|2001 Management Briefing Seminars index|
The ratio shows the difference between a company's book value based on tangible assets such as plants and subsidiaries, and a company's actual market value. It takes into account a company's entire operations, including intangible assets, said Randy Miller, a global automotive partner with Arthur Andersen.
Intangible assets include such things as the strength of a company's compensation structure, supplier turnover rates and how a company leverages e-business.
Nissan, for example, had a book value of $7.6 billion as of March 2001. But the company's market value more than tripled book value, totaling $26.8 billion. Miller said Nissan's customer assets, such as customer satisfaction programs and customer lead management, is fueling the automaker's strong market value.
Other strong performers include fellow-Japanese makers Isuzu Motors, Honda Motor Co. and Toyota Motor Co. Ford Motor Co. and its Japanese subsidiary, Mazda Motor Corp., also scored well. All of those companies had a market to book value ratio of more than two.
Ford, the strongest-faring U.S. automaker in the study, had a book value of $19.3 billion and a market value of $45 billion.
Miller pointed to Ford's heavily publicized e-commerce strategy as reason for its performance. Ford has developed a system to reach customers in every demographic category through a number of Ford-owned and non-Ford Internet portals.
Miller said that the companies performing well are doing a good job of creating value by successfully presenting their brand in the marketplace. He predicts that winners in the future automotive industry will be those companies that focus on building their brands in addition to tangible assets.
"The future," he said, "will be all about brands."
Automakers faring poorly on Andersen's study include GM, DaimlerChrysler and Korean automakers.
GM, according to the survey, had at book value of $30.3 billion compared with a market value of $34.7 billion. The company's book to market value ratio of 1.1 is slightly below DaimlerChrysler's ratio of 1.25. The study placed DaimlerChrysler's book value at $40 billion, and its market value at $50 billion.
All Korean automakers -- Hyundai Motor Co., Kia Motors Corp. and Daewoo Motor Corp. -- had market values below the book value. Those were the only three companies in the survey to have market values estimated to be less than book values.