Aston Martin's Turnaround Has Hit a Speed Bump

The Aston Martin Logo on a Vanquish S.
The Aston Martin Logo on a Vanquish S.

Aston Martin is pointing the figure at supply chain issues as the reason it can’t improve its finances, Credit Acceptance is seeing an increase in auto loan volume and value, and Tesla is closing its first showroom in China to save costs. All that and more in The Morning Shift for Wednesday, November 2, 2022.

1st Gear: Aston Martin Blames Supply Chain for Slow Turnaround

Aston Martin says global supply chain issues are to blame for it pushing back an expected financial improvement. It’s also caused the British automaker to cut its 2022 deliveries.

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This goes against projections it made in July that Aston would see improvements in its financial state in the second half of this year, and it would see positive cash flow. From Reuters:

Carmakers globally have faced problems sourcing parts and chips in the pandemic and difficulties have continued since Russia’s invasion of Ukraine. Aston Martin has also had its own challenges since its market debut in 2018, undergoing restructurings and management changes.

The company, which is also a Formula One racing team sponsor, estimated on Wednesday the incremental costs from the latest supply snags at about 20 million pounds ($23 million).

“Whilst (the supply issue) has created short-term impacts on our performance, I am confident that with the actions we are taking, we will exit the year in a stronger position to deliver on our goals for 2023 and beyond,” Chief Executive Amedeo Felisa said.

In September, Aston Martin raised about $660 million in a rights issue to lower its debt and invest in new models.

Reuters reports the company now expects to deliver between 6,200 and 6,600 vehicles in 2022. That’s down from the initial target of over 6,600 vehicles.

During the third quarter, Aston Martin operated at a 58.5 million pound loss.

2nd Gear: Credit Acceptance Seeing More Loans from Dealers

Credit Accpetance reported a double-digit increase in both auto loan volume and value during the third quarter of 2022. The subprime lender reportedly did business with a lot more dealerships. Despite this, its net income plunged during the same period.

The company announced that it had acquired 71,937 new auto loans from 8,547 dealers worth $924.9 million in the quarter. Those are double-digit increases in all three categories from a year earlier. From Automotive News:

[S]ome loans from recent years have been less lucrative than Credit Acceptance expected. The lender lowered its forecast for anticipated collection rates from its loan portfolio for debts assigned in 2019 through 2022. This means Credit Acceptance expects to miss out on $85.4 million in expected cash flow, a 0.9 percent decline, the company said.

Credit Suisse analyst Moshe Orenbuch observed during an earnings call Nov. 1 this decrease occurred during a time of stable employment, and he asked what would happen under improved or worsened jobless rates. Credit Acceptance Chief Treasury Officer Doug Busk pointed to the economic woes of the late 2000s, when his company’s forecasts were off by 2.5 to 3 percentage points.

“During the great credit crisis, our loans performed pretty close to our expectations,” he said.

According to Credit Acceptance, its net income fell 65 percent to $86.8 million in the quarter. That decline is being blamed on reduced financial income and new accounting rules that require the company to earmark funds in case of loss.

3rd Gear: Tesla Closes First Showroom in China

Tesla is reportedly closing its flagship showroom in China in an effort to lower retail costs in the country. From Reuters:

Tesla confirmed the closure of the showroom in Beijing’s upscale downtown shopping centre Parkview Green to Reuters on Wednesday. It said it had relocated the store to another mall called Raffles City. That showroom was opened in mid-October and is smaller than the original two-floor showroom in Parkview Green.

Two people with knowledge of the matter previously said Tesla had shut the Parkview Green showroom late last week. The store, opened in 2013, was Tesla’s first in China and was renovated and expanded in 2018.

The now-shuttered showroom will reportedly become a BAPE (a streetwear brand) store. Seems fitting, as Tesla is as much of a hypebeast brand as BAPE is. Gotta keep the tradition going for that space.

“Their contract with us expired and Tesla decided not to extend it,” a mall staff member told Reuters.

A call to the store earlier in the day was redirected to the Raffles City showroom.

Tesla owns and runs over 200 outlets across the country that display models and arrange test drives for potential buyers.

Reuters reported in September that Tesla was considering closing some showrooms in flashy malls in cities like Beijing after traffic plunged during COVID restrictions.

Tesla says it now plans to focus on less-costly suburban locations that are also able to provide repairs.

The company has sold over 318,000 vehicles in China so far in 2022. That’s up 55 percent from the same amount of time last year.

4th Gear: Subaru Assures Us That it is Strong

Subaru is assuring us that demand for new vehicles in the U.S. is strong despite rising loan and interest rates.

“Americans are feeling a slowdown in the economy, but car sales are strong as supply lags,” Tomomi Nakamura, Subaru’s chief executive, said during a news conference. From Reuters:

U.S. new vehicle sales in the next financial year starting in April 2023 are expected to be between 14 million and 14.5 million, according to local U.S. sales staff, he said.

Soaring inflation, rising interest rates and growing risks of economic recession in major markets have darkened the demand outlook, although auto production remains tight in general due to chip shortages and COVID-related restrictions.

Subaru is forecasting operating profit of 300 billion yen ($2.03 billion) in the business year ending March 2023, 50% higher than its previous estimate due to a weak yen and price hikes to offset the impact of rising commodity prices.

The automaker sold about 140,000 cars in the United States in its fiscal second quarter, up 3% year on year and the only region outside Japan to show growth. It expects U.S. sales for the current business year to reach 631,000, up 25% year-to-year, although down fractionally from the previous forecast.

Subaru reported an operating profit of 73.5 billion yen in the quarter that stretched from July to September. That’s triple what it was a year ago.

Despite all this, Nakamura says it will be hard to expand production in the U.S. because of the tight labor market.

5th Gear: One UAW Director Did A Bad Thing

A UAW regional head has reportedly violated an election rule prohibiting retaliation against a union member seeking international office. The Region 1 director denied his opponent a pass to this summer’s Detroit-based UAW convention, according to a copy of a letter. From the Detroit Free Press:

The letter, dated Saturday, said that UAW Region 1 Director James Harris waived his right to a hearing and “acknowledged that he inappropriately denied” a request for a pass by LaShawn English, his opponent in the UAW’s first direct election of top union leaders. Ballots for the election were mailed out beginning in mid-October, ahead of the Nov. 28 deadline to have them returned.

The monitor notified Harris on Oct. 14 after concluding an investigation into the matter and issued a “formal admonishment to Director Harris for this conduct” on Saturday, according to the letter.

[...]

It’s not clear what, if any, penalty Harris might face. The letter said the monitor considers the investigation officially closed. It’s also not clear if the monitor’s office has taken action on any other complaints from candidates. A message seeking comment was sent to the monitor’s office on Tuesday.

The Region 1 UAW director represents local unions in eight counties in Michigan and Canada. There are over 50,000 active and 100,000 retired members in that region.

Reverse: The Goose is Spruce!

Howard Hughes’s “Spruce Goose” flies

Neutral: It Is Wednesday


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