The coronavirus pandemic has resulted in unprecedented market volatility over the last several weeks and has taken a major toll on the automotive industry. With closure of factories, lower footfall at dealerships and disruptions in global supply chains, the auto industry is in turmoil.Weak consumer sentiment will further dent vehicle sales. As the future financial performances of automakers remain clouded due to uncertainties caused by the virus rampage, more and more companies are withdrawing their guidance.
With all eyes on the next earnings cycle, here are the major automakers that have lately scrapped full-year 2020 guidance and warned that it will be a tough year, as they brace for a bumpy road ahead.
Guidance Withdrawal & Business Updates
General Motors (
GM - Free Report) is the latest one to jump on the bandwagon of auto companies that have scrapped 2020 outlook. On Mar 24, the top U.S. auto giant announced the suspension of its full-year guidance, citing the uncertainty caused by the COVID-19 pandemic. Notably, General Motors has temporarily shut all U.S. factories at least until Mar 30 to contain the spread of coronavirus and will evaluate the situation on a weekly basis even after that. In a bid to boost cash reserve, the firm intends to draw down about $16 billion from its existing credit lines. The Zacks Rank #3 (Hold) firm expects to have $15-$16 billion in cash at the end of March. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. VIDEO
Last week, General Motors’ close rival Ford (
F - Free Report) also withdrew its 2020 guidance and announced plans to draw $15.4 billion from two credit lines to preserve cash, as vehicle sales are fading owing to the coronavirus outbreak. Moreover, the company also suspended quarterly dividend of 15 cents a share until further notice. Yesterday, the firm further pushed back resumption of production. It would not be restarting operations in the United States, Canada and Mexico on Mar 30, as originally planned.
Yesterday, BorgWarner (
BWA - Free Report) warned investors that it expects material impact on its 2020 performance amid the coronavirus-induced uncertainty. The maker of clean and efficient engine solutions expects sales to decline, as many of its customers have suspended operations.As of Mar 20, the firm had liquidity of $2.3 billion, including cash balance of approximately $820 million and an undrawn revolving credit facility of $1.5 billion.
On Mar 23, Superior Industries (
SUP - Free Report) , Oshkosh Corporation ( OSK - Free Report) , and trucking giants Navistar ( NAV - Free Report) and PACCAR ( PCAR - Free Report) provided business updates.
Superior Industries has suspended its 2020 view as the company plans to shutter operations at all its factories. The company has not specified the tenure of suspension of operations. The aluminum wheel manufacturer has fully drawn down its $160-million U.S. revolving credit line and €48 million on its €60-million European revolver.
Oshkosh, a manufacturer and marketer of a variety of specialty vehicles, has scrapped its fiscal 2020 guidance as it anticipates that the impact of the pandemic will weigh on operations and results. While the firm plans to halt Access Equipment production in North American from Mar 30 until Apr 13, operations in its Defense, Fire & Emergency and Commercial segments continue.
Navistar pulled back its 2020 guidance in response to disruptions in the company’s supply chain due to the pandemic-led crisis. The company expects that its future financial performance will be impacted but the extent is unpredictable at this point. Navistar has suspended production at the truck assembly plant in Springfield, OH, for two weeks.
PACCAR has warned that first-quarter and full-year 2020 results will be bear the brunt of lower production schedules due to changes in customer demand and the impact of government regulations or mandates. The company has halted truck and engine production at its factories worldwide, effective Mar 24 till Apr 6. PACCAR’s cash and marketable securities were $4.28 billion at the end of last month. The firm also has access to existing lines of credit of $3 billion.
Last week, Cummins withdrew its 2020 guidance amid lower commercial truck production in North America and plant shutdowns by various OEMs in Europe.The engine maker suspended production at the Indiana plant for two weeks, in response to the decision by its customer Fiat Chrysler to shutdown all U.S. factories at least until Mar 30 to contain the spread of coronavirus.
Automotive seating specialist, Adient also suspended its fiscal 2020 guidance due to global economic uncertainty amid the virus eruption.
BMW warned investors that the firm’s sales and profits will significantly drop in the wake of the pandemic. The firm now expects automotive EBIT margin in the range of 2-4% compared with the prior view of 6-8%.BMW shut dealerships and plants in Europe last week, which will last until mid-April. The company has suspended manufacturing facilities at Oxford and Swindon until Apr 17.
Volkswagen has already warned that 2020 will be a tough year amid dwindling sales and supply chain distortion. Volkswagen — which owns Audi, Bentley, Bugatti, Ducati, Lamborghini, Porsche, Seat and Skoda brands — temporarily closed all European plants in the wake of the health hazard. A couple of days back, CEO Herbert Diess warned that the crisis may force the company to keep factories shut for weeks.
The automotive industry — which has been already grappling with various challenges including new emission standards, rising costs amid technological shift and robust demand for ride-sharing services — is getting further plagued by coronavirus woes.
Year 2020 is certainly going to be tough for automakers, with the COVID-19 outbreak posing serious operational and financial challenges. According to Johns Hopkins University data, the number of confirmed coronavirus cases has crossed 4,00,000 worldwide, claiming more than 18,000 lives. Given significant increase in the number of cases and the associated lockdown measures undertaken by the government, the near-term sales outlook appears quite uncertain. Disruptions in logistics and supply chains are likely to further intensify in the coming weeks.
Now, it just remains to be seen how severely revenues and earnings of the companies will be hit and how long it will take for firms to be able to get back on their feet. Market watchers are especially cautious about the industry’s outlook due to ambiguity associated with the spread and duration of the health hazard.
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