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MEMA Reports Steel Cost Crisis

A new research report by the Motor & Equipment Manufacturers Association (MEMA) suggests that government intervention in the US steel market has caused a cost crisis that is hurting automotive and heavy-duty suppliers across the country, reports Tire Review. The MEMA report says that the result has been “unprecedented bankruptcies and job losses.”

The MEMA study, available online at www.mema.org, was written by economists Brian Becker and Kevin Hassett. The pair found that the steel crisis “triggered distortions in the steel market that have contributed to decreased availability, poorer quality and delayed deliveries of steel,” according to MEMA.

18th February 2005/by Tyrepress Editors

Michelin Share Price Increase

Deutsche Bank analysts are expecting the price of Michelin shares to increase by over 20 per cent from their current value of 53 euros per share to 65 euros. The estimate follows Michelin’s recent financial activities such as its investment in Poland, its Q4 results and its announcement that it is disposing of its wheel business. These signals “show the management commitment to turnaround this business unit,” wrote Deutsche Bank.

“In our view this shows a great consistency with the management strategy and reinforces our confidence in the capability of Michelin to reach their mid-cycle target of 10 per cent as early as 2006,” it estimated. This translates into 6.5 euros EPS.

However a risk lies in further strong increases in raw material prices which Deutsche Bank fears will not be able to be passed on to the customer.

17th February 2005/by Tyrepress Editors

BorgWarner Acquires 69 per cent of Beru

BorgWarner Germany GmbH now holds a total of 6,941,879 Beru AG shares, 69.42 per cent of the company’s share capital. Beru’s announcement follows an extended acceptance period for the voluntary public tender of its shares. The offer has been accepted for 639.209 shares or 6.39 per cent of Beru AG’s capital. BorgWarner had already acquired 63.03 per cent of the shares and voting rights (6,302,670) on 4 January 2005.

17th February 2005/by Tyrepress Editors

Nokian Tyres Announces Directed Share Issue

Nokian Tyres has revealed that it will issue a maximum of 1.074 million new shares in a directed share issue to selected investors today. This corresponds to 9.9 per cent of shares outstanding. According to a Deutsche Bank analyst, the move could be an early indication of a possible acquisition. “Nokian only has a track record of acquiring and integrating tyre retail and distribution companies. It has not integrated tyre plants historically,” they add. Despite a large investment programme, the analysts still expect 117 million euros of positive cash flow.

17th February 2005/by Tyrepress Editors

New Appointments to BERU’s Supervisory Board

Four new members, including BorgWarner’s CFO and vice president, have been appointed to the supervisory board of Beru AG. At the request of Beru’s executive board, economist Dr Ulrich Wöhr, (Diploma Business Management), chartered accountant Robin J Adams, CFO and chief administrative officer of BorgWarner Inc, Anthony D Hensel, as well as BorgWarner’s vice president, Alfred Weber were asked to join the board. The appointments follow the execution of the share purchase agreement of roughly 62 per cent of Beru AG’s shares through BorgWarner.

11th February 2005/by Tyrepress Editors

BERU Reduces Sales Growth Target to 10 per cent

Automotive supplier, Beru AG, has reduced its sales growth target, following lower than expected demand. The company now says that sales revenues should rise by at least 10 per cent in the current financial year with EBIT reaching at least 56 million euros. According to the company, an unusually warm winter, lower than expect demand for TPMS and lower sales in the field of diesel technology mean that its original 13 per cent sales goal will be unreachable.

11th February 2005/by Tyrepress Editors

Bidvest Buys 17 per cent Stake in Tiger Wheels

Diversified services group Bidvest has acquired a 17 per cent stake in Tiger Wheels for 239.9 million (£20.65 million), according to a South African Business Report story. Last year, Bidvest acquired McCarthy Motor Holdings and also has an American call option to purchase a further 1.8 million shares by 30 April for 45 million (£3.89 million). If it exercises this option, it will increase its stake in Tiger Wheel to about 20 per cent. Bidvest chairman Brian Joffe will be appointed a non-executive director of Tiger.

10th February 2005/by Tyrepress Editors

Indian Tyre Stocks Ride on Budget Hopes

Indian tyre stocks are riding high in expectance of a reduction in replacement tyre excise duty in the country’s forthcoming budget. According to sources quoted in India’s Business Standard, the expectance of a 24 per cent to 16 per cent reduction has led to renewed interest from institutional investors.

Yesterday Ceat shares rose 6.71 per cent to 75.50 rupees, Goodyear India stock went up 3.89 per cent to 70.85 rupees, MRF up 3.61 per cent to 2,733.05 rupees and JK Tyres up 15.41 per cent to close at 86.90 rupees, the magazine reports. The recent share price increase, however, is set against a background of increased raw material costs.

10th February 2005/by Tyrepress Editors

Pirelli to Buy 300 million More TI Shares

The shareholders of Olimpia SpA have agreed to allow the purchase of a further 700 million Telecom Italia shares. As chief partner in the company (holding 50.4 per cent) Pirelli could buy up to 300 million share, while the other parties (Edizione, Hopa SpA, Banca Intesa SpA and UniCredito Italiano SpA) will be able to buy 100 million each. Olimpia investors already hold 17 per cent of Telecom Italia’s shares. 700 million shares equates to roughly six per cent of Telecom Italia.

8th February 2005/by Tyrepress Editors

Analysts Raise Continental Target Price

Market analysts at Morgan Stanley, have raised Continental’s stock price target from 52 euros to 60 euros. The Morgan Stanley analysts clearly believe that the shares have more potential than they first thought: “We are raising our price target based on the expectation that our current earnings forecasts are likely too conservative and have significant risk to upward revisions following fourth quarter results.”

8th February 2005/by Tyrepress Editors

Goodyear Shares Slip 10 per cent

Shares in Goodyear Tire & Rubber have dropped 10 per cent after a Deutsche Bank analyst gave the company a “sell” rating. The analyst suggested that the share’s value had increased to the point that it could no longer be sustained. Although many news sources have reported the news, one business website, Motley Fool, ran an article suggesting that this was just “another reason why investors ought not consider analyst recommendations.” The story goes on to highlight how Deutsche bank has applied the range of ratings to Goodyear and not once “correctly called the stock’s performance.”

7th February 2005/by Tyrepress Editors

Michelin Shares Receive Sell Rating

The German Helaba Trust has changed its advice for Michelin shares to a sell rating. The announcement pre-empts Michelin’s quarterly sales results, which are due to be released on the 11 February. In the first nine months of 2004 Michelin’s turnover increased 4.6 per cent to 11.7 billion euros. The analysts believe that company will record fourth quarter sales of 4.3 billion, a one per cent increase. Their report suggests that this growth has been largely driven by the commercial vehicle sector, which it predicts will have been responsible for 1.1 billion euros of that total. The trust also suggests that the company’s passenger car sales remained virtually flat, with sales only increasing 0.3 per cent or 1.9 billion euros.

7th February 2005/by Tyrepress Editors

Kumho Tire Raises $363 Million in IPO

Kumho Tire, South Korea’s second-largest tyre maker, raised 373 billion won (around £193 million) in its recent IPO, according to the Reuters news agency. The total equates to the country’s largest issue in more than six months, the report added.

Kumho, which controls 42 per cent of the home tyre market, is selling 25.49 million shares at 14,650 won each, near the midpoint of an expected range between 13,250 won to 16,000 won, a source familiar with the deal said. The world’s 11th-largest tyre maker, will use the proceeds to expand its operations in China and slash debt. The dual listing in London and Seoul attracted good demand while Cooper Tire & Rubber Co. of the United States pledged to buy nearly 30 per cent of the shares offered, the report concluded.

4th February 2005/by Tyrepress Editors

Goodyear Shares Lowered to Sell Rating

Deutsche Bank analysts have lowered Goodyear’s share advice rating from hold to sell. The announcement comes in spite of the fact that Goodyear’s shares have performed strongly since mid-October in response to positive news from the industry, stabilisation of market share losses, and increased optimism about a turnaround. However, now that the company’s share price has reached 21 times the analysts’ 2005 estimate, the bank believes the price growth will slow down. According to the analysts, “the bull case is more than fully reflected.”

4th February 2005/by Tyrepress Editors

Amtel Aims to Expand into Europe

Following the news that Amtel was in “detailed discussions” with Vredestein Banden, Amtel president, Sudhir Gupta has confirmed that his company will buy Vredestein Banden and that it is planning initial public offerings (IPO) in London and Moscow in the next two years.

According to Dr Gupta, Amtel is planning a primary listing on the London Stock Exchange followed by a secondary listing on the Russian Stock Exchange. In a conversation with far eastern business publication, Business Times, Dr Gupta explained why the IPO would take place in London and not New York. “Europeans always understand Russia better than the Americans and most of the investment in Russia is European. That’s why we think London is a better place to list.” The secondary listing is also the result of ‘encouragement’ from the authorities for successful companies to list on the Russian Stock Exchange, and because “the stock exchange has good liquidity because of high oil prices.”

The listings are due to take place in one of two time frames; either October to November 2005 or April to May the year after, the Amtel president said.

Currently, Dr Gupta owns about 85 per cent of Amtel. An international investment fund managed by Templeton Asset Management Ltd, owns 5.65 per cent, while 10 per cent of Amtel’s shares were recently sold in a private placement for $34.2 million. These shares were bought by about 22 institutional investors in Europe, the US and Russia.

It is clear that a key part of Amtel’s expansion plans will involve venturing outside of Russian borders. One part of this is the company’s purchase of Vredestein Banden. By purchasing the Dutch company, Amtel appears to have been aiming to buy a ready-made foothold in the market. At the moment Vredestein sells 40 per cent its tyres in Europe’s biggest market (Germany) and has well organised distribution operations across Europe.
When the news of this transaction broke, Tyres & Accessories spoke to Vredestein CEO, Rob Oudshoorn. He described the venture as a win-win situation, saying, “one plus one equals three.” When the Vredestein boss visited Amtel’s factory in the summer, he said that he was surprised to see such modern equipment, maintaining that it was of a similar standard to Vredestein’s Enschede facility.

From his point of view, there is still a quality gap between imported products and those produced in Russia. Apart from believing that it can fill this gap, Vredestein sees Amtel’s size and influence as positive factors that will help it to reach further.
For Dr Gupta, there were other economic reasons for the transaction. “We had two options, either go ahead, spend money and time to build a global brand out of Amtel or go out and do some acquisition. So we agreed to buy this brand,” he told Business Times adding “we are looking to buy 100 per cent.” According to Amtel’s president, the sale is expected to be completed by middle of March 2005. When the two companies merge, they are expected to have a combined market value of $1 billion.

Dr Gupta is surprisingly pragmatic about doing business in Russia. This is surprising, because only a few years ago he survived an assassination attempt, something that would put most people off a country. According to the businessman, the men responsible for the murder attempt have been caught and will be prosecuted very soon. Despite his experience, Dr Gupta still believes Russia is a good place to do business, citing the country’s geographical position, the education of its people and its rich supply of natural resources as reasons to stay.

4th February 2005/by Tyrepress Editors