The Zacks Analyst Blog Highlights: General Motors, PSA Peugeot Citroen, Ford Motor, BlackRock and JPMorgan Chase
CHICAGO, Sept. 14, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include General Motors Company (NYSE:GM), PSA Peugeot Citroen (OTC: PEUGY), Ford Motor Co. (NYSE:F), BlackRock, Inc. (NYSE:BLK) and JPMorgan Chase & Co. (NYSE:JPM).
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Here are highlights from Thursday's Analyst Blog:
GM Opel Plans More Job Cuts
General Motors Company's (NYSE:GM) European arm, Opel, has reported more bad news. The ill-fated unit now plans to cut its administrative workforce by 30% or 1,000 jobs at its Ruesselsheim headquarters in Germany, according to German newspaperFrankfurter Allgemeine Zeitung.
The downsizing will be a part of GM's 10-year plan "Drive Opel 2022" that includes reduction in personnel costs. In July, the national newspaper also revealed that Stephen Girsky, the President of GM Europe, plans to cut the jobs of 2,400 managers in Opel, including 500 senior managers, with a pay package of more than €100,000 per year.
Last week, Opel announced its plan to shut down two plants in Britain, located in Ellesmere Port and Luton, beginning on September 24. The move will idle 3,000 workers at the plants. However, they will continue to be paid during the shutdown and their work hours will be banked for future production.
Both the plants manufacture Vauxhall branded cars for the U.K. market. However, most of the output from the plants is exported to Europe under Opel branding.
Late August, Opel announced its plan to cut work hours of thousands of workers at two of its four plants in Germany in response to a sluggish demand for cars in the troubled Europe. The company will reduce work hours at its main facility in Ruesselsheim and its component plant in Kaiserslautern for 20 days between September and the end of the year.
The move will affect half of 13,800 workers in Ruesselsheim, especially those in production lines and administration. On the other hand, it will affect 2,500 workers at the company's Kaiserslautern factory.
Opel lost $747 million last year due to weak car sales, high fixed costs and excess production capacity. This resulted in a total loss of more than $12 billion in 12 years.
In the first half of 2012, Opel's loss amounted to €938 ($1,200) per vehicle sold, according to the CAR Center of Automotive Research at the University of Duisburg-Essen. Its deliveries in Europe dipped 15% to 457,630 vehicles due to weak demand emanating from the debt-crisis in Europe and strong competition from Asian automakers.
In December last year, Opel had revealed that it expects to report an operating loss of €1 billion ($1.3 billion) in 2012 due to fewer car sales than anticipated. The unit expects to sell 1.4 million vehicles in 2012, which are about 100,000 units less than the earlier projected sales.
In order to reverse the 12 years of losses in Europe, particularly from the Opel brand, GM formed a global alliance with PSA Peugeot Citroen (OTC:PEUGY). The pact will help both the automakers reduce at least $2 billion in costs. In order to strengthen the market position, GM also plans to expand Opel's lineup by introducing 23 models by 2016, including the Mokka compact crossover in October.
The present Euro zone financial crisis has affected the operations of many global automakers, especially GM and
Ford Motor Co. F). Both the automakers have a significant exposure to the market.
Ford expects to lose more than €1 billion in Europe. It has already cut back production at its Cologne-based plant in Europe in May and June that affected 4,000 workers.
GM, a Zacks #3 Rank (Hold) company, reported a sharp 41% fall in profits to $1.49 billion or 90 cents per share in the second quarter of the year from $2.52 billion or $1.54 in the same quarter of 2011. Nevertheless, profits exceeded the Zacks Consensus Estimate by 15 cents per share.
Revenues in the quarter fell 4.5% to $37.61 billion, which is lower than the Zacks Consensus Estimate of $37.98 billion. Unit sales rose 3% to 2.39 million vehicles from 2.32 million vehicles in the second quarter of 2011. The automaker occupied a worldwide market share of 11.6% during the quarter, down from 12.3% a year-ago.
The decline in profits and revenues was attributable to strengthening of the U.S. dollar against most of the major currencies, as well as weak macroeconomic conditions globally, especially in Europe and South America.
BlackRock Fined $15M by FSA
BlackRock Investment Management Ltd (BIM) – a London-based wing of BlackRock, Inc. (NYSE:BLK) – was fined £9.5 million or $15.2 million by the UK Financial Services Authority (FSA) for mishandling clients' money from 2006-2010. This is one of the largest penalties ever charged by the FSA.
The FSA pointed out that BlackRock had put the clients' money in short-term money-market deposits without obtaining trust letters. Trust letters would have confirmed that the receiving banks are aware that they are holding assets of customers rather than that of BlackRock. This could have resulted in a long drawn legal hassle for the clients to get back their money if the company went bankrupt during that time.
The failure to issue trust letters stemmed from the re-organization efforts following the acquisition of the BIM, previously known as Merrill Lynch Investment Managers Limited. The error affected nearly £1.36 billion of client money on a daily basis between October 2006 and March 2010. However, the FSA as well as BlackRock clarified that despite erroneous handling of customers' money, none of the clients suffered a monetary loss.
BlackRock had reported this error to FSA after an internal review of its activities. Further, the company was allowed a discount on the fine to be paid as it decided for an early settlement. The original fine to be levied was nearly £13.6 million.
The crackdown on such unwarranted activities of the banks by the regulatory authority comes in the wake of the collapse of Lehman Brothers Holding Inc. The collapse left customers reeling under substantial losses since Lehman failed to separate client funds from its own accounts, leaving customers with competing claims that resulted in years of litigation. Therefore, the FSA intensified its vigilance to ensure proper protection of the clients' money.
BlackRock is not the only company to face the ire of the FSA. Earlier in 2010, the FSA penalized
JPMorgan Chase & Co. JPM). The firm was fined £33.32 million or $49 million, the largest penalty ever, for failing to effectively protect client money in the range of $1.9–$23 billion between November 2002 and July 2009. The average amount of money left unprotected was $8.55 billion.
BlackRock should be acknowledged for standing up and taking responsibility for its misconduct. However, being one of the largest asset managers in the world, failure to protect the customers' money does not send out good signals either to the investors or the customers.
BlackRock currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a long-term 'Neutral' recommendation on the stock.
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