Ford sees U.S. vehicle sales falling below 13 million forecast

DETROIT (Bloomberg) -- U.S. vehicle sales this year may not reach the 13 million unit mark that was the low end of Ford Motor Co.'s range of estimates, CFO Lewis Booth said.

Ford had forecast industrywide 2011 sales of 13 million to 13.5 million vehicles, including medium- and heavy-duty trucks, in its home market.

According to the average estimate of 18 analysts surveyed by Bloomberg in August, deliveries of cars and light trucks will rise to 12.7 million. In April, the analysts' average estimate was for 2011 sales of 13 million light vehicles.

"We see signs of pent-up demand," Booth said today, speaking at a UBS conference in London. "What it's going to take for that pent-up demand to emerge is some confidence in what the future will look like." Ford anticipated a modest U.S. recovery, "but we didn't expect it to be quite as slow as it's been."

Concerns about the economy and financial markets are further delaying purchases put off during the recession and early recovery, Jeff Schuster, executive director of global forecasting at J.D. Power & Associates, said earlier this year. He is among the 12 analysts surveyed by Bloomberg who have cut their full-year auto-sales estimates since the first quarter.

U.S. light-vehicle sales rose 11 percent in 2010 to 11.6 million from the previous year's 10.4 million, which was the lowest total since 1982. They averaged 16.8 million annually from 2000 to 2007.

Through August of this year, light-vehicle demand is up another 11 percent, to 8.47 million.

Checking costs

Ford will return to an investment-grade credit rating "sooner rather than later," and the automaker won't resume paying a dividend until after that, Booth said. Standard and Poor's rates Ford's debt at BB-, three levels below investment grade, with a positive outlook. The automaker's debt fell into junk status in 2005.

Structural costs related to new-model introductions may rise less than the $2 billion originally forecast, he said.

"If the industry takes a turn down, we will react to it," Booth said. "We no longer sit around and wait for the problem to go away. If we see a significant downturn, we'll cut back on structural costs."

CEO Alan Mulally raised prices this year to offset some of the higher costs the company expected, including manufacturing spending. The automaker is seeking to lower its labor costs in contract negotiations with the UAW. The current accord covering Ford's 41,000 U.S. hourly workers expires Sept. 14.

UAW talks

Booth said the UAW has not followed its tradition of selecting a lead company by Labor Day to set the pattern on wages and benefits for contracts for all three U.S. automakers. Talks may go past the deadline, if needed, Booth said today.

"It's not clear how it's going to work out," Booth said. If no deal is reached by the deadline, "we expect to continue working and continue those discussions."

Ford earned $9.28 billion in the past two years after $30.1 billion in losses from 2006 through 2008. The company borrowed $23.4 billion in late 2006, putting up all major assets including its blue oval logo as collateral. That helped Ford avoid the bankruptcies and bailouts that befell the predecessors of General Motors Co. and Chrysler Group LLC.

Potential Saab savior gets good signs from Beijing Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20110910/COPY01/309109974/1131#ixzz1Xf1ZQtLs

STOCKHOLM -- Chinese carmaker Zhejiang Youngman Lotus Automobile said it was getting positive signs from authorities in Beijing about its plans to invest in cash-strapped Saab, a Swedish daily paper reported on Saturday.

Youngman and Chinese car company Pangda Automobile Trade Co Ltd are seeking approval from China's authorities to invest 245 million euros in Saab, owned by Dutch-based Swedish Automobile, formerly Spyker Cars.

Youngman Director Rachel Pang told Svenska Dagbladet the company received a green light on its planned investment from local authorities and that a decision on the provincial level would be made on Wednesday.

A final approval is then needed from the National Development and Reform Commission in Beijing.

"We have ongoing contact with NDRC in Beijing. We are getting positive signals. I have a good feeling about this," Pang was quoted as saying.

But time is ticking and a Saab union said on Friday it would next week push for the carmaker to be declared bankrupt so that a state scheme that guarantees salaries are paid kicks in.

Saab has not paid August wages and whose bills from suppliers have been piling up. The carmaker was pushed closer to collapse this week after a Swedish court rejected its application for protection from creditors.

The company said it would make a fresh application for court protection from creditors on Monday.

Porsche loses investment appeal as VW merger skids

BERLIN -- Volkswagen AG looks set to abandon a merger with Porsche Automobile Holding SE in favor of taking direct control of the Porsche sports car business, robbing investors in the troubled financial holding of their only reason to own the stock.

At stake is ownership of Porsche SE's crown jewel -- majority control of the iconic Porsche sports car marque which analysts estimate cranks out 1 billion euros ($1.37 billion) in cash every year and industry-leading margins of about 20 percent.

Until Thursday, Volkswagen was set to seal a merger with the Porsche SE holding at potentially unfavorable terms this year in exchange for receiving the keys to the operating business and a bonus 700 million euros in additional annual synergies.

VW tore up that deal on Thursday, citing unquantifiable legal risks, including a criminal probe into the holding's former management team.

Now minority investors in Porsche SE may be stuck owning non-voting shares in a holding that has no access to underlying cashflows apart from annual dividends, when they had been counting on swapping their discounted stock for shares in Volkswagen.

"The merger has not been delayed, it's been called off. Volkswagen will exercise its option to buy the remainder of the sports car business at a strike price of 3.9 billion euros before the end of 2014 and Porsche will remain a pure financial holding," one Frankfurt-based analyst argued, declining to be named for compliance issues.

"We see no reason why VW should continue to pursue a merger with Porsche SE," wrote UniCredit analyst Christian Aust.

Suzuki spat

The setback to Porsche and VW comes only weeks after a very public spat with Suzuki Motor, which threatened to end a partnership Volkswagen badly needs to tap into fast growing Asian markets like India and the southeast Pacific rim and drive its ambition to be the world's number one carmaker by the end of the decade.

Lawsuits by investors, unresolved windfall tax liabilities and a criminal investigation in Germany into breach of trust and market manipulation continue to haunt Porsche SE, which nearly went bankrupt in 2009 trying to take over Volkswagen using an opaque web of derivative instruments.

Adding to Porsche's problems on Friday was a report in news magazine WirtschaftsWoche that the Munich law firm CLLB filed a 1.1 billion euro damages lawsuit in a German regional court.

The law firm could not be reached for comment.

Porsche shares sank 13 percent on Friday, reflecting among other things the lower valuations assigned to comparable holding vehicles like Exor, the Agnelli family holding company which is the biggest shareholder in carmaker Fiat.

Contingency plan

It seems likely VW will now revert to what had been its plan B - an outright 3.9 billion euro cash purchase of the remaining 51 percent of the sports car maker using call options that are rapidly gaining in value.

Analysts said VW's hints about a new, third way was likely just a tactic designed to buy time and prevent an even bigger sell-off in Porsche shares, hurting a key mutual investor of both carmakers, the Gulf state Qatar.

As part of a 2009 deal to recapitalize the highly indebted Porsche SE, Qatar agreed to buy a 10 percent voting stake from the Porsche and Piech clans which it expected to swap for more VW ordinary shares via the merger.

"Had VW said outright that the call option plan was the only remaining alternative, then the equity story behind Porsche SE would be completely dead and the share would fall not by a good 10 percent but by 25 percent," the Frankfurt analyst said.

"The logical consequence of the merger being called off would be for Qatar to sell its 10 percent Porsche SE voting stake back to the Porsche and Piech families, and Martin Winterkorn and Hans Dieter Poetsch resigning as CEO and CFO of Porsche to focus solely on their duties at Volkswagen," the analyst added.

The two executives at Europe's largest carmaker often warned how careful they had to be with their investors' money in view of the lopsided deal, particularly considering that VW chairman, Ferdinand Piech, is a major shareholder of Porsche.

Merging VW and its 19 billion-plus euros in net cash with a much smaller Porsche weighed down by 1.5 billion euros in net debt is a tough deal to sell to VW's preferred shareholders, who must approve the deal by an 80 percent majority.