While the Japanese giant is boldly going forward, GM is pressed by the UAW and the controversial German giant is doing post-scandal damage control.
On Thursday Toyota (NYSE: TM) announced a $243.29 million expansion at a plant in the Brazilian state of Sao Paulo. The Japanese giant is joining the controversial Volkswagen Group (OTC:VWAGY) and General Motors (NYSE:GM) in new investments in the region. Sao Paulo has long been the heart of Brazil’s auto industry, the largest in South America, but it had recently been losing manufacturers due to luring incentives offered by competing states.
In fact, Ford Motor Co (NYSE:F), whose stock has soured over the past year, has announced plans in February to shut down and sell one its oldest Sao Paulo plants.
This is not a surprise considering Ford’s free cash flow is expected to drop dramatically for the remaining of 2019 and into the fiscal year 2020. This is part of the company’s ongoing strategy of Global Redesign so it can face the electric future that is upon the industry.
Analysts find that due to this Global Redesign, the company won’t have enough adjusted free cash flow to afford other pressing obligations, including its pension contributions and debt repayments. As long as the company is obligated to pay out almost $5 billion per year in dividends, its free cash flow generation is being unnecessarily pressured and consequently, unable to follow up with the company’s financial obligations.
Going back to Toyota, its executives explained that Sorocaba plant expansion will create only 300 jobs as the company already has two other plants in Brazil. Meanwhile, only 2 days before, Toyota rolled out a new sportier model of the Corolla, making it the firm’s first fully redesigned sedan in about seven years. The new Corolla is equipped with a touchscreen you can text from and the latest version of a safety system that detects pedestrians and bicycles at night. The Corolla has sold over 47.5 million vehicles worldwide since its debut in 1966. Interestingly, Toyota is SA’s most hijacked brand of car ahead of Volkswagen, according to crime statistics released late last week. On the other end, the least hijacked vehicle during the same 12-month period was Fiat Chrysler (NYSE:FCAU) — useful to know if getting your car stolen is one of your fears.
Speaking of Fiat Chrysler Automobiles, a minivan was one of its most successful product debuts and what in fact, helped save the automaker from total ruin in the 1980s. The unveiling of the first Chrysler minivans in 1984 is still considered a landmark moment in the history of the automotive industry. But the minivan now only forms a small portion of the market, despite seeming like the sum of everything most people want in a car. So, although the minivan that screams ‘family’ once saved Chrysler, it seems to be the end of the road, urging for a disruptive invention.
And for the Germain giant, Volkswagen, the question is whether electric cars be able to save the brand from its diesel emissions scandal. Not to mention the fact that is origins are heavily intertwined with the Nazi party, the company is currently recovering from what many find as the worst scandal in its history.
The company’s several executives have been charged with fraud with some sentenced to heavy jail time for cheating on diesel emissions tests. The company has agreed to pay more than $10 billion to settle the scandal in the U.S. with part of that money dedicated to building zero-emission vehicles.
The company has heavily invested in its infrastructure to be able to support electric vehicles but there’s a lot of reputational damage to remedy. And many are skeptical whether any automaker can actually make money with electric vehicles, especially it being such a technologically savvy and more than costly adaption. But many also find that say that if anyone can do it, it’s the German giant. After all, let’s not forget the company’s size and more than diverse portfolio. The Volkswagen Group one of the world’s largest automakers, but perhaps more importantly, it produces cars in almost every auto segment: from its cheap Golf to more than luxurious Lamborghini. One thing is for sure, the company is betting big on the electric market.
Moving on to another global giant, at midnight Monday morning, around 50,000 General Motors workers went on strike. The last GM strike took place in 2007, just one year before the financial crisis when the federal government bailed out the auto industry. GM emerged from the crisis and managed to increase its profits and make $35 billion in the past three years. But little of that money has made its way into workers’ pay checks due to several plant closures. So, it’s not a surprise that striking workers are angry due to this uneven economic growth. They want job security along with demanding fairness in the treatment of temporary and permanent employees regarding pay and benefit divisions. This is how the UAW gained positive news coverage generating support from the general public. Such narratives always improve the union’s chances for a successful negotiation. On the other side, UAW’s officials are under investigation as they are accused of misusing union’s funds. So, GM has a shot there to reshape the narrative strategy of the strike. Of course, no one knows what will happen but more strikes are to be expected.
While GM is facing pressures from the UAW and Volkswagen both from U.S. and German prosecutors, Toyota has managed to not only remain faithful to its values but also to grow sustainably during the last decade. EU and US automakers could learn a thing or two, or several, from their Japanese industry peer, that is for sure.
Toyota’s News: Redesigned Corolla, New Investments and Partnerships
Toyota Motor Corporation (NYSE: TM) is managing something other automakers only dream of. The company is honouring its values while achieving sustainable growth for over a decade. The dependable Japanese giant continues to deliver on its promises as it prepares for an electric future.
A new sturdy yet sporty Corolla
On September 17th, the company announced a completely redesigned Corolla that now goes beyond just being a practical buying decision. The newly evolved Corolla has a sporty design, offering pleasurable driving and advanced safety equipment. Being built on Toyota New Global Architecture (TNGA), Corolla is ready to evolve to meet customers’ needs, according to Yasushi Ueda, chief engineer in charge of development.
Since its debut in 1966, this car is nothing less than adored by consumers all over the world and now, it will have its first hybrid version available to U.S. customers.
Hybrid strategy is actually paying off
Just like Honda Motor Co. (NYSE:HMC) with its 2020 CR-V Hybrid, Toyota is using its hybrid technology to position itself for future growth and transition to an all-electric future, despite the fact these energy saving vehicles do not qualify for government subsidies. But, this strategy is paying off as hybrid demand skyrocketed and the company proudly revealed in February that Lexus reached its 10 millionth vehicle sales milestone since its launch, with its 2018 sales performance achieving several ‘best-ever records’. And it is thanks to these figures that the Chinese government is also starting to see the potential of such vehicles so things can only get even better for Toyota. As the saying goes, persistence is the key to success and these two companies have been quite brave in sticking to HEVs.
New Investment – $391 Million Goes to Texas’ San Antonio Plant
This will be Toyota’s first expansion in nine years at the plant that produces its Tundra and Tacoma pickup trucks. It is the part of the company’s strategy to invest $13 billion in its U.S. operations over the period of five years, ending in 2021.
Future Investment – $243.29 million to Produce New Vehicle in Sao Paulo
Toyota is also about to get an even stronger presence in Brazil as it will hire 300 new employees at the Sorocaba Plant to start the production of a new vehicle.
And let’s not forget the ground-breaking partnership of Japan’s leading automakers that was revealed in August as Toyota and Suzuki Motor Co. (OTC: SZKMF) announced they will collaborate on developing autonomous car technology. This deal is cementing the bond that the two automakers kicked-off in 2016. They might seem like an odd couple as Suzuki is a everything but a big player, yet its strong presence in India is only one of the things that will greatly benefit Toyota. Although Suzuki admitted defeat on the world’s biggest playgrounds, China and the U.S., it cracked the code for emerging markets. And this is exactly where future global sales growth is expected to come from.
Inventing a car that will run forever?
According to Bloomberg, Toyota aims to go far further than electric by teaming up with Sharp Corporation (OTC:SHCAY) and Japanese governmental organization NEDO that encourages the development of innovative technologies. Considering that Toyota is a company that has even used the economic crisis and recession to only come out stronger, it’s not unlikely that it is set to out do the impossible by mixing the most efficient batteries with solar panels. The company’s strong financial performance and track record show that if anyone can do it, it’s Toyota Motor Co.
Nike Exceeds Wall Street Expectations With Q1 Earnings for FY2020
Direct-to-consumer sales and digital momentum strategies did the trick for Nike
When Nike (NYSE:NKE) released its better-than-expected first quarter of the fiscal 2020 results late Tuesday. Naturally shares jumped more than 5% to reach $91.80. The reported revenue increased 7.2% year comparing to last year, achieving $10.7 billion, greater than the expected $10.44 billion. Net income soared more than 28%, making adjusted earnings per share $0.86, also smashing expectations of $0.70 per share.
Nike managed to achieve a turnaround
The biggest contributor to total sales was Nike’s North American segment that increased 4% comparing to last year. But China sales also continue to grow and by double digit percentages: 22% to be exact, topping $1.68 billion. Overall, these are fantastic news for investors. Especially since the company’s rare earnings miss for the final quarter of the previous fiscal year. The company attributed this to increased marketing costs and a higher tax rate. But highly anticipated new product launches and solid results for continuing lines, along with efforts to draw new customers to the Nike SNKRS app, did their magic.
Digital momentum is key
Digital movement is transforming and amplifying everything Nike does and in Q1, Nike Digital grew 42% on a currency neutral basis. This growth is driven by enhanced digital services and the international expansion of its app ecosystem. Moreover, The Nike app and SNKRS app are now both live in over 20 countries, with more expansion coming throughout the year.
There are literally no weak spots for investors
Arguably, there are no weak spots for prudent investors to dig in as far as this quarter’s report is concerned. The company is literally firing on all cylinders. The company’s management attributes these results to “the depth and balance of the company’s complete offense, building on the strengths of its foundational business drivers and capitalizing on the untapped dimensions of its portfolio”. Management has also dismissed any concerns that US-China trade conflicts could harm its operations, disclosing no impact has been seen up to date.
Nike showed it can even handle the increased tariffs
Earlier this year Nike joined over 200 other footwear companies urging President Trump not to increase tariffs on footwear imported from China, calling the move “catastrophic for our consumers, our companies, and the American economy as a whole.” But while those tariffs are certainly catastrophic for small players, Nike seems more than capable of mitigating the consequences of this added expense.
Poor macroeconomic conditions are only masking Nike’s true power
The company made it clear that its figures would have been even stronger had it not been for macroeconomic challenges which are manifesting through tariffs and foreign-exchange rates. They implied that the weakening economic climate is essentially masking Nike’s true strength. And in addition to children, women are also a big opportunity for the company that Nike will continue exploiting. This is why Nike expects better-than-planned growth in its higher-margin NIKE Direct channels and international segments and consequently, its full-year gross margin. One thing is for sure: Nike has turned itself into so much more than a ‘sneaker-company’.
Apple Will Be Making Its MacBook Pros in the US
With a newly granted “federal product exclusion,” enabling it to import some Mac Pro parts without paying tariffs, Apple (NASDAQ: AAPL) will be able to save enough money to make US assembly worthwhile. The company announced on Monday that it will manufacture the new version of its Mac Pro desktop computer in Austin, Texas. It’s also a big political win for Apple, since President Trump has for years called on the company to make more products in the US. Tim Cook clearly made a compelling case during his meetings with President Trump. Apple described the decision to keep Mac Pro production in Austin as part of its “commitment to US economic growth.”
Macroeconomic climate is not favourable
The September figures around the world are simply awful. The uncertainty brought on by intensifying trade wars, the outlook for the car industry and Brexit are paralyzing investors, with September seeing some of the worst performance since the financial crisis in 2009, leading many to worry about whether yet another crisis is upon us. On a brighter note, Apple’s stock went up 0.2% after Bloomberg reported that ten of its 15 requests for an exemption from tariffs on imports from China had been approved.
Apple previously disclosed plans to spend $350 billion in the U.S. by 2023, a figure that includes new and existing investments. Its Apple TV+ is set to launch on November 1, with stars like Oprah Winfrey bringing her famed book club streaming show to the company’s subscription service. Among documentaries that will be released, there will even be a multi-series about mental health, featuring no other than Prince Harry himself. Apple’s subscription service will cost only $4.99 a month and will be available in 100 countries and regions at launch. Also, customers who buy a new Apple device will also get a free year of Apple TV+.
Netflix (NASDAQ: NFLX) is still the leader when it comes to U.S. streaming, along with Amazon Prime (NASDAQ:AMZN), AT&T’s HBO (NYSE: T) and upcoming Disney+ (NYSE:DIS), it is certain that competition will be intense. Netflix’s stock has been dropping since July, which was the first time the number of subscribers fell. Moreover, Netflix’s stock price has now officially wiped out any gains it’s made over the year so far and both Disney and Apple have a shot at beating Netflix at its own game.
Apple is still facing impending import duties and innovation difficulties
Let’s not forget that the company still faces import duties scheduled for Dec. 15 that could affect nearly all of its major products including iPhones, iPads, MacBooks and Apple Watches. And more importantly, it is thought by many as facing an innovation problem so it heavily relies on customer loyalty that will continue driving its sales. We’ll just have to wait for November 1st launch of Apple TV+ to see the impact of Apple’s new streaming subscription service.
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