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Auto Stock Roundup: CMI-NPROXX JV, GT-Lordstown Motors Alliance & More

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The coronavirus outbreak has indeed rattled the auto industry with lower vehicle demand amid economic slowdown and lackluster consumer sentiment. While auto biggies have been ramping up production to make up for the lost production during the two-month shutdown, some companies are still laying off workers and cutting production amid low demand. Last week, General Motors announced that it would retrench the third shift at the SUV plant in Spring Hill, which will result in the dismissal of 680 workers. Harley-Davidson also intends to axe 140 jobs in the United States amid lower production levels.

Meanwhile, the J.D. Power 2020 U.S. Initial Quality Study released last week. While Dodge and Kia held the top positions, Tesla took the last spot. Overall, domestic brands including Dodge, GMC, RAM, Chevrolet, Jeep, Cadillac and Buick fared better in this year’s study than the foreign counterparts.

(Read the Last Auto Stock Roundup here)

Recap of the Week’s Most Important Stories


1. Winnebago Industries, Inc. WGO reported a loss of 26 cents per share in third-quarter fiscal 2020, narrower than the Zacks Consensus Estimate of a loss of 41 cents. However, earnings of $1.14 a share were recorded in the year-ago quarter. Weak demand and disruptions across dealer network and supply chain due to coronavirus woes impacted the firm.Revenues in the reported quarter decreased 24% year over year to $402.4 million. The top line, however, beat the Zacks Consensus Estimate of $326 million. Revenues in the Towable segment declined 45.5% year over year to $188.9 million. Revenues in the Motorhome segment improved 27.1% year over year to $203.6 million driven by the Newmar buyout, partly offset by COVID-19 woes. The firm approved a quarterly dividend of 11 cents per share, payable on Jul 1 to shareholders of record as of Jun 17, 2020.

2. Ford F has vowed to become carbon free by 2050, a target that will put the automaker in line with the expectations set by the landmark Paris climate agreement. The company will focus on three key sources that make up to 95% of carbon dioxide emissions, including emissions from the vehicles it sells and factories, along with suppliers.Ford is committed to spend more than $11.5 billion in electric vehicles through 2022 by introducing zero-emission versions of some of the company’s popular vehicles, including the Mustang Mach-E, which will arrive in dealerships this year, as well as the Transit Commercial EV and full-electric F-150 that is coming in 24 months. Ford has also set a target of completely powering all manufacturing plants by 2035 with locally-sourced renewable energy, which indicates that energy would be derived only from sources like hydropower, geothermal, wind or solar.

3. Cummins Inc. CMI signed an agreement with NPROXX to form a joint venture (JV) for hydrogen storage tanks. Cummins and NPROXX will each own 50% of the new partnership and are expected to close the deal by the end of first-quarter 2021. The JV will be included as part of Cummins’ New Power business segment. The JV, which will still operate under the NPROXX name, will provide hydrogen and compressed natural gas storage products to customers for both on-road and rail applications. The collaboration will also bring rapidly-increasing hydrogen capability to Cummins in order to expand its fuel cell and hydrogen-processing technology capabilities. The addition of hydrogen storage to Cummins’ existing capabilities in hydrogen production and fuel cells will enable the firm to accelerate viability and adoption of these technologies in commercial markets.

4. The Goodyear Tire Rubber Company GT and Lordstown Motors will collaborate for tires and services, in addition to future tire intelligence opportunities. Under the deal, Goodyear plans to procure new Endurance trucks, the all-electric pickup truck from Lordstown, in order to incorporate into its own servicing fleet, acknowledging the sustainable footprint of all-electric vehicles. The launch coincides with Lordstown's unveiling of its first all-electric pickup truck — the Endurance — on Thursday, featuring Goodyear. Goodyear aims to be the tire maker of choice for EV suppliers. The company’s latest alliance with Lordstown reflects an ideal relationship with shared Ohio origins and mutual innovation, performance, and sustainability values.

5. Toyota Motor TM recently announced that domestic production volume in July is expected to recover and return to 90% of target output, as states continue to ease shelter-in-place strategies and begin reopening processes that were imposed due to the coronavirus outbreak. Toyota would make 10% fewer vehicles in July than originally planned, as it gradually resumes production following factory closures earlier this year amid the coronavirus crisis. While production is yet to return to normal, July's reduction is lower than 40% production cut in June. It expects the recovery trend to continue in August.Although Toyota halted production at some of the domestic factories from April to June, it will not change its plan of producing at least 3 million cars in Japan in 2020.

Price Performance

The following table shows the price movement of some of the major auto players over the past week and six-month period.

In the past week, all stocks have slid. In the past six months, all stocks apart from Tesla have declined.

What’s Next in the Auto Space?

Watch out for usual news releases and further updates on the impact of the COVID-19 pandemic on the auto sector. Car enthusiasts will be keeping a close watch on June 2020 U.S. car sales, which will be coming out this week. Investors in the auto sector would be closely tracking the monthly sales reports of auto biggies including Honda Motor, Hyundai and Toyota.

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