In 2007, Ford and General Motors recorded revenue of $172B and $182B, respectively. On December 24th, 2008, Ford and GM had dismal market caps of only $5B and $2B, respectively. Are the parts of these companies worth more than the whole? Listed below are a few examples of their intellectual property and assets that have significant value creation potential:
GM
- E-Flex series hybrid-electric propulsion system - to be used on the Chevy Volt and will be applied to other vehicles in the future.
- Engine business - world-class engines like the 304hp 3.6L Direct Injection V6 and the Ecotec family of efficient and powerful 4-cylinder engines, including the 260hp 2.0L turbocharged variant. These engines are capable of being applied to front-wheel-drive, rear-wheel-drive and all-wheel-drive vehicles of various sizes. Modified versions of the Ecotec engine have also been purchased for use in motorsports / race car applications.
- Transmission business - known for having some of the most reliable and smooth-shifting automatic transmissions. Premium automakers such as BMW, Rolls-Royce and Jaguar have sourced GM transmissions for their vehicles over the years.
- Milford Proving Ground (aerial photo above) - the first dedicated automobile test facility; opened in 1924 and currently has over 100 miles of test roads on over 4000 acres of private land, located 45 minutes west of Detroit. In addition to being a car and truck road-test facility, it could also become a private motorsports venue.
Ford
- SuperDuty truck business - commercial pick-up truck market leader with over 300K untis sold per year. Known for its load-carrying and towing capabilities. The market for these vehicles will return when the US housing market returns.
- Mustang brand and business - iconic design and legendary brand with history dating back to 1964. Significant value creation potential in intellectual property, loyal customer base and from brand licensing.
...And many others
If the Detroit 3 make it through the current financial crisis without Chapter 7 bankruptcy and liquidation, will the market again recognize the value of these and the many other assets in these companies? What is the best way to unlock the value of these assets?
1 comments:
Without doing the financial analysis, I think that almost everyone agrees that the sum of the assets exceed the market caps in Detroit. The big perceived liabilities are the costs of future health and retirement benefits and inflexible labor contracts.
A real effective Detroit bailout would be nationalizing healthcare. But that's a whole different converation...
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