SHAREHOLDER VALUE REPORT

Automotive investor returns were flat in the 1st quarter

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Global recalls, harsh U.S. weather and overseas political unrest combined to curb automotive investor returns in the first quarter. Publicly owned global automakers and U.S.-based retail groups were narrowly down and global suppliers rose just 1.9 percent in the latest Automotive News/PwC Shareholder Value Index.

"First-quarter shareholder returns were impacted by political uncertainty in South America and Eastern Europe and a record number of recall announcements," said Jeff Zaleski, PwC automotive partner.

Despite the rocky start to the year, the index showed double-digit returns for all three segments over the previous 12 months. And three-year returns for all groups were at even loftier levels.

Consumer and industry confidence remains high, and Zaleski is upbeat about worldwide automotive sales and production for the rest of 2014. PwC forecasting arm Autofacts expects global light-vehicle production to reach almost 87 million in 2014, up 4.8 percent from last year.

However, market conditions vary considerably by region and may affect short-term prospects for suppliers and automakers depending on where they are based.

In South America, for example, Argentina and Venezuela are undergoing political, social and economic unrest, leaving trading partner Brazil exposed as well.

The Russia-Ukraine crisis threatens to weaken a fledgling auto sales recovery elsewhere in Europe. First-quarter auto registrations jumped 8 percent in the European Union and the European Free Trade Association countries, a sign that a six-year slump could be broken this year.

North American auto markets grew in the first quarter despite extremely bad January and February weather. The U.S. market is headed toward a fifth straight year of growth.

Japan's domestic auto market got a bump in the first quarter from consumers rushing to buy before the sales tax on new vehicles increased to 8 percent from 5 percent on April 1. Autofacts expects a payback the rest of the year. Longer-term, Autofacts forecasts Japanese auto production will slightly decline to 8.3 million units in 2020 from 8.7 million this year.

Automakers


As a group, the 14 publicly owned global automakers fell to a negative 1.4 percent return in the first quarter but gained 24.6 percent over the past 12 months and 35 percent for three years. But there were extremes.

General Motors is mired in a recall crisis, and its returns dropped by 15 percent in the first quarter. Peugeot jumped 45.4 percent after finding two new partners to inject cash into the French automaker. However, over three years Peugeot investors are down 43.1 percent while GM returns rose 11.9 percent.

On a regional basis, Europeans led automaker returns in all three periods. But that's because their home markets are coming back from a horrendous six-year string of falling sales.

Suppliers


The 38 largest global suppliers eked out a 1.9 percent gain in the first quarter, but that's a lot lower than their average returns over the past 12 months and three years.

Results were highly regional in nature, following upbeat results in North America and strong returns in Europe. On average, Asian suppliers were lower than Europeans and North Americans in all three time periods. That's especially true in the first quarter when the 14 lowest results were for companies based in Japan or South Korea.

Retailers


Publicly owned U.S.-based retail groups lost an average 1.3 percent in the first quarter, with only AutoNation and Asbury gaining.

All six retailers show positive returns over one and three years. Over 12 months, Asbury is on top with a 50.7 percent gain. For three years, Lithia leads the pack by more than quadrupling returns for investors.

You can reach Jesse Snyder at jsnyder@crain.com.


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