Wolfe Research's Auto & Auto Retail Analyst, Chris Bottiglieri, hosted a webcast on LKQ to discuss an overview of the business, what went wrong, a recap of shareholder friendly changes that we think ValueAct was behind, LKQ growth algorithm after factoring in the turn-around, and Plan B: exploring asset divestitures and LBO scenario.
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California’s AB5 bill implements a more difficult “test” to justify classifying workers as contractors. But keep in mind that drivers would need to argue in court / arbitration that Lyft / Uber does not pass the “test”. This could take a long time to play out. In the meantime, discussions are ongoing to maintain contractor status for drivers but provide higher minimum earnings levels and some benefits. We see this as the most likely outcome.
We wanted to flag a few highlights in today's (09/12/19) Wolfe Research Auto Daily....
We wanted to flag a few highlights in today's (09/11/19) Wolfe Research Auto Daily....
This AM (9/10/19), LKQ held a call on its EU integration. LKQ did a strong job of addressing the critical questions from our preview. Our one critique is that qualitative details were lacking on how they accomplish this, but mgmt. likely relied on the ‘18/’20 analyst days for those details. LKQ shares +5%.
What does a junk rating mean for Ford and Ford Credit?
Moody’s downgraded Ford’s unsecured rating to Ba1, one-notch below Investment Grade. For now Ford should be able to continue tapping this market with only minor tweaks (S&P and Fitch still have Ford 2 notches above junk). And with the backstop of the ABS market, there should be no impact on Ford Credit’s cost competitiveness or their ability to support Ford Auto even if things get worse. That said, Moody’s commentary highlights concerns.
NYC Rideshare Update – Uber/Lyft Bookings still growing through price increases, but are both running out of runway?
We’ve analyzed ridership trends in New York City following the implementation of driver minimum wage rules in early February 2019.
China and Europe SAAR Update – Not as good as it looked
SAARs for Europe and China came in better than expected for August. (16.9 MM SAAR for Europe, 21.3 MM for China). However, digging into the numbers, selling rates appeared inflated in both regions (Self-registrations in Europe; aggressive discounting/incentive activity in China). Europe and China optics could improve through year-end: Expect more self-registrations in Europe ahead of onerous CO2 Regs; China likely remains soft, but comps get easier in Sept.
Experian 2Q19 Auto Finance Update
Experian released their 2Q19 Automotive Finance Report last week. We came away with two key takeaways from the report: 1) Rising rates pushed payments higher through Q2; 2) New vehicle buyers have been shifting towards less expensive late-model used cars. We’d note that benchmarks (3-year swap rates) have come down a lot. If loan rates (and payments) come down on lower rates, this could mitigate U.S. downside.
We wanted to flag a few highlights in today's (09/06/19) Wolfe Research Auto Daily....
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