building leasees. For many years now, unlike the private dwelling sector (exempting social housing), the commercial arena has had to drive down and balance CapEx and Life-Time Running costs.
With far greater desire for progress, the commercial building world has been ahead of the domestic housing building world, which it can be argued has relied upon traditional build methods since they are often so labour and materials intensive so as to have over centuries created a mini-economy of its own; one which is undeniably critically important to the British economy.
However, as seen, the functional needs of the ever improving motor-home has been forced to rely upon 'thin skin' technology, and for occupant comfort (and safety), the best of which must by an enormous factor outperform conventional buildings.
As Germany noted previously given its technology and manufacturing culture, the UK today must continue and indeed increase the pace of not only researching into eco-friendly building methods, but critically provide for the unblocking of any 'bottle-necks' inside the building sector that for self-interest and self-preservation purposes refute the need for progress.
The domestic house building arena has of course taken-on partial learning from the commercial building world, and importantly tends to do so during the policy-induced house-building booms that serve to assist national 'climb-out' from its fiscal woes, such as the 1930s when (German-derived) 'Crittal' windows were installed on a mass scale, and later in the 1970s when secondary and double-glazing was widely introduced.
With the UK's co-alition government liberalising the policy-climate for developers in brownfield and select green-field 'mixed-housing' housing development schemes, the present time is a window of opportunity for the introduction of new eco-tech solutions at both evolutional and step-change levels; the solutions applied befitting the project type.
[ NB the very recent TV programme 'Kevin's Grand Design' - presented by the very popular 'architectural guru' Kevin McCloud - aired on the evening of 8.11.2011. The 2-episode programme concerns itself with the creation of a new eco-housing project led by Mr McCloud which itself incorporates an eco-conscious bias and the use of a 'space & utility maximisation' philosophy now understood as derived directly from the caravan industry].
Thus whilst domestic housing obviously looks to commercial builds for eco-tech inspiration, there is also a need for both domestic and commercial to 'pick the brains' of the motor-home sector and cherry-pick or mimic those current and emerging solutions which can be deployed.
To this end there should be an exploration of:
- materials technology transfer
- build methods technology transfer
- efficient energy systems (electricity, gas, water, waste) transfer
(the latter looking beyond 'smart-meters' into whole systems efficiency)
There should be concentrated learning and deployment that enables technology-transfer between various types and modes of habitation type, from camper-vans to motor-homes to static-caravans to cabin-type holiday dwellings to conventional housing to progressive housing and to step-change type dwellings.
Undoubtedly presently the UK's Building Research Establishment does very good R&D work, its BRE Innovation Park demonstrates 10 separate buildings by differing concerns (from mainstream builders to research agents). This then presents what appears the natural channel for building sector efforts at feasible trickle-down eco-solutions, and no doubt will gain greater profile as part of the co-alition government's major new house-building effort, itself served by several different funds.
But to reach beyond the mid-term and look into the long-term, the BRE (or similar) and participant architects, developers and building contractors may need to extend their vision further afield and toward the world of motor-caravans to understand the realms of the possible, with solutions approached from the opposite direction.
The Camping Economy & Eco-Tech 'Starter Motor' -
Beyond the pragmatically academic R&D work of the BRE, it may be the case that to truly cross-fertilise technology learning across the plethora of habitation sectors, that the camping economy itself could be used to create a 'spiral staircase' toward mainstream habitation, one in which the upward force of change creates a (Dyson-esque) multiplier cyclone effect on the size / scale of applications as it moves from the fringe of motor-caravans and through into more mainstream (static building) types.
Furthermore, the fact that the broad camping sector has its own mini-economy could be of major assistance. If that mini-economy is understood and deployed adeptly, it suggests that the central message of technology transfer can be aired (via the camping route-way) to engender demand for such eco-tech change, with an onus on self-help, as opposed to expecting from the nanny state. Thus, already present and growing 'camping consumers' become a broad base of 'evangelists' or 'missionaries' on behalf of the eco-message.
The camping holiday arena is an economic world in itself, and as such should be viewed as a microcosm of the nation at large. It includes:
- Core Products
(tents, caravans, camper-vans, chalets, cottages)
- Functional Ancilleries
- Fashion Accessories
- Financial Services
- Insurance Services
- Driver Training Courses
- Emergency Rescue/Assistance Services
- General Advice Services
- Leisure Park 'Pitch' Rental
- Leisure Park 'On-Site' Facilities / Services / Events
This all combines to create a network or matrix of commercial interaction, from opportunities for brand development, cross-selling, loyalty schemes, promotional tie-ins etc. And with the emergence of the powerful 'grey market' over the last 20 years it is a sphere which many portfolio companies and investment houses have taken great interest, the past seeing interest from the likes of SAGA Group which sought motoring and travel synergies with its ownership of the Automobile Association under the name Acromas Holdings. Thus the wide realms of the camping world is recognised as a powerful economic force in itself and when tied to synergistic corporations.
It then represents a economic sub-system to that of the nation's which might be moulded to act as the 'eco-tech starter motor'. Undoubtedly the trend is already under way, though to what extend is unknown, with the emergence of hand-powered torches and wind-up radios, solar-powered electronic device chargers, and other energy capturing or energy saving items.
[NB it presently appears very slim that there will be any market/private-led or government-led incentive toward major re-investment in the UK's energy sector. This indicates that the present plant infrastructure will be utilised and 'run-down', replaced on an ad-hoc basis where necessary. This in turn indicates that supply levels vs demand levels will shrink, thus maintaining historically high price levels and so nurturing the consumer market for energy related devices].
The continued ideological support of this trend would provide the initial momentum for the 'ripple-effect', via an in-situ audience and so concomitant market-place, which is already attitudinally open to the positive aspects of eco-tech relative to 'natural living'. And thus, presumably, a domino effect of its influence throughout the various camping affiliated consumer groups and thereafter into the wider reaches of mainstream society.
This appears the reality already, but perhaps requires greater effort by commercial interests to turn the ripple into a wave of attitudinal change.
Scale-Up for National Economic Revitalisation -
The Autumn statement by the Chancellor of the Exchequer highlighted the need for continued to drastically reduce the UK's national debt levels, a central exercise if the UK is to ultimately rebound with necessary vigour. The classical economists' monetarist perspective relays common sense when it is recognised that the less the burden on government so the less the burden on industry (spanning high-finance to light-industry) thus onto commerce and so the people at large. In the meantime fiscal constraint will be hand in hand with inevitable consumer constraint as the re-balancing continues.
Although technically out of recession - represented by shallow growth figures – the undeniable reality is that the western world has endured what has been a monumental structural recession born from the 2008 financial crisis, and its after-shock - even without the Eurozone trauma which adds further tremors - was never going to show a strong near-term up-tick. For all the talk of 'U' shaped recession, or 'W' shaped recession, because of the unparalleled economic structural damage, it was always destined to be a very slow ride out of the storm. This is why investment-auto-motives talked of the 'New Norm' before it became generally accepted, and why the best symbol to represent the situation is a shallow angled 'tick' representing a slow trudge.
In tandem with cutting debt, plans for re-generating economic growth have been aired. In typical fashion the government targets infrastructure, with the 'National Infrastructure Plan' recognising 40 projects of “national importance” with another 500 identified by the private and public sector. It spans railways, power (notwithstanding the aforementioned note), roads and internet.
Naysayers such as The Economist state that this alone will not provide the necessary re-energisation to fully assist the UK, a whilst a somewhat obvious / fatuous statement given that infrastructure build is the direct catalyst for one or two sectors of the economy (FTSE 500 and all), it does replay the usual re-vitalisation pattern by working 'bottom-up' with more immediate shovel-ready jobs leading to new infrastructure related jobs across many other sectors.
However, whilst this represents a much needed £250bn or so capital injection, and represents the beginning of the foundational 'productivity push', as stated in the last section, there needs to be a 'demand pull' to ensure that generated wealth that passes through employees hands from infrastructure programmes and additional cash injections from UK private enterprise and incoming FDI monies, is re-spent throughout the UK economy.
Green issues and eco-tech has over the last decade risen ever higher in the consciousness of the public. Yet to a large extent, that consciousness has been regards state driven ideals – themselves stemming from the Kyoto Protocol in the early 1990s. Focused on what appeared the radically transformative effects of wind-farms located off & on-shore, sea based wave-motion generators on the water's surface and current-motion (water-wheel) machines situated on the sea-bed, or solar-farms such as those pioneered in Spain and the Sahara project to convey solar-energy into the European power-grid. But in the fiscal reality of today such grand schemes appear not only prohibitively capital intensive but also a leap into a technically unproven future.
Instead, because of the expected decline in power availability in the UK, the realistic future is not energy production, but energy management, and that very much depends upon the behaviour of the public and its own consumer actions.
But of course, state, private enterprise and consumers do not operate in individual isolation. To this end investment-auto-motives believes that the camping sector – including the wider popularisation of the motor-caravan – can act as a fundamental catalyst in transforming consumer and thus public behaviour.
It was noted that camping is a multi-faceted world, with different yet often interconnected business streams. Moreover the various methods of camping represent a 'staircase' of habitation levels (comfort and security), from the basic 1-2 man tent through to family tents, to caravan / motor-home, static caravan and to chalet / cabin type construction.
Each represents a level of habitation closely ties to comfort / convenience / safety and as such is closely related to a level of energy use. Each of these habitat types has had tools, devices, instruments, machines developed to suit the need, from a hand wind-up mobile phone charger when in a tent, to in the case of a remote cabin, roof-mounted black coloured water-stores which absorb the sun's heat and provide for warm showering.
Whilst many such solutions can and are used by different habitation types – and of course rely upon the the basic science - there is very probably an opportunity for eco-tech transfer between most levels of the 'staircase', thus allowing for alternative energy efficient answers.
Perhaps none more so than the relationship between motor-caravan and conventional house.
It is believed that the fact that motor-homes seek to have a 'closed-loop' level of self-sustainability to provide for as much time spent 'off-grid' or 'unplugged' as possible Yet also the fact that energy is available from the vehicle's internal combustion engine (itself of course from petrol) when necessary.
This then mimics the desire that house-holds become as self-sufficient as possible, ultimately drawing power from the national grid when necessary. Here then the parallel and route to learning is that the national grid can be represented by motor-home's internal combustion engine.
To provide for such a high level of self-sustainability, motor-homes have for many years had energy management systems. These signal energy use rates and remaining levels, very much as the fuel-gauge does on a standard car, and is able to allocate energy consumption between the energy stored in the vehicle's batteries and the functional ancilleries. Thus 'smart-meters' have been deployed in the camping world for nigh on decades.
However, there is of course an intermediate type of habitat that sits between motor-home and conventional house: the holiday chalet or cabin.
This then offers the possibility of deploying the holiday chalet as an intermediary enabler in the mainstream acceptance of eco-tech, from smart-meters and energy allocation systems (for primary and secondary functions) to newly deployed materials and methods in wall insulation (such as the PUAL system used by HYMER) to perhaps even an increase in the use of human powered devices.
[NB It seems ironic that gym-base running machines et al require electricity drawn from the grid when the human is expending energy].
Thus given that the camping arena is so broad and so directly philosophically connected to nature and the ideals of self-sufficiency, it is appropriate that camping products, camping / leisure centres and all that operates in this micro-cosmic universe be well orchestrated by those related commercial entities. This spanning from influential entrepreneurs such as the Dragon's Den's Deborah Meaden, to camping-centric holding companies such as Swift Group to Private Equity firms that have taken a deep investment interest in the sector.
Conclusion -
The 3 sections presented over the last 3 weeks sought to demonstrate the growing importance of the UK motor-caravan sector to personal leisure, regional travel and acceptance of eco-tech solutions; these stemming from and reacting to, the massive shift in demographic and economic trends that have taken place in recent years.
It sought to highlight how all players of the sector need to consider their reaction to this period of change, from the old established family firm through to the ever growing multi-brand sector consolidator. These changes mean that new challenges and opportunities have and will continue to appear. And critically that the sector, having gone through 'boom and bust' could well benefit from what may be a prolonged period of mass popularisation and growth. But this only achievable if the the previously narrow perception – itself a natural result of historical experience - toward the market and so products and service is expanded to relate to demographic and fiscal change.
Moreover, why the motor-caravan sector must be viewed by manufacturers and investors, not as a discrete isolated sub-section of the camping genre, with little more than production synergies with tow-caravans, but as perhaps the vanguard of the contemporary 'self-sustaining' 'eco-tech' zeitgeist.
Why the time has come for new thinking about how the motor-caravan sector can act as a catalyst – as part of a far broader agenda - for social change in greater acceptance of systems-based and personal-base eco-tech.
Eco-tech that may be scaled-up through the camping mini-economy and its 'staircase' of habitation types.
To this end, whilst Britain politically appears 'at odds' with Europe given the outcome of the recent Brussels meeting between EU leaders, the reality is that perhaps more than ever, the need for UK & European trade is greater than ever. And that relationship should serve the UK to learn, absorb and appropriate the best examples of eco-tech seen in Europe (typically Germany), both importing when desirable, but also being inspired to produce in the UK for the UK.
Hence the notion of a “British HYMER” (ideally many companies of such ilk), which can act as physical vehicles for personal and family leisure, and as critically technology-transfer platforms for the naton-wide acceptance of new era, multi-layered eco-tech.
This approach replicated by the big-players of the wide-span camping sector, so that 'intelligent motor-homes' can influence 'intelligent holiday chalets' to influence 'intelligent mainstream housing'
However, within the motor-caravan sector, because company fortunes have been so closely linked to the economic cycle, and much affected by 'boom and bust' periods, there seems a polarisation of company size and operational attitudes. An overly simplistic depiction is - the ambitious (perhaps financially leveraged) growth orientated enterprises that seek sector consolidation, versus family-run firms run on caution, operational cashflow and generational stability, (very much in the Mittelstand manner).
Though let down by its European partners, Germany still offers the philosophical basis of an economic model that could serve Britain very well into the future. One where the benefits of market and technical learning amongst all parties in a sector far outweigh the far more short-termist gains of the large player over the small player.
Whilst the age of credit driven corporate growth has not wholly diminished in the west , and will indeed underpin necessarily consolidation in certain speheres. But for the new growth arenas such as eco-tech, itself enabled through a renewed appreciation for nature and camping, the fact is that the large and small players of the sector will be far better served, as will the nation as a whole, from mutual respect and efforts to grow the overall 'economic cake'.
Having reviewed in Part 1 the general dynamics of a resurgent motor-caravanning market, altered through changing socio-demographics and commercial reaction, and in Part 2 an overview of the UK's traditional camper-van & motor-home producers, set in the context of foreign competition and the competitive advantage of technology advancement.
This final section looks at the possible opportunity for the UK to initiate a path toward improved nation-wide economic well-being assisted by ecologically orientated technological solutions.
Very basically, such efforts would consist of the following:
- Improved fortunes for the sector at large by becoming greater aligned to social change.
- A new era of marque differentiation & focus via technical innovation
- Opportunity for an “Eco-Tech Ripple” toward seasonal-use and mainstream housing sectors.
- Exploitation of the Camping Economy as Eco-Tech 'Starter Motor'
- Stepped Programme of Eco-Tech Scale-Up for National Economic Re-Vitalisation
Market Connection -
As noted in Part 1, the last 10-15 years has witnessed two fundamental shifts: initially that of social change, and latterly that of economic shift.
The change in social dynamics during what was an economic boom period through the 1990s & 2000s included a broadening of lifestyle and lifetime experiences , especially amongst the middle-class young who could interweave a long period of international travel (usually 'back-packing' but also increasing NGO work) with their post-poned undertaking of 'expected' higher education & career. Whereas their parents may have interpreted 'travel aspirations' as an alternative 2-week package holiday, or the hope of cruise-boat holidays or long-trips when in retirement, 'GenYers' recognised the irresponsibility of youth as the time to undertake their own cultural and hedonistic 'Grand Tours' of Asiana and South America. Thus, by historical standards, the younger generation's expectancies reached an all time high, buoyed by the golden years of western economic fortune.
However, the 2008 Financial Crisis, the subsequent heavy economic downturn and resulting 'New Norm' of socio-economic instability, has created a seizmic shift in cross-generational perceptions. The undermined long-term financial security of even middle-class families has 're-set' what had been a 'travel sponsoring' mindset for their children, and for parents and child alike the now necessarily hiked financial cost of securing a personal future from higher education means that 'gap year' global travel ambitions look ever more diminished.
Hence a situation where the youth – and indeed not so young - of the UK have been molded toward the expectations of 'wunderlust', but are now forced to recalibrate ideas about what is realistically achievable within far tighter budgetary constraints.
The emergence of this socio-economic re-orientation – whilst no doubt noted - needs to be far better understood by the players within the UK motor-caravan sector; which for very good reason of its own, has been focused on the well established traditional market which caters to middle-aged and 'grey-market' clients who though 'middle of the road' and highly conventional had the benefit of stable employment and solid pensions supporting their relatively high disposable spending in this arena.
It must be recognised that such people still represent the major core of the sector, a core which still looks to set to have a remaining 20 – 30 year life-span and which will undoubtedly continue to be the commercial 'bread & butter' with propensity for relatively 'elastic spending'. So a continued prime market which UK producers will need to attract and satisfy.
And undoubtedly, in time many of those “Gen-Y globe-trotters” will become as (comparatively) conventional as their parents, time and much altered 'life-agenda' diminishing their previous youthful exuberance, and with it an increasing preference for the conservative. Yet because of the increasingly heavy influence of a fashion-orientated, media-driven society, successive generations of people appears to retain / adopt aspects of this youth-centric culture, albeit for the 30-something, 40-something, 50-something and even 60-something, in a more diluted manner.
Thus it is not surprising that whilst the influence of fashion and change was perhaps more obvious half a century ago with different generations clearly de-lineated by clothing, activities and attitudes, the far more heavily media engrained late 20th & early 21st century society. The plethora of media forms via a plethora of media devices has resulted in a form of “human programming” which has fundamentally changed people's lifestyles and interaction behavior.
This now endemic media-centric social shift then must be recognised along with the previously mentioned 'travel-bound' ideology and the economically constrained 'New Norm'.
And it is these 3 major trends that will increasingly affect the motor-caravan sector, and thus must be better understood by sector players and their financiers, so as to evolve in identifying and creating the opportunities to be had, and as importantly, navigate headwinds and avoid potential pitfalls.
To this end investment-auto-motives suggests that the National Caravan Council (and similar sector bodies) funds a meaningful sector research project - structured primarily toward the macro-level 'PESTEL' in nature - into the future of the industry, with special reference to the sociological and technological..
This to be done using either a portion of subscriptions monies paid to the NCC (and other similar trade bodies) if substantive enough, or by the creation of a special project fund. It is viewed that perhaps the most pragmatic course would be to create a 3-stepped programme to run over a number of years.
Step 1 – The work undertaken by the NCC itself if possible for cost efficiency reasons and the advantages of such an 'organic' exploratory process. Although recognising that its own limited capabilities may lead to what may be considered “lower value” research methods, analytical work and final conclusions / recommendations, it would be a useful cost-effective start-point.
Step 2 – Having determined a research base, thereafter, to ascertain “mid-value” recommendations the NCC could perhaps commission a higher-cost, higher-value project via academia. For example, the Cardiff Business School's 'Centre for Automotive Industry Research', or others as most appropriate relative to sector familiarity, research capability and familiarity with the technological and the sociological. Degree level students may not offer the insight required, whilst PhD students typically require long-length (multi-year) projects to substantiate their award. Thus perhaps the best option is to offer the project to a university which can weave a 6-month to 12-month project into the typical 'real-world' case study work undertaken by MA/MSc students. Given the results of Step 1, this approach should provide for useful yet still cost-effective insights.
Step 3 – Ultimately as an optional later stage possibility, if NCC members all agree that previous research has been fruitful and seek to continue in the quest for future sector learning, what should be “high-value” insights may be gained from the use of premium commercial research agencies, such as those used by major car manufacturers. This would undoubtedly lean toward the sociological (technical R&D tends to be undertaken in-house or with academis by VMs) but should identify important “utility / demographic / psychographic” conclusions about the mindsets of various consumer types within the motor-caravan world.
To this end, investment-auto-motives suggests a 3 year programme using each of these steps for cost-efficient 'step by step' picture building might prove most effective. It will ensure that the vital importance of 'Market Connection' is maintained and better understood.
New Era of Marque Differentiation via Technical Innovation -
Given its relatively narrow audience, it is no surprise that this niche sector of the auto-industry does not hold a level of popular esteem equal to that of the legendary British car manufacturers of today or indeed yesteryear.
Motor car manufacturers, the premium marques included, have undoubtedly suffered during historic economic downturns. However, by virtue of the ubiquitousness of the car and their innate standing as symbols of status, meant that the apparent best names – through better company management or marque reverence or indeed both – have been able to withstand economic headwinds; companies taken over as necessary by foreign interests.
In stark contrast, the fact that motor-caravanning has typically always been 'under the societal radar' here in Britain, connected to a previously a small band of participants and only really popularised as the butt of jokes regards summer-time road congestion, it is not so surprising that a major divergence of general knowledge exists between car and motor-caravan. This divergence appears far smaller on the European continent and of course in the USA, given the wider propensity to enjoy such vehicles.
Furthermore, perhaps even more so than tow-caravans, the motor-caravan brand suffers from the fact that the marque itself is viewed as a secondary element compared to the on the road 'visual supremacy' of the base vehicle from the VM van manufacturer; whether VW, Mercedes, Renault, Peugeot / Citroen, FIAT or Ford.
If a camper-van conversion the visual change is to be seen but rarely recognised unless adorned with striking brand graphics, which goes against the typically conservative buyer preference for subtlety and visual convention, and especially obvious on the smaller available body-side of a windowed van.
If a motor-home often the actual model name graphic on the body-side tends to take precedence over the converter company logo or main brand, which may be seen on the front grille and rear as a far smaller 'unseen' badge. The apparent UK preference for periodic change in model names, done to update the range and maintain competitiveness, therefore disrupts even a certain model-line from establishing itself over time.
This then different from the HYMER case study in which its model-line identification remains 'in perpetuity' thus reflecting the standard long-lived nomenclature used on German cars. A long-lived name on necessarily changing product adds gravitas and credibility, as opposed to arguably a more short-termist approach where immediate PR-led market gain is captured by publicised model name change.
Thus we see that the actual name of the converter company itself – notionally the primary brand – has historically been required to 'take a back-seat' resulting from buyer preference and/or model marketing initiatives.
Yet, as previously seen with Winnebago, Airstream or HYMER, this can be overcome to provide strong and direct market connection when the product demonstrates itself as technically superior (ideally both functionally and visually) and is additionally supported by the usual strong customer service quotient the sector demands.
Technical innovation then has proven itself to offer major competitive advantage, when it can be demonstrated as both functionally beneficial and when presented as socially symbolic and so accepted as consumer desired.
Airstream's use of aluminium for its caravan bodies from the 1930s onwards not only had direct links to aero-tech systems, but therein was direct connection to the innate idea of mechanically enabled social progress and betterment. The material itself was also highly evident in the construction of road-side Diners along the then new US highway system, so there was an immediate literal reflection between these two totems of social progress. And the fact that until then roads and roadsides were comparatively deserted meant that the consumer impact for Airstream products 'set in the new age and new sea' was all the greater.
The UK, Europe and Northern America today are far more complex social and sales environments in which sector players must work. So, the 'blank sheet' technical leap that Airstream enjoyed by transforming consumer tastes from old-style wooden & fibre-board caravans toward aluminium structured and aluminium panelled caravans, is not so easily open to manufacturers today. The idea of moving from today's CMC sheet plastic and hand-lay fibre-glass for motor-home body-sides to the 'leap-frog' equivalent of utilising carbon-fibre is wholly unrealistic given the massive pricing gulf between the materials.
Yet that does not mean that other technical advances cannot be made in design, structure, and the utility of fittings, just as has been the case in the past.
The best known example is HYMER's 'PUAL system' of body-side construction / bonding. Introduced some decades ago it is a sandwich mix of outer-skin aluminium, foam core and board interior-skin. Besides negating general water ingress, the system is known to have good insulational properties, steady temperature control and so avoids condensation issues. The producer's own advertisements state that “the 35mm of PUAL wall thickness provides a performance equivalent to an 800mm thickness of standard brick. This innovation has been copied by others in one form or another, though seemingly not quite up to the PUAL standard.
The company also sought to gain advantage by then offering the space-saving innovation of a “pull-down” double-bed, often situated above the driver's cab area, so utilising what is otherwise 'dead-space' and so leaving much of the rear saloon for day-time habitation space. This an innovation thereafter copied by others.
The last renowned innovation from HYMER was the introduction of twin level flooring, effectively creating a sandwich floor which could be used to package both the vehicle's heating systems and provide for expansive under-floor storage areas to stow away camping ancilleries and other low use items such as suitcases etc, which would otherwise clutter the living area of the van.
The “Eco-Tech Ripple” -
It is such intelligent technology and space-planning solutions, borne from the very necessary needs of heat preservation and energy-use reduction aswell as the maximisation of space utilisation, that has over the few decades had such an impact in the more progressive areas of building construction..
Not surprisingly, it has been the commercial building world, with a necessary fiscal imperative for all stake-holders; the new building (land) owners, the building constructors and of course the building leasees. For many years now, unlike the private dwelling sector (exempting social housing), the commercial arena has had to drive down and balance CapEx and Life-Time Running costs.
With far greater desire for progress, the commercial building world has been ahead of the domestic housing building world, which it can be argued has relied upon traditional build methods since they are often so labour and materials intensive so as to have over centuries created a mini-economy of its own; one which is undeniably critically important to the British economy.
However, as seen, the functional needs of the ever improving motor-home has been forced to rely upon 'thin skin' technology, and for occupant comfort (and safety), the best of which must by an enormous factor outperform conventional buildings.
As Germany noted previously given its technology and manufacturing culture, the UK today must continue and indeed increase the pace of not only researching into eco-friendly building methods, but critically provide for the unblocking of any 'bottle-necks' inside the building sector that for self-interest and self-preservation purposes refute the need for progress.
The domestic house building arena has of course taken-on partial learning from the commercial building world, and importantly tends to do so during the policy-induced house-building booms that serve to assist national 'climb-out' from its fiscal woes, such as the 1930s when (German-derived) 'Crittal' windows were installed on a mass scale, and later in the 1970s when secondary and double-glazing was widely introduced.
With the UK's co-alition government liberalising the policy-climate for developers in brownfield and select green-field 'mixed-housing' housing development schemes, the present time is a window of opportunity for the introduction of new eco-tech solutions at both evolutional and step-change levels; the solutions applied befitting the project type.
[ NB the very recent TV programme 'Kevin's Grand Design' - presented by the very popular 'architectural guru' Kevin McCloud - aired on the evening of 8.11.2011. The 2-episode programme concerns itself with the creation of a new eco-housing project led by Mr McCloud which itself incorporates an eco-conscious bias and the use of a 'space & utility maximisation' philosophy now understood as derived directly from the caravan industry].
Thus whilst domestic housing obviously looks to commercial builds for eco-tech inspiration, there is also a need for both domestic and commercial to 'pick the brains' of the motor-home sector and cherry-pick or mimic those current and emerging solutions which can be deployed.
To this end there should be an exploration of:
- materials technology transfer
- build methods technology transfer
- efficient energy systems (electricity, gas, water, waste) transfer
(the latter looking beyond 'smart-meters' into whole systems efficiency)
There should be concentrated learning and deployment that enables technology-transfer between various types and modes of habitation type, from camper-vans to motor-homes to static-caravans to cabin-type holiday dwellings to conventional housing to progressive housing and to step-change type dwellings.
Undoubtedly presently the UK's Building Research Establishment does very good R&D work, its BRE Innovation Park demonstrates 10 separate buildings by differing concerns (from mainstream builders to research agents). This then presents what appears the natural channel for building sector efforts at feasible trickle-down eco-solutions, and no doubt will gain greater profile as part of the co-alition government's major new house-building effort, itself served by several different funds.
But to reach beyond the mid-term and look into the long-term, the BRE (or similar) and participant architects, developers and building contractors may need to extend their vision further afield and toward the world of motor-caravans to understand the realms of the possible, with solutions approached from the opposite direction.
The Camping Economy & Eco-Tech 'Starter Motor' -
Beyond the pragmatically academic R&D work of the BRE, it may be the case that to truly cross-fertilise technology learning across the plethora of habitation sectors, that the camping economy itself could be used to create a 'spiral staircase' toward mainstream habitation, one in which the upward force of change creates a (Dyson-esque) multiplier cyclone effect on the size / scale of applications as it moves from the fringe of motor-caravans and through into more mainstream (static building) types.
Furthermore, the fact that the broad camping sector has its own mini-economy could be of major assistance. If that mini-economy is understood and deployed adeptly, it suggests that the central message of technology transfer can be aired (via the camping route-way) to engender demand for such eco-tech change, with an onus on self-help, as opposed to expecting from the nanny state. Thus, already present and growing 'camping consumers' become a broad base of 'evangelists' or 'missionaries' on behalf of the eco-message.
The camping holiday arena is an economic world in itself, and as such should be viewed as a microcosm of the nation at large. It includes:
- Core Products
(tents, caravans, camper-vans, chalets, cottages)
- Functional Ancilleries
- Fashion Accessories
- Financial Services
- Insurance Services
- Driver Training Courses
- Emergency Rescue/Assistance Services
- General Advice Services
- Leisure Park 'Pitch' Rental
- Leisure Park 'On-Site' Facilities / Services / Events
This all combines to create a network or matrix of commercial interaction, from opportunities for brand development, cross-selling, loyalty schemes, promotional tie-ins etc. And with the emergence of the powerful 'grey market' over the last 20 years it is a sphere which many portfolio companies and investment houses have taken great interest, the past seeing interest from the likes of SAGA Group which sought motoring and travel synergies with its ownership of the Automobile Association under the name Acromas Holdings. Thus the wide realms of the camping world is recognised as a powerful economic force in itself and when tied to synergistic corporations.
It then represents a economic sub-system to that of the nation's which might be moulded to act as the 'eco-tech starter motor'. Undoubtedly the trend is already under way, though to what extend is unknown, with the emergence of hand-powered torches and wind-up radios, solar-powered electronic device chargers, and other energy capturing or energy saving items.
[NB it presently appears very slim that there will be any market/private-led or government-led incentive toward major re-investment in the UK's energy sector. This indicates that the present plant infrastructure will be utilised and 'run-down', replaced on an ad-hoc basis where necessary. This in turn indicates that supply levels vs demand levels will shrink, thus maintaining historically high price levels and so nurturing the consumer market for energy related devices].
The continued ideological support of this trend would provide the initial momentum for the 'ripple-effect', via an in-situ audience and so concomitant market-place, which is already attitudinally open to the positive aspects of eco-tech relative to 'natural living'. And thus, presumably, a domino effect of its influence throughout the various camping affiliated consumer groups and thereafter into the wider reaches of mainstream society.
This appears the reality already, but perhaps requires greater effort by commercial interests to turn the ripple into a wave of attitudinal change.
Scale-Up for National Economic Revitalisation -
The Autumn statement by the Chancellor of the Exchequer highlighted the need for continued to drastically reduce the UK's national debt levels, a central exercise if the UK is to ultimately rebound with necessary vigour. The classical economists' monetarist perspective relays common sense when it is recognised that the less the burden on government so the less the burden on industry (spanning high-finance to light-industry) thus onto commerce and so the people at large. In the meantime fiscal constraint will be hand in hand with inevitable consumer constraint as the re-balancing continues.
Although technically out of recession - represented by shallow growth figures – the undeniable reality is that the western world has endured what has been a monumental structural recession born from the 2008 financial crisis, and its after-shock - even without the Eurozone trauma which adds further tremors - was never going to show a strong near-term up-tick. For all the talk of 'U' shaped recession, or 'W' shaped recession, because of the unparalleled economic structural damage, it was always destined to be a very slow ride out of the storm. This is why investment-auto-motives talked of the 'New Norm' before it became generally accepted, and why the best symbol to represent the situation is a shallow angled 'tick' representing a slow trudge.
In tandem with cutting debt, plans for re-generating economic growth have been aired. In typical fashion the government targets infrastructure, with the 'National Infrastructure Plan' recognising 40 projects of “national importance” with another 500 identified by the private and public sector. It spans railways, power (notwithstanding the aforementioned note), roads and internet.
Naysayers such as The Economist state that this alone will not provide the necessary re-energisation to fully assist the UK, a whilst a somewhat obvious / fatuous statement given that infrastructure build is the direct catalyst for one or two sectors of the economy (FTSE 500 and all), it does replay the usual re-vitalisation pattern by working 'bottom-up' with more immediate shovel-ready jobs leading to new infrastructure related jobs across many other sectors.
However, whilst this represents a much needed £250bn or so capital injection, and represents the beginning of the foundational 'productivity push', as stated in the last section, there needs to be a 'demand pull' to ensure that generated wealth that passes through employees hands from infrastructure programmes and additional cash injections from UK private enterprise and incoming FDI monies, is re-spent throughout the UK economy.
Green issues and eco-tech has over the last decade risen ever higher in the consciousness of the public. Yet to a large extent, that consciousness has been regards state driven ideals – themselves stemming from the Kyoto Protocol in the early 1990s. Focused on what appeared the radically transformative effects of wind-farms located off & on-shore, sea based wave-motion generators on the water's surface and current-motion (water-wheel) machines situated on the sea-bed, or solar-farms such as those pioneered in Spain and the Sahara project to convey solar-energy into the European power-grid. But in the fiscal reality of today such grand schemes appear not only prohibitively capital intensive but also a leap into a technically unproven future.
Instead, because of the expected decline in power availability in the UK, the realistic future is not energy production, but energy management, and that very much depends upon the behaviour of the public and its own consumer actions.
But of course, state, private enterprise and consumers do not operate in individual isolation. To this end investment-auto-motives believes that the camping sector – including the wider popularisation of the motor-caravan – can act as a fundamental catalyst in transforming consumer and thus public behaviour.
It was noted that camping is a multi-faceted world, with different yet often interconnected business streams. Moreover the various methods of camping represent a 'staircase' of habitation levels (comfort and security), from the basic 1-2 man tent through to family tents, to caravan / motor-home, static caravan and to chalet / cabin type construction.
Each represents a level of habitation closely ties to comfort / convenience / safety and as such is closely related to a level of energy use. Each of these habitat types has had tools, devices, instruments, machines developed to suit the need, from a hand wind-up mobile phone charger when in a tent, to in the case of a remote cabin, roof-mounted black coloured water-stores which absorb the sun's heat and provide for warm showering.
Whilst many such solutions can and are used by different habitation types – and of course rely upon the the basic science - there is very probably an opportunity for eco-tech transfer between most levels of the 'staircase', thus allowing for alternative energy efficient answers.
Perhaps none more so than the relationship between motor-caravan and conventional house.
It is believed that the fact that motor-homes seek to have a 'closed-loop' level of self-sustainability to provide for as much time spent 'off-grid' or 'unplugged' as possible Yet also the fact that energy is available from the vehicle's internal combustion engine (itself of course from petrol) when necessary.
This then mimics the desire that house-holds become as self-sufficient as possible, ultimately drawing power from the national grid when necessary. Here then the parallel and route to learning is that the national grid can be represented by motor-home's internal combustion engine.
To provide for such a high level of self-sustainability, motor-homes have for many years had energy management systems. These signal energy use rates and remaining levels, very much as the fuel-gauge does on a standard car, and is able to allocate energy consumption between the energy stored in the vehicle's batteries and the functional ancilleries. Thus 'smart-meters' have been deployed in the camping world for nigh on decades.
However, there is of course an intermediate type of habitat that sits between motor-home and conventional house: the holiday chalet or cabin.
This then offers the possibility of deploying the holiday chalet as an intermediary enabler in the mainstream acceptance of eco-tech, from smart-meters and energy allocation systems (for primary and secondary functions) to newly deployed materials and methods in wall insulation (such as the PUAL system used by HYMER) to perhaps even an increase in the use of human powered devices.
[NB It seems ironic that gym-base running machines et al require electricity drawn from the grid when the human is expending energy].
Thus given that the camping arena is so broad and so directly philosophically connected to nature and the ideals of self-sufficiency, it is appropriate that camping products, camping / leisure centres and all that operates in this micro-cosmic universe be well orchestrated by those related commercial entities. This spanning from influential entrepreneurs such as the Dragon's Den's Deborah Meaden, to camping-centric holding companies such as Swift Group to Private Equity firms that have taken a deep investment interest in the sector.
Conclusion -
The 3 sections presented over the last 3 weeks sought to demonstrate the growing importance of the UK motor-caravan sector to personal leisure, regional travel and acceptance of eco-tech solutions; these stemming from and reacting to, the massive shift in demographic and economic trends that have taken place in recent years.
It sought to highlight how all players of the sector need to consider their reaction to this period of change, from the old established family firm through to the ever growing multi-brand sector consolidator. These changes mean that new challenges and opportunities have and will continue to appear. And critically that the sector, having gone through 'boom and bust' could well benefit from what may be a prolonged period of mass popularisation and growth. But this only achievable if the the previously narrow perception – itself a natural result of historical experience - toward the market and so products and service is expanded to relate to demographic and fiscal change.
Moreover, why the motor-caravan sector must be viewed by manufacturers and investors, not as a discrete isolated sub-section of the camping genre, with little more than production synergies with tow-caravans, but as perhaps the vanguard of the contemporary 'self-sustaining' 'eco-tech' zeitgeist.
Why the time has come for new thinking about how the motor-caravan sector can act as a catalyst – as part of a far broader agenda - for social change in greater acceptance of systems-based and personal-base eco-tech.
Eco-tech that may be scaled-up through the camping mini-economy and its 'staircase' of habitation types.
To this end, whilst Britain politically appears 'at odds' with Europe given the outcome of the recent Brussels meeting between EU leaders, the reality is that perhaps more than ever, the need for UK & European trade is greater than ever. And that relationship should serve the UK to learn, absorb and appropriate the best examples of eco-tech seen in Europe (typically Germany), both importing when desirable, but also being inspired to produce in the UK for the UK.
Hence the notion of a “British HYMER” (ideally many companies of such ilk), which can act as physical vehicles for personal and family leisure, and as critically technology-transfer platforms for the naton-wide acceptance of new era, multi-layered eco-tech.
This approach replicated by the big-players of the wide-span camping sector, so that 'intelligent motor-homes' can influence 'intelligent holiday chalets' to influence 'intelligent mainstream housing'
However, within the motor-caravan sector, because company fortunes have been so closely linked to the economic cycle, and much affected by 'boom and bust' periods, there seems a polarisation of company size and operational attitudes. An overly simplistic depiction is - the ambitious (perhaps financially leveraged) growth orientated enterprises that seek sector consolidation, versus family-run firms run on caution, operational cashflow and generational stability, (very much in the Mittelstand manner).
Though let down by its European partners, Germany still offers the philosophical basis of an economic model that could serve Britain very well into the future. One where the benefits of market and technical learning amongst all parties in a sector far outweigh the far more short-termist gains of the large player over the small player.
Whilst the age of credit driven corporate growth has not wholly diminished in the west , and will indeed underpin necessarily consolidation in certain speheres. But for the new growth arenas such as eco-tech, itself enabled through a renewed appreciation for nature and camping, the fact is that the large and small players of the sector will be far better served, as will the nation as a whole, from mutual respect and efforts to grow the overall 'economic cake'.
Subscribe to:
Posts (Atom)