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How well are US carmakers prepared for the upcoming recession? What do the balance sheets say?

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Ford News

The Coronavirus has hit the US economy very sharply. Last week was the worst week for the stock market since 2008 despite the fact that the FED and the government took some very serious actions. It is quite clear that bad times are ahead for everyone, especially for the sensitive and already-troubled automotive industry. Morgan Stanley analysts expect that auto sales numbers will drop very sharply in the US, up to 90% in the next three months. Based on China’s experience, where auto sales numbers fell by 80%, it can be said that this forecast sounds quite realistic. The question is how well are automakers prepared for such a negative scenario?

Balance sheets can provide the answer

If the company’s revenues drop too much, serious losses can be expected for all US auto manufacturers. How big will those losses be is hard to predict because no one knows for sure how long will this crisis last. The number of new cases is increasing exponentially day by day and it looks like the coronavirus is gaining momentum.

In times of such an unprecedented crisis, liquidity is of crucial importance. What financial managers want in times of crisis is to have a mountain of cash and for their total current assets to be much greater than current liabilities. With big cash balances and very positive net current assets, the company has a much better chance to survive both in the short and mid-term, even with serious losses. All those numbers can be found in the company’s balance sheet.

What do US carmakers’ balance sheets say?

Well, the numbers are mixed, but generally positive. According to the latest balance sheets as of 31.12.2020, Detroit’s big 3 carmakers combined net working capital was negative, approximately $0.5 billion. Ford’s net current assets were positive (approximately 16 billion USD), while General Motors (NYSE: GM) and Fiat Chrysler (NYSE: F) showed negative results, minus $7 and $9 billion, respectively.  Negative numbers are everything but ok. In times of crisis when sales suddenly and seriously plunge, profits turn quickly to losses. During those times, banks usually hesitate to provide further financing to companies. Thus, the figure behind net current assets is usually the only source of cash and the only source of debt repayment. But if net current assets figure is negative, then companies have very little space to maintain liquidity if the crisis prolongs. Creditors will ask questions to find out how those companies will meet their current liabilities. If no answer is provided, they will try to reduce their exposure faster, only adding more financial pressure.

Luckily, Detroit’s Big 3 US carmakers have the answer.  It is a mountain of cash and cash equivalents. As of 31.12.2019, General Motors , Ford and Fiat Chrysler (NYSE: FCAU) had combined approximately 75 billion USD of cash reserves. The amount is big enough to cover approximately 1/3 of total current liabilities. It will help CFOs to meet a lot of current liabilities and refinance them with long-term debt. It will also help them to survive despite negative net current assets.

Conclusion

US carmakers are ready for the first crisis attack. Money is at their disposal. Lock and load.

This article is not a press release and is contributed by Ivana Popovic who is a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure . Ivana Popovic does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com Questions about this release can be send to ivana@iamnewswire.com

BenzingaEditorial

Could COVID-19 End Up Being “Good” For EVs?

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Tesla Electric Vehicles

Wise people say each problem is an opportunity in disguise and crisis are no different. Those in favor of clean energy see opportunity even in the pandemic. By seeing nature blossom as half of the world’s population was kept in lockdown, more people could indeed feel more inspired to opt for EVs. But the consequent recession also implies cuts. Which vision of the post-pandemic future will prevail?

 Electrification during the pandemic

As for corona- cancellations, Lincoln/Rivian SUV is the only one so far. And to be honest, it was quite a brave R&D abstract project. On the other hand, Ford Motor Company’s (NYSE:F) far more important Mustang Mach-E still seems to be headed for production, although deliveries may be delayed. Over at General Motors (NYSE:GM), early May prognosis is that it may have to work harder and put more resources on these programs to keep them on time, but there’s no slowdown. And despite several launches being delayed or even cancelled, GM clearly stated that production remained intact.

Volkswagen’s (OTC:VWAGY) new ID.3 is rolling off the assembly line in Zwickau, Germany, and YouTuber nextmove, who recently toured the facility, said he also saw another, newer model on the production line—the ID.4, an electric crossover that’s expected to be similar in size and range to the Tesla Inc’s (NASDAQ:TSLA) Model Y and, unlike the ID.3, will be sold in the US.

Even before the lockdown eased, Tesla was well-positioned. Moreover, recent events have only made it crystal clear that Musk plans to bring production back up to speed as quickly as possible. And he will use whatever means necessary, even if it involves getting himself arrested.

The situation in the U.S. varies greatly by state

So, the short-term production picture looks solid. But the long-term outlook greatly depends on government regulation. The Trump Administration is not letting fossil fuels die but its hostility to all things green is nothing new.

But things are more optimistic when looked at a state-level, especially when looking at California and Colorado. Despite the trucking industry attempting to play to COVID card, zero-emission and EV policies are being put forward.

Global direction

Out of all coronavirus-related stimulus programs, US and China governments have been by far in favor of polluting industries. Two of the world’s biggest economies have turned their back to environmental improvement.

Brighter skies in Europe

Despite Germany also not getting a very good score, Chancellor Angela Merkel has insisted that Europe’s economic recovery plan needs to be based on the European Green Deal to keep a close eye on climate protection.

Enlightened governments are opting out from investing in dead-end internal combustion technologies. Even the severely hit Spain’s government looks set to approve a package of climate-related measures that includes investment in EV charging infrastructure and the establishment of low-emission zones.

France Made EVs central

French President Emmanuel Macron announced an $8.8 billion plan last Tuesday to rescue the country’s auto industry as auto sales fell 90% in April compared to last year. And boosting both production and sales of EVs is the main action of the strategy.

Macron wants France to become the leading producer of clean cars in Europe and compete fiercely with Germany for that leadership role. Consumer incentives to buy an electric car will also be increased from €6,000to €7,000. There will also be incentives for people to switch their old vehicles for a lower-emission model upgrade. The message is clear: the government is ready to ready to support the demand for vehicles as long as they are clean vehicles that emit less CO2, like EVs.

The figure does not include a €5 billion government loan guarantee under discussion for struggling Renault (OTC:RNLSY) which shuffled its short-term strategy with Nissan Motor Co (OTC:NSANY) to survive the coronavirus earthquake. It also does not include the millions the government has already spent on temporary unemployment payments to auto workers.

The French government owns a 12% stake in Peugeot’s (OTC:PUGOY) maker PSA through the state investment bank. PSA might have reported record profits last year but its sales plunged with the lockdown. Its merger with Fiat Chrysler Automobiles (NYSE:FCAU) to create the world’s fourth-largest automaker is very much on as the two companies will be sharing electric vehicle platforms.

Electrification is gaining momentum at ‘enlightened’ countries

The pandemic and the resulting economic damage that’s just beginning to be felt has hurt auto sales across the board will surely impact electrification plans. But the technology as well as global demand for EVs have evolved too far to turn back. Odds are that electrification will only go faster, at least in the countries not willing to turn their back on climate change such as France. Like every other crisis, the pandemic will create winners and losers for years to come.

This article is not a press release and is contributed by Ivana Popovic who is a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure . Ivana Popovic does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com Questions about this release can be send to ivana@iamnewswire.com

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BenzingaEditorial

Pharma Large and Mid-Caps in the Race Against COVID-19

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Global economy corona virus

If COVID-19 has done something, it has made us realize that health should always be our top priority. No one knows when will the pandemic end, but we are counting on the pharmaceutical industry to win this battle for us. And while the world has stood still, the companies kept going full speed ahead.

AbbVie Inc – Botox to the rescue

With unappreciated potential, the stock of this big drug maker has stellar fundamentals. AbbVie’s (NYSE:ABBV) acquisition of Allergan that was finally summarized on May 8, almost one year after the announcement, brought the company more than 120 additional products that generated more than $16 billion in revenues last year.

There were a few bumps along the way but AbbVie now has Botox. And its sales are growing both as a cosmetic and in treating various therapeutic conditions including chronic migraine and overactive bladder.

J&J – active on all fronts

Although Johnson&Johnson (NYSE:JNJ)’s share price is nearly where it was at the start of the year, there are many reasons why this stock is an ‘evergreen’ favorite. To start with, it is the largest healthcare company in the world with tremendous resources.

In March, it committed to invest more than $1 billion to develop a COVID-19 vaccine. And it is doing much more than that. It is also setting up a manufacturing capacity to produce the vaccine even before clinical trials take place by September. The vaccine could be available for emergency use authorization by 2021, if all goes well. But its scientists are exploring the potential for existing drugs to treat COVID-19. And we haven’t even mentioned the company’s activities besides its coronavirus efforts.

One of the main reasons that this stock has been a favorite among investors is its diversification across the healthcare sector with three business segments. The company’s pharmaceutical segment is its biggest growth driver but other two segments, consumer health and medical devices, are also multibillion-dollar businesses.

Merck- entering the COVID-19 arena

A buzzing hot stock as Merck& Co (NYSE:MRK) announced three deals to find new medicines and vaccines to help combat the coronavirus. Merck uses debt in its business but it is no more threatened by its debt than an elephant is by a mouse. What is also positive is that Merck grew its EBIT by 29% in the last year, and that should make it easier to pay down debt. Only profitability can strengthen its balance sheet over time but Merck showed it is using debt quite reasonably. Consequently, investors gave it the nod it needed so the company is all set to enter the race!

Novartis – vaccine it is!

Novartis AG (NYSE:NVS) re-entered the vaccine area on Thursday. Its US teammate relies on technology similar to its $2.1 million-per-patient gene therapy, Zolgensma so hopefully they will together exploit the power of synergy.

Roche- combining drugs to fight COVID-19

Moving on to mid-caps which are just as active, another Swiss contender, Roche Holding AG (OTC:RHHBY) had an announcement of its own on Thursday.  Roche plans to test if mixing its anti-inflammation drug Actemra with Gilead Sciences Inc’s anti-viral treatment remdesivir might give better results in treating severe cases of COVID-19 pneumonia than remdesivir alone.

Roche is hoping that by combining the two in a global study of 450 hospitalized patients worldwide, it will be able to offer doctors a one-two punch against the enemy that took 360,000 lives as it quickly contaminated 5.8 million people.

Everyone is fighting for the same goal – and the world is cheering for them to reach the finish line as soon as possible!

This article is not a press release and is contributed by Ivana Popovic who is a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure . Ivana Popovic does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com Questions about this release can be send to ivana@iamnewswire.com

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BenzingaEditorial

4 Blue Chips That Lived Up to Their Title During the Pandemic

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A blue chip is stock in a corporation that enjoys a wide reputation for the value it contributes to the world and its ability to do well even during downturns. This pandemic is an unprecedented crisis that has put the economy into a virtual standstill. These companies showed tenacity to survive the storm.

BAT

A London-based company that took the second position in the US cigarette market with the acquisition of Reynolds American in 2017. British American Tobacco (NYSE:BTI) is surely among the highest yielding picks. But its investors were not pleased even before the pandemic. The company is facing several challenges, the greatest one being the tough trend in declining cigarette sales. The number of smokers has fallen, and that’s forced BAT to use its pricing power to boost profits and maintain revenue growth. But the company remains excited for its shift towards alternatives such as tobacco heating products and vapors. The new segment has shown results but it has been followed by regulatory difficulties. Due to FDA’s slow approval, it is still falling short of its potential. And there is the issue of controversy as the company is being investigated by the U.S. Department of Justice.

Yet, BAT is also one of the more surprising players who are working on a COVID-19 vaccine. Early signs of plant-based biotech development have been promising, but it’s far from certain if BAT can indeed provide the first solution to the coronavirus battle. And there is also the question if it this could be the most effective vaccine in the long run.

But the bottom line is that BAT shares demonstrated tenacity over the long run. Despite the challenges, it has a solid dividend that now yields almost 7% and an abundant cash flow. Fortunately, the decline in smoking has been a gradual one so its main business cannot evaporate into thin air just like that. So even if alternative don’t pan out as well as hoped, things are surely not bad!

Alibaba

Speaking of being at the right place at the right time Alibaba Group Holding (NYSE:BABA) is the one as the pandemic give wings to e-commerce that generated 82% of its revenue. But despite reporting amazing earnings recently, its stock dropped. But the culprit is a bill that the US Senate passed last week that raised the question whether some Chinese companies would be delisted from the US exchanges. Yet, the Chinese giant has not much to fear as investors over the globe are becoming increasingly dependent on Alibaba’s marketplaces to reach Chinese consumers. Moreover, despite the majority of its businesses being based in China, AliExpress is a leading marketplace in Europe.

Alibaba is also expanding its cloud platform overseas with significant investment, where it faces intense competition from Amazon.com Inc’s (NASDAQ:AMZN) AWS.

J&J

The allure of Johnson & Johnson (NYSE:JNJ) is its predictability and impressive insulation from recession conditions. It is a true stock from the ‘grandparents’ era. Although we are not speaking of a blockbuster growth, its 2.5% dividend and cash cow status are what make it an evergreen jewel. It is also preparing its own runner for the SARS-CoV-2 race as the first phase of human clinical trials is planned to begin in September 2020.

McDonald’s

Even during the pandemic, McDonald’s Corporation (NYSE:MCD) shares have managed to hold up all right as its drive-thru business and high-quality, financially sound franchisees give shares some resiliency. And this is not the first test that McDonalds passed. During the 2008 crisis, when others such as General Electric (NYSE:GE) were on the verge of slashing its dividend, McDonald’s was increasing its payout which is an annual ritual it has successfully maintained for 43 years. That year alone, it outperformed the S&P 500 by 46 percentage points. Its stock has what it takes to do the same.

Although tech has made the history of blue chips debatable with young companies such as Facebook (NASDAQ:FB) receiving the status simply due to their enormous impact, one thing has remained the same. Even these four companies come from a variety of industries, but they all have one thing in common: tenacity.

This article is not a press release and is contributed by Ivana Popovic who is a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure . Ivana Popovic does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com Questions about this release can be send to ivana@iamnewswire.com

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