Delphi 4Q16 Earnings Call Notes

Kevin P. Clark

Autonomous driving capabilities continue to garner strong customer interest

“As I mentioned, our autonomous driving capabilities continue to garner strong customer interest. When you combine Mobileye’s Vision and Road Experience Management systems with Delphi’s best-in-class sensor suite, automated driving software from Ottomatika, and our multi-domain controller, no other entity comes close to matching the quality or the capability of our CSLP automated driving platform. We believe no other system will be faster to market. And as we’ve heard from our customers, no other company is in as strong a position as Delphi.”

Some of the more automated stuff in Mexico could potentially come back

“The whole discussion around border tax, it’s actually broader than Mexico at this point, right? When they talk about import value, they’re talking effectively globally. So it’s clearly Mexico is a big piece of it, but it is hard to speak to specifics. As it relates to businesses or types of operations down there, there are certainly more automated-type manufacturing processes down there, which you could conceivably see coming back to the – or coming to the U.S. Some of these were never in the U.S. We’ve grown them in Mexico or started them in Mexico. And we’ll look at that depending on where the rules go. But it would have to be much more of the – sort of the automated-type manufacturing operations, just given the difference – the labor differential there.”

Joseph Massaro


“In total, 2017 revenue guidance is $16.5 billion to $16.9 billion, including approximately $400 million of net FX and commodity headwinds, including the euro at $1.05 versus an average of $1.11 in 2016. While operating income is expected to be between $2.2 billion and $2.3 billion with margins between 13.3% and 13.5%. Earnings are expected to be in the range of $6.40 to $6.70, up 7% to 11% over 2016, including the benefit from $600 million of share repurchases in 2017, which we are using for planning purposes. Our guidance assumes a 16% effective tax rate for the year. And we expect to generate over $2 billion of operating cash flow.”

Strength in China

“Yeah. About half the revenue upside – about half of it, Itay, came from China. Particularly late in the quarter we saw very strong demand in China. I think China totals up about 19% in the quarter. The rest was spread sort of evenly between Europe and North America. And again, we saw it flow strongly from an OI perspective, from a performance perspective. So it sort of mirrored that volume flow.”

Group 1 Automotive 3Q16 Earnings Call Notes

Group 1 Automotive’s (GPI) CEO Earl Hesterberg on Q3 2016 Results

There are still many dealers chasing volume

“I think it’s starting to turn but there are still many dealers including us in some places chasing volume. And the problem we have is many of our locations are in these markets where the industry is down double digits. And when you have targets that are up almost double digits, I mean it just you know it’s a disconnect. And that’s the problem when OEMs provide target is they can’t necessarily fine tune them and prescribe for some of the pockets like the oil industry or the industry isn’t behaving like it is another parts of the U.S. So it really get some disconnects on some of these targets versus reality.”

OEMs starting to back off aggressiveness with leasing

“my impression is that OEMs are starting to back off or slow down a little bit on leasing, leasing is not as big for us because of our geographic concentration in south central U.S. where about 17% leasing where as the industry is as you say closer to 30%. So it’s not the same concentration for us, because leasing is quite heavy in the northeastern U.S. and California. But with used car values likely having peak sometime in the past, my impression is the OEMs are starting to become a little more prudent about how aggressive they get in pushing higher levels of leasing.”

Oklahoma not as diversified as Texas

“Oklahoma was probably the market that surprised us the most with the 18% decrease. But I think we always recognize that the Oklahoma economy is not nearly as diverse as Houston or many parts of Texas, so it’s very heavily energy dependent. But I think there’s a general feeling of getting closer to the bottom in Texas, but I don’t think there’s any declaration that we’ve hit the bottom yet.”

UK suffering from uncertainty

“In the U K it’s still just mostly suffering from uncertainty, I don’t think markets particularly weak, but uncertainty is never good for consumer confidence, which is the main driver of auto sales. But I had certainly haven’t any input that says the U K market is especially weaker than it was in September and it was fairly reasonable in September with retail sales down only 1%.

Our inventory levels are still high, OEMs are cutting production

“I don’t think any of us are having to push back as much as we did 90 days ago, because many of the OEMs have now reacted and reduced production. It is true that we’re still very sensitive to our inventory levels and they’re still not quite where we’d like them to be. I think we like them to still be another six or eight days lower. But they are coming into line and I think you’ve probably read about many of the production cuts that the OEMs are making. So I think the entire industry understood the problem, and we’re working together to get it back in line with.”

I think we’ll get some clarity after the election

“Well I think there’s two camps, I think there’s a camp that says flat and camp it says a slight decrease. And I think there’s some factor that will gain some clarity after we get a presidential election outcome, and then we’ll see what the mood of the public is, because so much of consumer confidence are psychological and most experts would contend that the current electoral process is creating some distraction.”

Delphi 2Q16 Earnings Call Notes

Delphi Automotive Plc (DLPH) Q2 2016 Results

Kevin P. Clark – President, CEO, Chief Operating Officer & Director

Customers increasingly seeing need for electrification

” As we’ve discussed previously, our customers are increasingly seeing the need for further electrification of the powertrain to close regulatory gaps on CO2 emissions and fuel economy. 48-volt mild hybrids deliver roughly a 70% reduction in CO2 emissions compared to full hybrids at about 30% of the cost. Given our strength in Electrical Architecture and power electronics, Delphi has competitive advantage in the intelligent electrification of the vehicle.”

Large increases in demand for active safety technologies

” with almost 80% of the safety benefits of Level 4 automation coming for just 20% of the cost at Level 2 automation, we see the near-term demand for active safety technologies only growing. As a result, we expect our active safety revenues to increase roughly 50% annually over the next few years.”

Singapore is farthest along in launching robo-taxis

“Yeah, Singapore’s the most advanced from a plan to get to, use your term, robot taxis, and we’ve been working with them or planning with them for about the past year. There are several other cities that are talking about it at this point in time, that we’re talking with, providing the same sort of service and solution. But when you look at Singapore in terms of actually executing, we’re in a situation now where we’ve launched a program. We’ll have piloted vehicles for two years through the end of 2018 and actually pilotless vehicles beginning in 2019. And their plan is to have pilotless vehicles, a fleet of pilotless vehicles in the areas that we’re currently testing beyond 2020 servicing consumers. So they, by far and away, are the further along. But when you look at other U.S. cities, there certainly are examples. London’s talking about it, Amsterdam’s talking about it. They’re looking at it where we’re located outside of Shanghai in Anting, so there’s a lot of dialogue, but Singapore’s first.”

Better margins where it’s tougher to integrate

“We’re now at a point, we’ve talked previously, we talked specifically to active safety, about an investing mode. We’re in profit mode now. It’s not where E&S margins are, but we’re clearly making money. I think with respect to price pressure with specifically as it relates to active safety, it really somewhat depends on what sort of active safety solution you’re talking about, right? If it’s Level 1 where it’s just a camera or just a radar right? As you know, we’re in an industry that commoditizes itself very, very quickly. And to Joe’s point, we’re really good at getting cost out when we get volume and leveraging the manufacturing plant as well as getting material savings. As you get into integrated solution where you’re fusing sensors, that’s a much different scenario, and there are only a few players that can actually do that, we being one of them. And I think in those sorts of scenarios, and that’s where this space is headed. In those sort of scenarios, the pricing pressure is actually very reasonable. It’s there. It’s always there but it’s much more reasonable.

Joseph R. Massaro – Chief Financial Officer & Senior Vice President

We’re watching north America closely but at this point have not seen any softening

Yeah, David, we’re obviously watching it very closely. There was obviously an announcement last week with Ford and such. At this point, what we see is in the forecast. We haven’t had any updates or we have not seen any softening at this point beyond the volume estimates that we have provided.

Ford 1Q16 Earnings Call Notes

Ford Motor (F) Mark Fields on Q1 2016 Results

Chinese consumers are almost “fervor” for SUVs

“I just came back from the Beijing Auto Show, and it was very interesting to see consumers are almost fervor for SUVs. You saw it not only in the exhibitors that were there, but just looking at the folks that were crowded around the vehicles. ”

Used car prices is a supply issue not a demand issue

“And then, Ryan, on your question on used car prices, obviously you’ve seen some of the Manheim reports. This is not a demand issue. The demand is there. It’s really a supply issue as more of these three-year leases come off. We’re going to watch it closely. Obviously, we’ve done a lot of the studies to see, are used car buyers actually cross-shopping with new cars. It’s very small, it’s in the single digits, but clearly it does have implications for trade-in values, so we’re going to continue to watch that closely.”

We’re looking at autonomous vehicles in terms of miles traveled

“in terms of what technology, whether it’s autonomous, or semi-autonomous, or all the connected cars will do for the industry, what is it going to mean? From our standpoint, we’re looking at this – first off, it’s too early to tell, but we’re really looking at this as vehicle miles traveled. And you could argue that in urban areas there may be less car density, either because of costs or just outright legislation, not allowed to use personal vehicles, which could dampen car sales. But also, at the same time, if you make something more available and you make it less expensive, it’s used more. And if you think about things like autonomous vehicles that will be used 24/7, they’ll rack up miles sooner, which will drive, as I mentioned earlier, more service revenue and, ultimately, more car sales.”

Robert L. Shanks – Chief Financial Officer & Executive Vice President

Used car prices falling as lease rates have been high

“you can see our experience in terms of auction values at first quarter mix across all periods there. And you can see that we have seen a decline in both 24 months and 36 months auction values versus a year ago. We are up sequentially from the fourth quarter. We would normally have expected that increase to be higher. It hasn’t occurred and that is largely based on supply. We have, across the industry, more units coming back from the increasing rates of lease over the last number of years. We’ll have about 200,000 units coming back this year. Demand, for us anyway, is still very healthy and about where it has been, we just have more units coming back.”

General Motors at Deustche Bank Conference Notes

Mary T. Barra

Onstar helps give us some advantage in autonomous

“if you just look at the crowdsourcing work that we’re going to be doing with MobileI, I think it really leverages the fact that we’ve got all these vehicles that have OnStar. So we’ve got the connectivity because as we all know when you look at autonomous, one of the key is having accurate road information and surrounding information and it’s ever changing. So it’s not just get everything mapped once you got to constantly be updated. So when you think about our fleet in our car park that’s got OnStar that has the ability to upload that information for it to be processed working with MobileI I think that is a huge opportunity that our scale and our existing car park with the embedded connectivity that we’ve had for quite some time enables.”

Dan Ammann

Clearly there’s a lot of concern about the auto cycle maturing

“So just a quick opening comment on the macro-environment, I think clearly there’s a lot of concern in this room and around the investment community in general, but the automotive cycle is maturing and if you look just simply at the volume numbers coming out of 2009 for the global industry you see exactly that picture where the growth rate was initially pretty rapid, coming out of the trope and has begun to moderate going forward.”

As growth is decelerating we need to make shifts in the way we’re allocating resources

“when you get into an environment where it’s becoming arguably more challenging from a macro perspective decelerating growth. You couple that with fundamental change going on in your business, you get back to the central issue of how and where are we allocating our resources. And the usual momentum strategy no longer applies, so we need to bring a fundamentally different wins to the business and how we’re doing this.’

We believe that the first scale deployment of autonomous vehicles will be into this ride share business model

“as we engaged with people around the industry and in particular as we engaged with the team from Lyft we found we had this very common view that the first scale deployment of autonomous vehicles will not be selling them to individual consumers, but it will be into this ride share business model and there’s lots of reasons why that’s the case from safety and regulatory to the fundamental economics of taking an expensive new technology and deploying it into a high utilization model into the technical constraints in the early stages of this, which will lend themselves much more to an owned fleet in a controlled operating environment.”

We see a very clear convergence between autonomous and ride share

“So for all of those reasons we see a very clear convergence between autonomous on the one hand and ride share on the other and that’s what’s total unique about the partnership and alliance that we have put together with Lyft is the first time we have a major scale ride share platform combining with a scale car making platform and all of the technical capability in and around that from an autonomous perspective.”

Chuck Stevens

Pricing in the US has been reasonably rational

“pricing in the U.S. continues to be reasonably rational and you guys have accessed to the same data we do. Incentive spend as a percentage of transaction price went up a bit in 2015, but still overall very, very rational and we would expect that to continue. With that said one other reason we’re still focused on driving cost efficiency is we control cost, we don’t always control what happens in the market and again we would as a baseline assumption would expect continued rationality in the market at least in 2016.”

Commodities should be a tailwind in 16 again though not as large as ’15

“Commodities I’ve talked before about 2015 as a developed it was a several hundred million dollar tailwind force in ‘15 versus ‘14. I would expect kind of more of the same in ‘16 versus ‘15, it’s not $1 billion or $1.5 billion, but certainly several hundred million dollars of tailwinds at least not as things are developing right now and that’s factored into our outlook for sure.’

General Motors at Barclays Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Johan de Nysschen – President, Cadillac & General Motors Executive Vice President

I’m going to be candid

“I’d like to do is to give you a very candid assessment, I suppose about the state of the Cadillac business. It may or may not be as frank as you are accustomed to hearing, but hopefully it’s what you want to hear.”

We have to really take stock of where we are

“I’m not here to try to sell anything to you. I am not here to try to impress you. But I think that unless we really take stock of where we are, we cannot implement and execute the strategies and tactics and operational measures to address the shortcomings and to begin to build the brand back to where we would like to take it.’

I’m a newcomer

“I’m a newcomer to the company and I kind of look at it with a fresh pair of eyes. ‘

I’m from Audi

” would like to make one small correction to the introduction, no Audi guy would ever want to be described as being from Volkswagen. I prefer to say my 20 years was spend at Audi, which probably gives you a bit of an insight into the way my brain in wired.’

GM is focused on the mainstream business, not the nuances of the luxury business

“there are lot of very smart people that I’m now proud to call my colleagues, but also a lot of people who – to be honest are more rooted in the needs and requirements for success in the mainstream business as opposed to understanding the finer nuances for success in the premium end of the business and the rule books are different.”

If you apply the same plays to the premium sector that you do to mainstream, it doesn’t work

“if you exercise the same plays in the premium sector as you would do in the mainstream sector, which are the requirements for the success there. I guess you do that for long enough and you take one of the greatest brands in the world and you turn it into one that have a great potential, but is no longer living up to that very high standard.’

You need to change the culture and systems completely

“it’s not just a matter of policy you also need systems, mindsets, even our dealer staff will need to come to terms with the new way of doing business.’

There’s really not a cadillac division within GM

“I’m referring today the reality that Cadillac is heavily matrixed within the General Motors organization and to be really candid with you – idea that there exists a Cadillac division, that’s not so.’

The company is organized by function

“the company is organized by function and the functions work across all brands.’

You end up with a lowest common denominator approach

“it works particularly well when you’ve got brand that are Chevrolet, Buick and GMC positioned more or less in the mainstream part of the business. But imagine, what we are asking the fine men and women of General Motors to do. We said to them, please start your product planning discussions, your marketing planning discussions and your network development discussions, your distribution discussions with a full agenda.

In the morning, you cover all the brands and somewhere about 3:10 in the afternoon, you get to Cadillac. And now, we expect them to do a 180 degree shift in terms of the insights and understanding of the competitive environment and in terms of the application of particular strategies that are appropriate for that environment.

It can’t happen and what does happen is that you end up with kind of a, lowest common denominator approach that really is rooted in predominantly meeting the needs of the maintain stream business.”

A problem with the number of stores too

“we have a massive legacy issue with our retail distribution network, 929 stores. This will lead to of course very strong dilution of the volume throughput per store. It means the dealer profitability is somewhat challenged. That means dealer can’t invest into facilities, into people, into creating an ownership experience that supports the positioning of the brand.’

The luxury segment of the auto industry does 10% of the volume but 50% of the profit

:The global luxury market accounts for, depending on how you define the luxury market, 10% to 12% of the total auto business globally, but generates about half the profit. :

GM is a titan

“General Motors is a titan corporation. Seriously, you know, I read a lot of negative press about the company, but as an outsider whether it was in the VW Group or whether it was at Nissan, we looked at General Motors with trepidation. It’s a powerful competitor. It’s a company with massive resources, with great expertise, with great depth of skill and financial things.’

We don’t want a cadillac in every driveway, we want it in the right driveways

“one of the issues for us that we see as an opportunity is to get back to the original concept of premium exclusive motoring. It used to be the domain of a few. You had to have a particular station in life to get to these high-end brands.

And we have to hand it to the three leading German brands, they have become so successful that they’ve almost become ubiquitous, everybody drive one, there is one in every driveway. And the opportunity for us to say we don’t want to park a Cadillac in every driveway, but in the right driveways. ”

Captains of industry make things aspirational

“if people see the captains of the industry arriving at the airport or parked outside the golf club, driving a particular brand of automobile, then to conformation, that kind of automobile is driven by successful people. Therefore, it’s aspirational.’

We’re separating Cadillac from the rest of GM

“it’s been discussed and agreed and announced, you will be aware that we are now effectively separating Cadillac from General Motors. We are setting up dedicated organization and we really want to focus on this notion of securing 100% mindshare on developing the Cadillac business.”

We can’t just go commando though or we’ll fail

“I will absolutely as a new comer to the company and with the strong support that I’m getting from all of my colleagues, if I try to go to war with General Motors and the organization and I want to tell it this is how the world will work, I will definitely, definitely fail. It’s clear.

And so, how we do business must be taking into account how General Motors does business. I have set up the top layer of functions that I believe need to be inside Cadillac. This has been done and it’s been agreed. However, the bottom up construction of the organization is being done on a consultative basis.’

Moving Cadillac HQ to NYC

“there is a lot of talk and discursion about the decision for us to relocate Cadillac global headquarters to here in New York.

Particularly, a lot of the Michigan people were unhappy about that and I need to explain. It’s not that we have a problem with Detroit, we don’t. What we need to do is to create geographic separation. It forces process changes, it forces us to do things in a different way.”

We want to use our American heritage

“We’re an American brand, we definitely don’t want to try to out German, the Germans. We want to use our American roots and heritage as a key differentiator. And America is still, I have to tell you despite what you might hear on CNN and read in USA Today, are an admired country around the world. I say that as a non-American. And American products are highly regarded.’


“Cadillac will present itself as a bold American brand, bold and confident. We are sophisticated, but a modern progressive contemporary kind of sophistication, not the old world grand chandeliers kind of sophistication. That’s not the lady in the ball gown, but in the seductive black cocktail dress.

And then, of course, being American, we also have this deep-rooted belief that the future will be even better than it is today. Yes, we are about a little bit of domestic [ph] behavior, the joy of life and enjoying life to its fullest everyday. But there’s a fundamental belief that tomorrow holds even better prospects. And that will be a little of the swagger that we will come to market with. And you’ll see it expressed in the design language of our cars, you will see it expressed in the marketing communication tone and manner, you’ll see it expressed in our behaviors at Cadillac.”

TRW Automotive 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Consumer auto demand remains robust

“Consumer demand in North America remains robust and supports the current level of production. The third quarter seasonally adjusted selling rate averaged about 16.7 million units.”

China sale trended higher, but softened as the quarter progressed

“In China, vehicle sales and production continued to trend higher. However, signs of softening emerged as the pace of growth moderated as the quarter progressed.”

Autonomous driving is going to come in stages

“I think the path that I have outline, as I will say my personal view is still very much intact which is there are many stages that we will see on the development towards a future autonomous vehicle.”

I think we wont have fully autonomous cars on the road yet in 2020

“I am not yet convinced that we will see a fully autonomous vehicle on the road by 2020, which has been a date thrown out there by some commentators. Basically, because I think there are many things, which are yet to be overcome in terms of the legal, insurance, liability management issues.”

There is some increasing interest from rulemakers

“I think the increasing interest from not only from the European, I’ll say, rule makers [European] which is in the 1780 timeframe, but also now from the US regulatory authorities including – I think they are seeing increased value from some of these technologies maybe there will be future rulemaking. It is unclear at this point.”

I don’t see drop off risk, I see stagnation risk, but that’s not what I’m planning for either

“I don’t see drop off risk. I see the stagnation risk, but that’s not my planning assumption. I think, we are going to see a small steady increases year-on-year for the next two to three years now.”