· FROTO (HOLD, TP: TL 17.4): Ford Motor Company (FMC) announced on Oct 25 it expects a $1.5b+
loss from European ops in 2012 & therefore announced a restructuring program
(prev: $1b+ loss=> Will close 3 European facilities (Southampton, Genk,
Tooling & stamping operations in Dagenham), decreasing European capacity by
18% (gross annual savings of $450m -500m)=> Transit assembly plant in
Southampton (c.28k Transit production in 2011) to be closed & Transit
production to be consolidated in Kocaeli/Turkey (est. 2H13) => Transit has
highest rev/vehicle & highest mrg w/i FROTO’s portfolio => assuming
incremental 25k units (9% of 2012E production) & no incremental Capex need
=> c.+10% on our DCF val for FROTO (to be partially negated by worsening
outlook on mrg for 2013 than our current est indicate). Following relocation
decision, FROTO might need to adjust capacity allocation b/w basic Transit
models (160k units as of 2014) & Transit/ Tourneo Custom (130k units) =>
to have a balanced CUR b/w 2 lines in l/t => will recheck production numbers
& Capex requirement if any. Restructuring plan of FMC can also facilitate
more competitive pricing for PC ops of FROTO in mid-term => -VE trend in mrg
of FROTO is not only driven by its ageing LCV product portfolio, but also
uncompetitive pricing against VW brands in PC. NET/NET: +VE for FROTO
given weakening outlook for 2013 => however we believe market was already
partially pricing some positive developments on new sourcing
arrangements. DIVIDEND: FROTO TRY0.65/share divi on Oct 31.
Opel - PSA
announcement & TOASO (BUY; TL9.25) > On Oct
24, Opel and PSA announced key steps in their global strategic alliance which
includes next steps in joint purchasing organization, and four common vehicle
platform development projects. The Alliance aims to launch the first vehicles on
these common programs by end-2016. Impact on Tofas => possibly limited,
but unconfirmed for now: we believe the most critical item that could impact
Tofas could be the joint program for a compact-class Multi-Purpose Van
