Stock market: Too good for stock markets

3 September 2007

The Big Eight European and US carmakers have all reported their profits for the first half of the year. Although they were almost all exceptionally good, the stock markets decided they were too good to be true and sold the shares.

The exceptions were Volkswagen, where the tone of the statement was so positive, and Peugeot, where the full, new corporate plan is still eagerly awaited. Ford and GM were both down by more than 13%.

Volkswagen put in such a strong trading performance for the half-year that it was able to say that it would make profits for 2007 that it initially did not expect before 2008.

Fiat management admitted that the new Bravo was not selling in the volumes hoped and that the Alfa Romeo brand was not growing as it should. A new management plan is to be put in place, and the rollout of dealership sackings and hirings is to accelerate across Europe – following the UK experiment that has already resulted in all Alfa dealers becoming profitable.

BMW said its slight underperformance on expected profit in the first half was because of unfavourable currency movement but there were commentators who thought BMW might miss its annual profit targets.

BMW is heavily manned relative to the opposition and very late in restructuring. Volkswagen has been a good investment since a firm grip was taken on costs.

Peugeot figures saw a first-half rise in operating margin from 2.4% to 2.7% and in Europe a small market share uplift of 0.2% to 14.2% in a market down 0.2%. Operating profit was 22% up at E842m.

Renault’s equivalent numbers were a surplus of E722m for an operating margin up to 3.5%. It expects to hit a 3% margin for the year. PSA is less certain that it can push on in the second half.

Christian Streiff, the new president, will unveil his turnaround plan – that has been in preparation since the turn of the year – on September 4.