In the market for a used car? You are in luck

A Hertz bankruptcy will flood the market with used vehicles

If you are in the market for a used car, you are in luck. That is, if you have a place to drive to!

According to the Detroit Press, used car prices fell 34.4 percent in April alone. The paper offers solace to it’s readers by mentioning that  used car prices could go up soon due to a shortage of new cars caused by plant closures. The paper however, failed to mention the nearly half a million cars currently sitting ideal on Hertz car lots. With practically no one traveling these days, the need for rental cars has evaporated. Hertz (HTZ) and Avis-Budget (CAR) have suffered the most. Hertz has bigger problems than COVID-19 and that is it’s balance sheet.

There are several stories suggesting a Hertz bankruptcy is around the corner.

Hertz is near bankruptcy

According to Bloomberg, Hertz’s situation is a three-way standoff between Holders of Hertz’s asset-backed securities. They could delay pressuring Hertz to sell down its fleet for a short period of time, but they will need Hertz’s banks to promise to make them whole. The banks, in turn, may not want to take on such a risk, which requires them to bet that either the rental car business or used car prices return to some normal operating level.

A 2-year price chart of Hertz (HTZ), Stockwinners

Meanwhile, controlling shareholder Carl Icahn (IEP) holds a 39% equity stake in the rental company. Bloomberg says that he could put in more money to keep Hertz afloat, but this once again is dependent on a belief that the rental car business will recover to some extent in the very near future.

Carl Icahn

In a bankruptcy, Bloomberg notes, equity holders’ claims would be behind those of creditors, which is not an incentive for Icahn to put in more money at the moment.

Used car prices have fallen sharply due to Covid-19

A Hertz bankruptcy could flood the used car market with several hundred thousand cars, whose value is likely to take a substantial hit at a time when used car lots are already quite full and demand is low.

Companies now deliver used cars to your home for test drives

Bloomberg notes that used car prices dropped 11.4% from March to April, while sales were merely a quarter of pre-outbreak levels.

Meanwhile Hertz has started discounting its cars on its used car lots and Hertz Car Sales. In fact, you can pick up a car, and they will deliver it to your house for a test drive. We have seen discounts as high as 25% on some models.  The company carries brands like Ford, Chevrolet, Toyota and Nissan, to some luxury brands like Audi, Jaguar and Mercedes-Benz.

Cars are discounted by Hertz

One more footnote to this story: auto dealerships usually set their used car prices as a function of new car prices. With most of the domestic auto plants closed, price of new cars (2021 model year) will not be known anytime soon.

Companies in the space include: Copart (CPRT), CarMax (KMX), Carvana (CVNA), CarGurus (CARG), Penske (PAG). AutoNation (AN). 

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Tesla shares lower as sales slowdown

Tesla registrations nearly halved in California in Q4

Tesla’s (TSLA) overall vehicle registrations nearly halved in California during the fourth quarter, according to a Dominion Cross-Sell report, which collates data from state motor vehicle records, Reuters reports.

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Tesla shares lower as sales slow down, Stockwinners

The report showed registrations in California plunged 46.5% to 13,584 in the quarter ended December 2019, from 25,402 in the same period a year earlier.

Model 3 registrations, which accounted for about three-fourth of the total, halved to 10,694.

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Car of the Year, Stockwinners

The massive drop comes as tax credit for Tesla buyers ended in 2019. It had fallen to $3,750 at the start of the year and had halved to $1,875 in July.

An existing $7,500 U.S. tax credit for electric vehicles (EVs), which allows taxpayers to deduct a part of the cost of buying an electric car, phases out over 15 months once an automaker hits 200,000 cumulative EV sales, which Tesla hit in July 2018.

Morgan Stanley

Morgan Stanley analyst Adam Jonas downgraded Tesla to Underweight from Equal Weight with a price target of $360, up from $250.

The analyst sees an unfavorable risk/reward at current valuation levels following the stock’s recent rally.

Tesla gets a boost from Bud. See Stockwinners.com
Tesla is expected to rollout is big rig soon, Stockwinners

Further, he believes risks to Tesla’s long-term Chinese business may not be fully appreciated by the market.

Four factors have driven Tesla’s share price up 105% over the last four months, namely stronger than expected global demand for its vehicles, China announcements that show the company’s expansion into the world’s largest electric vehicle market, supportive incentive developments and positive sentiment around its product expansion, Jonas tells investors in a research note.

The analyst, while admitting near-term momentum and sentiment around the stock is very strong, questions the “sustainability of the momentum.” Jonas increased his expectations for Tesla’s core auto business while decreasing his expectations for the mobility business, resulting in the price target raise to $360.

TSLA is down 2.75% to $504.

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Hexcel and Woodward merge to form Woodward Hexcel

Hexcel, Woodward announce merger of equals

Woodward (WWD) and Hexcel (HXL) announced a definitive agreement to combine in an all-stock merger of equals “to create a premier integrated systems provider serving the aerospace and industrial sectors,” the companies said.

Woodward and Hexcel agree to merge, Stockwinners

Under the terms of the agreement approved by the Boards of Directors of both companies, Hexcel shareholders will receive a fixed exchange ratio of 0.625 shares of Woodward common stock for each share of Hexcel common stock, and Woodward shareholders will continue to own the same number of shares of common stock in the combined company as they do immediately prior to the closing.

Hexcel and Woodward to merge, Stockwinners

The exchange ratio is consistent with the 30-day average share prices of both companies.

Upon completion of the merger, existing Woodward shareholders will own approximately 55% and existing Hexcel shareholders will own approximately 45% of the combined company on a fully diluted basis.

In connection with the transaction, Woodward is increasing its quarterly cash dividend to 28c a share.

The merger is expected to be tax free for U.S. federal income tax purposes.

The combined company will be named Woodward Hexcel.

For each company’s respective fiscal year 2019 on a pro forma basis, the combined company is expected to generate net revenues of approximately $5.3B and EBITDA of $1.1B, or a 21% EBITDA margin.

The transaction is subject to the approval of the shareholders of both Woodward and Hexcel, as well as other customary closing conditions, including required regulatory approvals.

The parties expect the merger to close in the third calendar quarter of 2020, subject to satisfaction of these conditions.

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PolyOne buys Claiant’s color business for $1.45B

PolyOne acquires Clariant color and additive masterbatch business for $1.45B

PolyOne (POL) announced that it has entered into an agreement with Switzerland’s Clariant to purchase its global color and additive masterbatch business.

In addition, PolyOne has entered into an agreement with Clariant Chemicals India Ltd. to purchase its color and additive masterbatch business.

The combined net purchase price is $1.45B, representing an 11.1x multiple of last twelve months adjusted EBITDA, or 7.6x including anticipated synergies.

Polyone buys paint business of Clariant, Stockwinners

“This will be a truly transformational acquisition for both PolyOne and Clariant customers and employees around the world. Together, we will benefit from the combined ingenuity, passion and expertise of two global leaders in color design, additive technologies and sustainable solutions,” said Robert M. Patterson, Chairman, President and Chief Executive Officer, PolyOne Corporation.

Clariant’s color and additive masterbatch business, which had sales of $1.15 billion for the last twelve months, includes specialty technologies and solutions for high-growth global end markets, such as consumer, packaging, and healthcare.

Polyone buys Clariant’s color biz for $1.45B, Stockwinners

The Clariant business includes 46 manufacturing operations and technology centers in 29 countries and approximately 3,600 employees, who will join PolyOne’s Color, Additives and Inks segment.

PolyOne Corporation provides specialized polymer materials, services, and solutions in the United States, Canada, Mexico, Europe, South America, and Asia. It operates in four segments: Color, Additives and Inks; Specialty Engineered Materials; Performance Products and Solutions; and Distribution. 

POL is up 0.89 to $36.86.

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Truck sales decline in November

Classes 5-8 truck orders soften in November amid trade and tariff worries

Truck sales downturn could be canary in the coal mine

There are eight classes of commercial motor vehicles in the United States, and they’re divided into three, more general categories: light-duty, medium-duty, and heavy-duty. Commercial motor vehicles or trucks that operate on U.S. highways can be classified based on their gross vehicle weight rating (GVWR).

ACT Research said in an earlier report:

“Preliminary November data show that Classes 5-8 net order volumes were uniformly soft. Combined NA Classes 5-8 intake fell 15% m/m and 38% y/y in November on a nominal basis. Preliminary North America Class 8 net order data show the industry booked 17,500 units in November, down 20% from October, while Classes 5-7 orders fell 8% m/m, to 15,300 units.

Complete industry data for November, including final order numbers, will be published by ACT Research in mid-December.

Various Classes of Vehicles, Stockwinners

ACT’s State of the Industry:

Classes 5-8 report provides a monthly look at the current production, sales, and general state of the on-road heavy and medium duty commercial vehicle markets in North America. It differentiates market indicators by Class 5, Classes 6-7 chassis and Class 8 trucks and tractors, detailing measures such as backlog, build, inventory, new orders, cancellations, net orders, and retail sales.

Additionally, Class 5 and Classes 6-7 are segmented by trucks, buses, RVs, and step van configurations, while Class 8 is segmented by trucks and tractors with and without sleeper cabs.

This report includes a six-month industry build plan, backlog timing analysis, historical data from 1996 to the present in spreadsheet format, and a ready-to-use graph package.

A first-look at preliminary net orders is also published in conjunction with this report.

“Preliminary November data show that Class 8 net orders failed to sustain October’s encouraging start to the order season,” said Tim Denoyer, ACT’s Vice President and Senior Analyst.

He continued, “The freight market downturn worsened in the past month and uncertainty surrounding trade and tariffs continue to weigh on truck buyers’ psyches. With rising pressure on carrier profits from the combined impact of lower rates and the recent, rather sudden jump in insurance premia, recent events have not developed in the industry’s favor.” Denoyer concluded,

“While private fleets continue to add capacity on the retail end, the market is increasingly heeding for-hire price signals and the stage is being set to right-size the fleet, bringing it closer to equilibrium with the work to be done.”

Historically, Dow Jones Transports have sold off prior to the rest of the market. The .djt has turned bearish as is shown above.

Publicly traded companies in the space include ArcBest (ARCB), J.B. Hunt (JBHT), Knight-Swift (KNX), Old Dominion (ODFL), Swift Transportation (SWFT), Werner (WERN), Paccar (PCAR), Navistar (NAV)and Cummins (CMI).

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Aptiv, Hyundai Motor to form autonomous driving joint venture

Aptiv, Hyundai Motor to form autonomous driving JV

Aptiv (APTV) and Hyundai Motor Group (HYMTF) announced that they will be forming an autonomous driving joint venture.

This partnership brings together one of the industry’s most innovative vehicle technology providers and one of the world’s largest vehicle manufacturers.

Aptiva scores a victory by forming JV with Hyundai, Stockwinners

The joint venture will advance the design, development and commercialization of SAE Level 4 and 5 autonomous technologies, furthering the partners’ leadership position in the global autonomous driving ecosystem.

The joint venture will begin testing fully driverless systems in 2020 and have a production-ready autonomous driving platform available for robotaxi providers, fleet operators, and automotive manufacturers in 2022.

As part of the agreement, Hyundai Motor Group and Aptiv will each have a 50 percent ownership stake in the joint venture, valued at a total of $4B.

Hyundai forms autonomous driving joint venture, Stockwinners

Aptiv will contribute its autonomous driving technology, intellectual property, and approximately 700 employees focused on the development of scalable autonomous driving solutions.

Hyundai Motor Group affiliates – Hyundai Motor, Kia Motors and Hyundai Mobis – will collectively contribute $1.6B in cash at closing and $0.4B in vehicle engineering services, R&D resources, and access to intellectual property.

The partnership reinforces the companies’ shared vision of making mobility more safe, green, connected, and accessible by advancing the development and commercialization of the highest-performing and safest autonomous vehicles.

Shares of Aptiva are up 1.6% to $88.50.

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Tesla crashes after latest report

Model Y to become available in the U.S. in Fall 2020

Model 3 to become available in China in Fall 2020

Tesla (TSLA) shares are sharply lower in Thursday’s trading after the electric car maker posted a loss that surprised investors.

Tesla (TSLA) reported a 2nd Quarter June 2019 loss of $1.12 per share on revenue of $6.3 billion. The consensus estimate was a loss of $0.52 per share on revenue of $6.4 billion. Revenue grew 58.7% on a year-over-year basis.

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Tesla shares tumble following its results, Stockwinners

The company said in it continues to expect positive GAAP earnings in the third quarter. The current consensus estimate is earnings of $0.27 per share for the quarter ending September 30, 2019. Tesla reported 95,356 vehicle deliveries in Q2 and production of 87,048 vehicles in Q2.

Tesla CEO says Model Y production ramp will be ‘significantly faster’ – Musk cites parts compatibility of the company’s existing models. 

Tesla CEO Elon Musk wrote in the company’s Q2 update letter, “This quarter, we are simplifying our approach to guidance. We are most focused on expanding our manufacturing footprint in new regions, launching new products and continuing to improve the customer experience, while generating and using cash sustainably. Local production and improved utilization of existing factories is essential to be cost competitive in each region.

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 to become available in China, Stockwinners

We remain on track to launch local production of the Model 3 in China by the end of the year and Model Y in Fremont by fall of 2020. We are also accelerating our European Gigafactory efforts and are hoping to finalize a location choice in the coming quarters. We are working to increase our deliveries sequentially and annually, with some expected fluctuations from seasonality. This is consistent with our previous guidance of 360,000 to 400,000 vehicle deliveries this year. Additionally, we expect positive quarterly free cash flow, with possible temporary exceptions, particularly around the launch and ramp of new products. We believe our business has grown to the point of being self-funding. We continue to aim for positive GAAP net income in Q3 and the following quarters, although continuous volume growth, capacity expansion and cash generation will remain the main focus. Our 2019 capex is expected to be about $1.5B-$2.0B, a reduction from prior guidance. We continue to find opportunities to improve capital efficiency and shift cash outflows to future periods. This estimate includes the development of our main projects, on the timelines referenced, and to expand our Supercharger and service networks.”

TSLA shares are down $36.90 to $228.50

Model Y to become available Fall 2020, Stockwinners

ANALYSTS’ COMMENTS

Barclays

Neither revenues nor earnings were “anywhere near a record” in Tesla’s Q2 results, which “calls into question the growth story,” Barclays analyst Brian Johnson tells investors in a research note. The analyst believes Tesla’s loss in Q2 “should mark the top of the current ‘swing trade.'”

The results should temper bullish expectations for profit leverage, says Johnson, who reiterates an Underweight rating on the shares with a $150 price target.

Canaccord

Canaccord analyst Jed Dorsheimer lowered his price target on Tesla to $350 from $394 following Q2 results that were roughly inline with his expectations.

The analyst said its free cash flow suggests the company has a bit more time to grow into its profitability expectations. Dorsheimer maintained his Buy rating on Tesla shares.

Credit Suisse

Credit Suisse analyst Dan Levy notes that Tesla posted a Q2 EPS miss. Broadly, while Tesla has maintained its narrative, the analyst expects the stock to be under pressure near-term, as expectations had risen post the Q2 deliveries release earlier this month. Levy reiterates an Underperform rating and $189 price target on the shares as the Q2 results reminded him of the challenges ahead for Tesla in gross margin, especially as it relates to Models S/X. While Tesla has maintained its delivery guidance, he believes the company will be challenged to meet it given challenges to S/X volumes and the phase-out of the U.S. EV tax credit.

Model S interior, Stockwinners

Jefferies

Tesla last night reported a “challenging set of numbers,” although its pre-restructuring loss was in line with consensus estimates and its free cash flow better with a $600M operating inflow, Jefferies analyst Philippe Houchois tells investors in a research note titled “Q2 Challenging but Still Encouraging.”

Tesla’s vehicle gross margin improved but remains low for sustainable profitability at this stage, adds the analyst. Further, he believes e. JB Straubel moving to an advisory position adds to fears of “executive fatigue.” Houchois keeps a Buy rating on Tesla with a $300 price target.

JMP Securities

JMP Securities analyst Joseph Osha lowered his price target on Tesla to $337 after its Q2 results, saying the company’s revenue was “solid” but gross margins disappointed even in the absence of reduced regulatory credits.

The analyst adds that the output of 87K cars was below capacity, which is a positive because of “low utilization” of its Model S and X, but notes that the “fixed-cost asset under-absorption” suggests the company is struggling with reducing Model 3 costs as expected.

Morgan Stanley

Following Tesla’s analyst call, Morgan Stanley analyst Adam Jonas shares his key thoughts, including his view that JB Straubel giving up the Chief Technical Officer role “may be the biggest news of the quarter.” It is unclear what motivated the 15-year veteran of the company to give up direct operational responsibility, but, “unfortunately, nobody asked this on the call,” Jonas said.

Elon Musk said that Q4 will be “very strong, but said the first and second quarters of 2020 will be “tough,” noted Jonas, who thinks investors should be ready for more quarter-to-quarter sales volatility heading into 2020. He keeps an Equal Weight rating and $230 price target on Tesla shares.

Model X sales slow down, Stockwinners

Needham

Needham analyst Rajvindra Gill kept his Underperform rating on Tesla after its “significant” loss reported in Q2 along with a “slight” increase in its margins hurt by average selling price reductions across all of its vehicle models. The analyst notes that while the company affirmed its FY19 delivery target and forecast profitability in Q4, he is cautious on that outlook as it would require a “significant snapback” in the second half of the year. Gill sees Tesla remaining challenged by “structurally low margins” and growing competition.

Nomura Instinet

Nomura Instinet analyst Christopher Eberle lowered his price target for Tesla to $270 from $300 following last night’s “mixed” Q2 results. Deliveries exceeded initial expectations meaningfully, but profitability metrics “underwhelmed,” Eberle tells investors in a post-earnings research titled “Spinning Its Wheels.”

The analyst doubts the quarter “will inspire enough confidence to get the stock working.” As such, he keeps a Neutral rating on Tesla.

Oppenheimer

Oppenheimer analyst Colin Rusch lowered his price target for Tesla to $356 from $437, noting that while automotive revenue and full company free cash flow beat expectations, full company revenue, gross margin and EPS results were below, driven partially by Model S/X ASP declines.

The analyst believes this dynamic will fuel bearish investors focused on limited demand for Tesla products, but believes bulls will focus on strong volumes, stable Model 3 ASP and better than expected cash flow as the company appears to be getting increasingly efficient with its spending. Rusch has an Outperform rating on the shares.

Piper Jaffray

Piper Jaffray analyst Alexander Potter reiterates an Overweight rating on Tesla following last night’s Q2 results while lowering his price target for the shares to $386 from $396.

Forward looking metrics related to revenue, such as orders and deliveries, are “all trending in the right direction – and that’s probably the most important thing,”

Potter tells investors in a research note. The post-market selloff was driven initially by mix-related concerns, and the resulting pressure on gross margin, but then Tesla’s Chief Technology Officer subsequently resigned on the earnings call, and the selling pressure intensified, explains Potter. He believes today’s pullback provides an entry point into Tesla shares.

Roth Capital

Roth Capital analyst Craig Irwin lowered his price target for Tesla to $224 form $238 after the company posted weak Q2 EPS, with automotive margins marking the lowest levels since Q1 of 2018. The analyst reiterates a Neutral rating on the shares.

Wedbush

Wedbush analyst Daniel Ives lowered his price target for Tesla to $220 from $230 to reflect a softer margin profile and pushed out profitability looking ahead. The analyst notes that the company delivered some bad news that will weigh on shares on Thursday as the company significantly missed the Street on the bottom line with “disappointing” gross margins that fundamentally call into question its ability to show sustainable profitability on the heels of lower margin Model 3 units going forward. Ives reiterates a Neutral rating on the shares.

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Milacron sold for $2 billion

Hillenbrand to acquire Milacron in cash, stock deal valued around $2B

Milacron sold for $2 billion, Stockwinners

Hillenbrand (HI) and Milacron (MCRN) announced that they have entered into a definitive agreement under which Hillenbrand will acquire Milacron in a cash and stock transaction valued at approximately $2B, including net debt of approximately $686M as of March 31.

Under the terms of the agreement, which has been unanimously approved by the boards of both companies, Milacron stockholders will receive $11.80 in cash and a fixed exchange ratio of 0.1612 shares of Hillenbrand common stock for each share of Milacron common stock they own.

Based on Hillenbrand’s closing stock price on July 11, the last trading day prior to the announcement, the implied cash and stock consideration to be received by Milacron stockholders is $18.07 per share, representing a premium of approximately 34% to Milacron’s closing stock price on July 11, and a premium of approximately 38% to Milacron’s 30-day volume-weighted average price as of the close on July 11.

Hillenbrand pays $2 billion to buy one of its suppliers, Stockwinners

Upon closing, Hillenbrand shareholders will own approximately 84% of the combined company, and Milacron stockholders will own approximately 16%.

Milacron will benefit from the Hillenbrand Operating Model, or HOM, and Hillenbrand expects to leverage Milacron’s global shared services center to drive operational efficiency.

The transaction is expected to generate annualized, run-rate cost synergies of approximately $50M within three years following close, primarily through reducing public company costs, realizing operating efficiencies, and capturing direct and indirect spend opportunities.

The transaction is also expected to generate revenue synergies, driven by opportunities to cross-sell extruder and material handling equipment, and to leverage the combined service footprint to further penetrate the product aftermarket.

These efficiencies will be driven across the combined organization through utilizing the HOM, while maintaining a commitment to serving customers with excellence and innovation.

The transaction, which is expected to close in Q1 of 2020, is subject to customary closing conditions and regulatory approvals, including the approval of stockholders of Milacron.

About the Companies

Hillenbrand, Inc. operates as a diversified industrial company in the United States and internationally. The company operates in two segments, Process Equipment Group and Batesville. The Process Equipment Group segment designs, engineers, manufactures, markets, and services process and material handling equipment and systems for various industries, including plastics, food and pharmaceuticals, chemicals, fertilizers, minerals and mining, energy, wastewater treatment, forest products, and other general industrials.

Milacron Holdings Corp. manufactures, distributes, and services engineered and customized systems within the plastic technology and processing industry in the United States and internationally. 

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Ford launches new business model in Europe

Ford to cut 12,000 jobs in Europe by end of 2020

Ford to realign its European operations, Stockwinners

Ford (F) said in a statement that it is launching a new business model and fresh vehicle line-up as part of the most comprehensive redesign in the history of its business in Europe.

The company also is on track to significantly improve its financial results in Europe this year, paving the way to sustainable profitability and its longer-term goal of delivering a 6% EBIT margin.

The new European operating model and resulting organization are effective July 1.

Three new business groups – Commercial Vehicles, Passenger Vehicles and Imports – are being established to facilitate fast decision-making centered on customer needs, Ford said.

Ford Kuga will now be manufactured in China instead of Europe, Stockwinners

Ford is freshening and expanding its vehicle line-up in Europe, introducing at least three new nameplates in the next five years as it continues to grow its utility vehicle portfolio, including the all-new Mustang-inspired fully electric performance utility.

The new nameplates are in addition to all-new Kuga, Puma and Explorer Plug-In Hybrid coming by early 2020.

Manufacturing efficiency is being improved through the previously announced proposed or confirmed closure or sale of six assembly and component manufacturing plants by the end of next year: Proposed closure of Bridgend Engine Plant in South Wales; Closure of Ford Aquitaine Industries Transmission Plant in France; Closure of Naberezhnye Chelny Assembly, St. Petersburg Assembly and Elabuga Engine Plant in Russia; Sale of the Kechnec Transmission Plant in Slovakia to Magna.

This Ford Mustang designed for the European market, Stockwinners

As a result, Ford’s manufacturing footprint in Europe will be reduced to a proposed 18 facilities by the end of 2020, from 24 at the beginning of 2019.

In the U.K., the Ford of Britain and Ford Credit Europe headquarters in Warley also will close later this year and operations consolidated in Dunton.

In addition, Ford is implementing shift reductions at its assembly plants in Saarlouis, Germany, and Valencia, Spain, as well as a more streamlined management structure and marketing and sales operations.

In total, approximately 12,000 jobs will be impacted at Ford’s wholly owned facilities and consolidated joint ventures in Europe by the end of 2020, primarily through voluntary separation programs.

Around 2,000 of those are salaried positions, which are included among the 7,000 salaried positions Ford is reducing globally.

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Fiat Chrysler propose to merge with Renault

Fiat Chrysler proposes to 50/50 merger agreement with Renault

Chinese automakers weigh bids for FCA. See Stockwinners.com Market Radar for details
Fiat Chrysler propose to merge with Renault, Stockwinners

Fiat Chrysler Automobiles N.V. (FCAU) announced that it has delivered a non-binding letter to the board of Renault (RNLSY) proposing a combination of their respective businesses as a 50/50 merger.

The FCA proposal follows initial operational discussions between the two companies to identify products and geographies where they could collaborate.

Fiat Chrysler propose to merge with Renault, Stockwinners

Fiat said, “These discussions made clear that broader collaboration through a combination would substantially improve capital efficiency and the speed of product development. The case for combination is also strengthened by the need to take bold decisions to capture at scale the opportunities created by the transformation of the auto industry in areas like connectivity, electrification and autonomous driving…The combined business would sell approximately 8.7 million vehicles annually, would be a world leader in EV technologies, premium brands, SUVs, pickup trucks and light commercial vehicles and would have a broader and more balanced global presence than either company on a standalone basis.”

Under the terms of the proposal, shareholders in each company would receive an equivalent equity stake in the combined company.

The combination would be carried out as a merger transaction under a Dutch parent company.

The board of the combined entity would initially be composed of 11 members, with the majority being independent and with equal representation of four members each for both FCA and Groupe Renault, as well as one nominee from Nissan.

Further, there would be no carryover of existing double voting rights.

However, all shareholders would have the opportunity to earn loyalty voting rights from the completion of the transaction under a loyalty voting program.

The parent company would be listed on the Borsa Italiana, Euronext and the New York Stock Exchange. Before the transaction is closed, to mitigate the disparity in equity market values, Fiat said its shareholders would also receive a dividend of EUR $2.5B.

In addition, prior to closing, there would be a distribution of Comau’s shares to Fiat’s shareholders or an incremental EUR $250M dividend if the Comau spin-off does not occur.

The combination is expected to deliver in excess of EUR $5B of annual run rate synergies, incremental to existing Alliance synergies.

Renault’s Response

Renault announced that its board met today to examine the proposal received from Fiat Chrysler Automobiles (FCAU) regarding a potential 50/50 merger between Renault S.A. and Fiat.

Renault said, “After careful review of the terms of FCA’s friendly proposal, the Board of Directors decided to study with interest the opportunity of such a business combination, comforting Groupe Renault’s manufacturing footprint and creating additional value for the Alliance.

A further communication will be issued in due course to inform the market of the results of these discussions, in accordance with applicable laws and regulations.”

FCAU closed at $12.85. RNLSY closed at $11.18.

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International Speedway sold for $2 billion

NASCAR to acquire International Speedway for $45.00 per share

NASCAR to acquire International Speedway for $45.00 per share, Stockwinners

International Speedway (ISCA) has entered into an agreement and plan of merger with NASCAR pursuant to which NASCAR will acquire ISC.

The transaction is valued at approximately $2B. The consideration to be paid to ISC’s shareholders will be $45.00 in cash for each share of ISC Class A common stock and ISC Class B common stock.

The merger agreement was unanimously recommended and approved by a special committee comprised solely of independent directors of the board of ISC and was unanimously approved by the full board.

NASCAR to acquire International Speedway for $2B, Stockwinners

In addition, the participating shareholders have signed a letter agreement to cause their respective shares of ISC Class A common stock and ISC Class B common stock to be transferred to NASCAR prior to the effective time of the merger.

Under the terms of the merger agreement, ISC shareholders will be entitled to receive $45.00 in cash, without interest, for each share of ISC Class A common stock and ISC Class B common stock held immediately prior to the effective time of the merger.

The transaction, which is expected to close in calendar year 2019, is conditioned on the approval of a majority of the aggregate voting power represented by the shares of ISC Class A common stock and ISC Class B common stock not owned by the controlling shareholders of ISC, voting together as a single class.

The transaction is also conditioned on other customary closing conditions.

In connection with the transaction negotiations, counsel for the plaintiff in The Firemen’s Retirement System of St. Louis v. James C. France, the previously-disclosed class action lawsuit on behalf of ISC shareholders challenging the transaction, met with representatives of the special committee and has determined to not challenge the fairness of the transaction price.

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Tesla higher after raising money

Tesla offers $650M of shares, $1.35B of notes to ‘strengthen’ balance sheet

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla higher after raising money, Stockwinners

Tesla (TSLA) confirmed in a press release that it disclosed this morning offerings of $650M of common stock and $1.35B aggregate principal amount of convertible senior notes due in 2024 in concurrent underwritten registered public offerings.

In addition, Tesla has granted the underwriters a 30-day option to purchase up to an additional 15% of each offering.

Elon Musk, Tesla’s CEO, will participate by purchasing $10M of common stock.

The aggregate gross proceeds of the offerings, assuming full exercise by the underwriters of their option to purchase additional securities, would be approximately $2.3B before discounts and expenses.

Concurrently with this offering of common stock and pursuant to a separate prospectus supplement, Tesla is offering convertible senior notes due 2024 to the public in an aggregate principal amount of $1.35B, or $1.55B if the underwriters for the concurrent convertible notes offering exercise in full their option to purchase additional notes.

Tesla intends to use the net proceeds from the offerings to “further strengthen its balance sheet, as well as for general corporate purposes.”

The notes in the offering will be convertible into cash and/or shares of Tesla’s common stock at Tesla’s election. The interest rate, conversion price and other terms of the notes are to be determined.

Goldman Sachs and Citigroup are acting as lead joint book-running managers for the offering, with BofA Merrill Lynch, Deutsche Bank Securities, Morgan Stanley and Credit Suisse acting as additional book-running managers, and Societe Generale and Wells Fargo Securities acting as co-managers.

Wolfe Research

#Wolfe Research analyst Daniel Galves downgraded Tesla to Peer Perform from Outperform and cut his price target for the shares to $265 from $375. Tesla’s product is “truly differentiated” with a multi-year sustainable advantage in long-range electric powertrains and highly-assisted driving, Galves told investors in a research note. However, the analyst says it is now clear that “broad consumer awareness doesn’t happen overnight.”

In the interim, he believes shares of Tesla will be driven by investor confidence in the company’s medium-term demand and earnings power. And #Galves no longer has confidence in substantial free cash flow at Tesla until its Model 3 volumes rise to 7,000 per week. As such, the analyst moves to the sidelines saying he can no longer recommend the shares.

Shares of Tesla are up 4%, or $9.09, to $243.55 in Thursday’s trading following the news.

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Lord Corporation sold for $3.7 billion

Parker-Hannifin to acquire LORD Corporation for $3.7B in cash

Parker Hannifin to buy Lord Corp., Stockwinners

Parker Hannifin (PH) announced that it has entered into a definitive agreement to acquire LORD Corporation for approximately $3.675B in cash.

The transaction has been approved by the Board of Directors of each company and is subject to customary closing conditions, including receipt of applicable regulatory approvals.

LORD, headquartered in Cary, North Carolina, is a privately-held company founded in 1924 offering a broad array of advanced adhesives, coatings and specialty materials as well as vibration and motion control technologies.

Lord Corp. sold for $3.7 billion in cash, Stockwinners

LORD’s products are used in the aerospace, automotive and industrial markets. LORD has annual sales of approximately $1.1B and employs 3,100 team members across 17 manufacturing and 15 research and development facilities globally.

“This strategic transaction will reinforce our stated objective to invest in attractive margin, growth businesses, such as engineered materials, that accelerate us towards top-quartile financial performance,” said Tom Williams, Chairman and CEO of Parker.

“LORD will significantly expand our materials science capabilities with complementary products, better positioning us to serve customers in growth industries and capitalize on emerging trends such as electrification and lightweighting.

Upon closing of the transaction, LORD will be combined with Parker’s Engineered Materials Group.

Parker plans to finance the transaction using new debt.

Following the completion of the transaction, Parker expects to maintain a high investment grade credit profile.

The transaction is not expected to impact Parker’s dividend payout target averaging approximately 30-35% of net income over a five-year period, while maintaining its record of annual dividend increases.

The transaction is expected to be completed within the next four to six months and is subject to customary closing conditions, including receipt of applicable regulatory approvals.

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ExxonMobil to increase its Permian Basin output

Exxon Mobil to increase Permian output to 1M barrels per day by 2024

ExxonMobil to increase its Permian Basin output, Stockwinners

ExxonMobil (XOM) said it has revised its Permian Basin growth plans to produce more than 1 million oil-equivalent barrels per day by as early as 2024 – an increase of nearly 80 percent and a significant acceleration of value.

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ExxonMobil expects to make 10% return on its Permian Basin fields at $35 per barrel oil, Stockwinners

The size of the company’s resource base in the Permian is approximately 10 billion oil-equivalent barrels and is likely to grow further as analysis and development activities continue.

ExxonMobil’s investments in the Permian Basin are expected to produce double-digit returns, even at low oil prices.

At a $35 per barrel oil price, for example, Permian production will have an average return of more than 10 percent.

The anticipated increase in production will be supported by further evaluation of ExxonMobil’s Delaware Basin’s increased resource size, infrastructure development plans, and secured capacity to transport oil and gas to ExxonMobil’s Gulf Coast refineries and petrochemical operations through the Wink-to-Webster, Permian Highway and Double E pipelines.

Among the company’s key advantages in the Permian, is its acreage position.

The company has large, contiguous acreage that enables multi-well pads in large development corridors connecting to efficient gathering systems, reducing development costs and accelerating production growth.

ExxonMobil’s scale, financial capacity and technical capabilities enable the company to maximize the value of the resource. ExxonMobil is actively building infrastructure to support volume growth.

Plans include construction at 30 sites to enhance oil and gas processing, water handling and ensure takeaway capacity from the basin. Construction activities include central delivery facilities designed to handle up to 600,000 barrels of oil and 1 billion cubic feet of gas per day and enhanced water-handling capacity through 350 miles of already-constructed pipeline.

The investment plans will also bring great benefits to the local area. ExxonMobil’s expansion in the region will benefit communities in West Texas and southeast New Mexico through billions in property tax revenue, economic development and the creation of high-paying jobs.

ExxonMobil remains one of the most active operators in the Permian Basin and has 48 drilling rigs currently in operation and plans to increase its rig count to approximately 55 by the end of the year.

Increased use of technology, including enhanced subsurface characterization, subsurface modeling and advanced data analytics to support optimization and automation, will help the company reduce costs, improve its development plan and increase resource recovery.

Crude oil is up 5 cents to $56.64 per barrel. XOM last traded at $80.22.

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Fiat Chrysler to invest $4.5B in Michigan

Fiat Chrysler to invest $4.5B in five existing Michigan plants

FCA (FCAU) would invest $1.6 billion to convert the two plants that comprise the Mack Avenue Engine Complex into the future assembly site for the next-generation Jeep Grand Cherokee, as well as an all-new three-row full-size Jeep SUV and plug-in hybrid (PHEV) models, adding 3,850 new jobs to support production.

The Company intends to start construction of the new Detroit facility by the end of Q2 2019 with the first three-row vehicles expected to roll off the line by the end of 2020, followed by the all-new Grand Cherokee in the first half of 2021.

Also as part of this announcement, the Jefferson North Assembly Plant would receive an investment of $900 million to retool and modernize the facility to build the Dodge Durango and next-generation Jeep Grand Cherokee.

FCA expects to create 1,100 new jobs at Jefferson North. The reborn Mack facility would be the first new assembly plant to be built in the city of Detroit in nearly three decades.

In 1991, Jefferson North was the last new assembly plant built in the city.

When complete, Mack would join Jefferson North as the only automotive assembly plants to be located completely within the city limits of Detroit. The Pentastar engines – the 3.6-, 3.2- and 3.0-liter – currently built at Mack would be relocated to the Dundee Engine Plant as part of a $119 million investment. Pentastar production at Mack I would end by Q3 2019.

Mack II has been idle since it ceased production of the 3.7-liter V-6 in September 2012.FCA also confirms the investment at Warren Truck to retool for production of the all-new Jeep Wagoneer and Grand Wagoneer, announced in 2017, along with their electrified counterparts, would increase to $1.5 billion.

The Pentastar Engines currently built at Mack would be relocated to the Dundee Engine Plant, Stockwinners

Production is expected to launch in early 2021. In addition to the new Jeep models, the plant would continue building the Ram 1500 Classic, which is being extended to meet market demand. It is expected that 1,400 new jobs would be added.

As a result of this investment announcement, production of the all-new Ram Heavy Duty will continue at its current location in Saltillo, Mexico.

To support the additional production, the Company’s Warren Stamping (Warren, Michigan) and Sterling Stamping (Sterling Heights, Michigan) plants would receive investments of $245 million and $160 million, respectively, with Sterling Stamping expected to add more than 80 new jobs.


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