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News Article

What Has Been COVID-19’s Impact on OEMs’ Finances?

By Alejandro Enríquez | Wed, 04/29/2020 - 12:46

OEMs have started to balance the impact that the COVID-19 pandemic will have on their quarterly and yearly results. Nissan, Daimler, Volkswagen, Ford and General Motors have issued statements on the subject. While for some the picture looks grim, others expect 2020 to be in fact profitable.

Nissan announced on Tuesday a 43 percent drop in sales in March compared to the same month in 2019, its worst sales performance in nine years. The Japanese automaker announced an expected annual operating loss of up to US$419.7 million. The net loss was recalculated to ¥95 billion (US$890 million), a contrasting figure to the originally expected ¥65 billion (US$610 million) profit. “The company’s performance continues to decline, primarily impacted by the COVID-19 pandemic," said Nissan in a statement. According to Reuters, Japanese automakers reported a global sales fall of 7.3 percent in March.

As for European automakers, the scenario is mixed. According to Reuters, two sources close to Renault affirm the company is considering reducing the number of sub-contractors to develop new models. The objective is to save between €100 million and €200 million (US$92.14 million and US$184.28 million). The French government, owner of 15 percent of the company, said it is working on a €5 billion (US$4.61 billion) aid plan for Renault. Volkswagen, meanwhile, announced to journalists it expects an operating loss for 2Q20 but yearly operating profits, according to Frank Witter, CFO of the brand.

Daimler presented a completely different scenario. The German automaker expects a full-year operating profit for its Mercedes-Benz Cars & Vans division. The company is forecasting annual growth despite the COVID-19 crisis. “There is nothing cheering in the auto numbers we have seen so far across the industry but Daimler seems to have had a decent start to Q1 and managed working capital better than we had feared,” Jefferies Analyst Philippe Houchois told Reuters. The company has discarded the need to apply to state-backed loans.

Regarding US automakers, Ford has said that its 2Q20 losses will be about US$5 billion, doubling the US$2 billion loss of 1Q20. However, the company assured it had enough cash to endure 2020 smoothly. The company has already restructured corporate strategies towards autonomous and electric vehicles. The company's market value was reduced by US$14.4 billion from last Friday. The US’ top automaker, General Motors, announced on Monday a suspension in quarterly dividends for the company to save enough money. The company's shares saw a 1.4 percent reduction yesterday. US vehicle production is expected to be resumed in mid-May.

The data used in this article was sourced from:  
Reuters
Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst