Industry's steady growth lifts auto shares
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Investors in all public sectors of the automotive industry broadly gained value in the first quarter as production and sales move from rebounding recovery to steady growth.
The Automotive News/PwC Shareholder Value Index showed positive group returns for automakers, suppliers and retailers for every measured period: three months, one year and three years.
"We continue to see automakers and suppliers shift from restructuring and recovery to growth," said Jeff Zaleski, PwC transaction services partner.
Despite losing some steam on investor concerns following the March 11 Japan earthquake and tsunami, the first quarter index finished higher for each sector, although only retailers recorded a double-digit gain.
To be sure, not all players posted a positive return. Global suppliers, for instance, were almost evenly split between gainers and losers in the first quarter, but the overall index gained 7 percent.
"There are clear differences in growth prospects and shareholder value by region," Zaleski said.
China and South Korea are driving organic growth in the Asia-Pacific region, he said. The export drive by German manufacturers is the only bright spot among major European makers.
In North America, the U.S. auto sales recovery is strong. But it is driven by increased auto financing and leasing, short-term incentives and pent-up demand and isn't supported by "significant upticks in major U.S. economic pillars" of the general economy, jobs and housing, Zaleski said. "Economic, employment and credit growth are key to increase auto sales in 2011."
Asian, European carmakers lead
Strong shareholder returns from Chinese, Korean and German automakers led in all three periods, but PwC sees a strong rebound in the entire sector.
In the first quarter, Japanese, French and U.S. automaker stocks suffered, but double-digit growth at China's SAIC and South Korea's Hyundai pulled the automaker's index up to a 0.6 percent gain.
Over one year, every stock in the index was positive, with returns of 50 percent or more from five manufacturers: Hyundai, Volkswagen, BMW, Daimler and Fiat.
Over three years, results were more mixed. Most Europeans and Japan's Toyota and Suzuki were down, but huge gains at Hyundai, Ford and SAIC kept the sector in positive territory.
Suppliers stay positive
As a group, auto parts suppliers performed well over all three time periods.
"For the broader parts industry, positive returns likely reflect the continuing global economic recovery resulting in greater production and sales volume outlook," Zaleski said.
Quarterly, one- and three-year results were generally solid for European, North American, Chinese and Korean suppliers, especially Hyundai Mobis and Hankook of South Korea, France's Plastic Omnium, TRW Auto and BorgWarner.
But most Japanese suppliers lost value in the first quarter after the Japan quake. That dragged several of them to negative returns over the one- and three-year periods.
By product line, tire makers were especially strong. Five of the 13 suppliers that outperformed the shareholder value index in the first quarter make tires. Having cut capacity during the recession, the tire industry is seeing strong demand from both automakers and the aftermarket.
Despite that, suppliers outperformed three major market indices in the first quarter: the S&P 500, Dow Jones Industrial Average and FTSE100.
Retailers clean up
Publicly held U.S. auto retailers surpassed automakers and suppliers with double-digit returns in every time period. They also outperformed major market indices for the quarter, one and three years.
With one exception, each retailer added value in each period. Sonic Automotive was down over three years.
Zaleski credited the surge to easier credit availability, a less-crowded marketplace thinned by widespread dealership closings and higher profitability "resulting from the benefits of financial and operational restructuring."
You can reach Jesse Snyder at jsnyder@crain.com.
