Japanese automakers (OTCPK:NSANY, TM, HMC, OTCPK:MZDAY, OTCPK:SZKMY, OTCPK:FUJHY, OTCPK:MMTOF) are reconsidering strategy in the U.S. after taking in the strong preference by American buyers for SUVs and trucks. The shift in sales mix has contributed to the rising incentive spending needed to clear inventory.
Top execs at Toyota say the company will have to be "very careful" with the North American market going forward.
"It’s a peak and we don’t see a potential for further growth," said Nissan co-CEO Hiruto Saikawa.
Toyota reported earlier today a sharp drop in FQ2 operating profit. Last weekend, news broke that the company may make a serious pure EV commitment.
The shifting ground in the automobile industry has long-term implications for suppliers as well.
U.S. auto sales are expected to show a decline of 2% to 5% for August amid a dialing back of discounting activity, according to the range of forecasts from Kelley Blue Book, Edmunds, J.D. Power, and LMC Automotive. General Motors is poised to report a loss of market share as its plan to cut out fleet sales impacts volume.
Bloomberg estimates the seasonally adjusted selling rate for the month will be 17.2M, down from 17.9M last month.
The sales dip isn't necessarily a bottom line drag for the sector due to reduced discounting and the increasing mix of higher-profit SUVs and trucks. But higher profit hasn't lifted automaker stocks this year, with the group having trouble gaining traction and trading with low forward PE multiples (GM 5.5, Ford 6.8, Honda 10.5, Toyota 10.9).
General Cable (BGC +2.3%) has a definitive deal to sell its ignition-wire business in North America to Standard Motor Products (SMP -2.3%), for about $71M.
The cable-products maker will use proceeds to reduce debt.
It's been a strong business, says CEO Mike McDonnell, but it's "not aligned with our strategic and financial criteria going forward. As previously communicated, we are focused on growing our businesses in the electric utility, communications and industrial markets where we have leading positions, scale and sustainable profitability.”
At last report, General Cable's total debt sat at $1.15B with a debt/equity of 410%. Market cap is $681M.