Automotive Purchasing News Review 28 July 2014 - page 4

28 July 2014
automotive purchasing
Jul 25, 2014
Famously, Michigan – nicknamed the Great
Lake State – is home to Detroit’s so-called
Big Three automakers. Naturally, therefore,
as Automotive Purchasing editor Drew
Hillier reports, the US State has with a
special fondness for the auto business. No
wonder the Michigan Strategic Fund has
recently approved further tax exemptions
for companies, spurring interest from GM
and several auto suppliers.
The Michigan Strategic Fund – an arm
of the development corporation – has just
approved an amendment of the automaker’s
global state tax credit, immediately followed
by a General Motors announcement the
company plans to invest up to $800 million
in the state, creating in the process 1,750
new jobs. The modifications allows GM’s
Warren Technical Centre to rise the number
of employees included in the state tax credit
from 5,000 to 6,750.
“The $800 million in new investment will
be the result of upgrading various facilities
in Michigan in anticipation of future vehicle
platforms and programs,” says a memo to
the fund. “The 1,750 additional new jobs
will be the result of the consolidation of
various engineering functions from outside
of Michigan to a site in Michigan.”
Auto suppliers, many hard hit during the
last economic downturn, are also slowly
returning to the state that houses the three
major US automakers, with the lawmakers
granting them various incentives to set up
new businesses there. The grants range
from $2 million going to Italy’s Brembo for
a new factory to state tax credit for Chinese
companies willing to invest in the US.
A significant plank of the Fund’s newly-
publishedactions is the revised tax credit forGM,
and incentives for two Chinese manufacturers
that are investing in the state: H.A. Automotive
Systems and YanFeng Automotive.
Jobs added
GM has added or retained 33,000 jobs
under an original tax agreement reached
with the state in 2009. As Michael A. Finney,
President and CEO of the Michigan fund said:
“GM, as well as Ford and Chrysler, have over
the last few years continued to invest very
heavily in Michigan.”
“Wearepleasedwith theStateofMichigan’s
action which makes a strong business case
for potential future jobs and investment at GM
facilities across Michigan,” the automaker said
in a statement. GM also expects to add jobs
at its Brownstown Township battery plant and
the Detroit-Hamtramck assembly plant.
Michigan’s Strategic Fund also:
Awarded a $2.25-million grant to H.A.
Automotive Systems, a subsidiary of
Shanghai Changhui Industry Development
Co. H.A. is investing $28.8 million in a
North American headquarters in Troy,
where it expects to hire about 360 people.
Amended a tax credit for YanFeng USA
Automotive Trim Systems, a Chinese
supplier of automotive interiors. The
company plans to expand in Harrison
Township and hire 519 people.
Awarded $2 million to Suniva, an Atlanta-
based manufacturer of solar panels that
is opening a plant in Saginaw.
Awarded $2 million to Brembo North
America, which plans to make brake
rotor casting in Albion Township.
Awarded $2.3 million to Challenge
Manufacturing, which plans to invest
$65.5 million in a plant.
Expanded a previous grant by $507,000
for auto supplier Magna Interior Trim
Components; it plans to hire 169 employees
in St. Clair and Benzie counties.
European recovery
Jul 25, 2014
After years of sluggish economic conditions
which took the car industry to a two-decade
low, the rebound finally seems to be gaining
traction across the European region, even
as political instability plagues Ukraine and
During the announcement for the second-
quarter profit earnings, GM also talked about
its ailing European business, reiterating
its previous goal to return to profitability
in Europe “by mid-decade.” The ACEA
European auto industry group released
figures for last month’s sales, showing that
across the continental Europe deliveries for
new passenger cars
climbed for the tenth consecutive month,
signalling the overall economies are finally
exiting the years of the sovereign debt crisis.
Pretty strong performance
Nonetheless, sales thus far are 19 percent
behind the levels accounted in 2007, while
according to consultancy AlixPartners car
plants in the region only function at an
average 72 percent capacity.
According to remarks reported by Reuters
by GM’s CFO, “…excluding the impact of
restructuring, the losses in Europe were
roughly $100 million, consistent with last year,”
said Chuck Stevens (pictured). He added
that results are “a pretty strong performance
considering the incremental headwinds we
have this year because of Russia.”
In a strategy that includes a greater
utilization of jointly developed
designs and common parts
from GM’s other brands,
Opel is now ready to
introduce 27 models
and 17 new engines in
the period to 2018.
announcesQ1 2014 results
Jul 25, 2014
Texas headquartered Freescale Semi
conductor, Inc., a leading Tier supplier to
the automotive industry, has announced
financial results for the first quarter ended
April 4, 2014.
“We continue to see solid progress on
our initiatives to increase revenue and
improve gross margin,” said Gregg Lowe
(pictured), president and CEO of Freescale
Semiconductor. “All five product groups
generated revenue growth sequentially
and year over year. With a 15 percent year-
over-year growth in revenue, the company
continues to make strides in gaining market
“Our results continue to benefit from
margin expansion and deleveraging
efforts, as our sequential revenue increase
of 4 percent drove an adjusted earnings
per share growth of 42 percent.”
First Quarter Highlights
Net sales for the first quarter of 2014
were $1.13 billion, compared to $1.08 billion
in the fourth quarter of 2013 and $981
million in the first quarter of 2013.
Operating earnings for the period were
$155 million, compared to $145 million in
the fourth quarter of 2013 and $104 million
in the first quarter of 2013. Operating
earnings improved on a sequential and
year-over-year basis due to higher sales
and improving gross margins, partially offset
by increased investments in new products
and higher incentive compensation.
Net loss for the first quarter was $23
million, or $0.08 per share, compared to a
net loss of $118 million, or $0.46 per share,
in the fourth quarter of 2013 and a net loss
of $48 million, or $0.19 per share in the first
quarter of 2013. First quarter 2014 results
included a $59 million loss associated
with debt retirement and refinancing
transactions completed during the quarter,
which will result in lower interest expense
in future quarters.
Consistent progress
Commenting further, Lowe said that,
looking at the results, the performance
in Q2 demonstrates that Freescale
Semiconductor is making ‘consistent
progress’ on its goals of growing revenue
to gain share and increasing margins.
“Looking at the quarter specifically,
revenues were $1.19 billion, towards the
upper end of our guidance and 6 percent
higher than Q1. This represents a 15 percent
year-on-year growth which indicates that we
are on track to gain share again in 2014,” said
Lowe, adding: “We're continuing to invest in
the business to help maintain the momentum.
For example, we completed the acquisition
of the Mindspeed processor business from
MACOM which helps expand our digital
networking portfolio, and while in the early
innings, we're seeing some good initial
design win momentum with that portfolio.”
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