Early premarket gappers
- Gapping up:
- DCFC +5.4%, IVVD +4.1%, MTN +3.7%, WK +2.9%, ATRA +2.1%, MOR +2%, MNSO +1.8%, JEF +1.6%, SVC +1.1%, CBRL +1%, ATCO +0.9%, PLD +0.6%, EFX +0.5%
- Gapping down:
- SUNL -23%, AMPS -15.7%, CTLT -4.8%, MLKN -4.3%, VJET -3.3%, VLTA -3.2%, BILI -3%, MNTS -2.7%, CNXC -2.5%, FEAM -2.2%, ALGN -1.6%, ADC -1.5%, TUR -1.3%, PCG -1.3%, SBUX -1.1%, NEM -0.8%
>>> Up
* Givaudan Raised to Buy at Citi; PT 3,300 Swiss francs
* KWS Saat Raised to Buy at M.M. Warburg; PT 71 euros (+)
* Snam Raised to Add at Intesa Sanpaolo; PT 5.30 euros (+)
>>> Down
* Hugo Boss Cut to Reduce at Baader Helvea; PT 44 euros
* Rightmove Cut to Sell at Citi; PT 400 pence
* THG PLC Cut to Sector Perform at RBC; PT 50 pence
>>> Initiation
* Elisa Reinstated Neutral at Citi; PT 49 euros
* Embracer Rated New Buy at Deutsche Bank; PT 75 kronor
* Evotec SE Rated New Buy at Bryan Garnier; PT 22 euros (+)
* Petrofac Rated New Hold at Peel Hunt; PT 125 pence
* Storebrand Rated New Buy at Berenberg; PT 99 kroner
* Tele2 Reinstated Neutral at Citi; PT 105 kronor
* Traton Rated New Equal-Weight at Morgan Stanley; PT 17 euros
* Unilever ADRs Rated New Equal-Weight at Morgan Stanley
>>> Call
* Accor’s New Ebitda Guidance Is Ahead of Consensus, Analysts Say (+)
* Embracer Has Digested the Bad News, New Buy at Deutsche Bank (+)
* ‘Extreme’ Negativity Sends Buy Signal on Stocks, Bernstein Says
* European Packaged-Food List Prices Go Up, But Rarely Come Down
* Givaudan Raised to Buy at Citi, Negative on Novozymes Outlook
* Hugo Boss Gets Only Negative Rating, Baader Cites Market Trends (+)
* Rightmove Downgraded to Sell as Citi Sees Further Downside Ahead
* Sinch Equal-Weight, Exposed to Low Growth Areas: Morgan Stanley
* THG Faces ‘Uphill Battle,’ RBC Downgrades to Sector Perform
* Traton a Restructuring Story, New Equal-Weight at Morgan Stanley (+)
DAX:
- Porsche SE (PAH3 TH) +2.4%
- Porsche Set for Bold Trading Debut After Pricing at Top End
- VW (VOW3 TH) +1.2%
- Siemens Energy (ENR TH) +0.9%
- Zalando (ZAL TH) -1.9%
MDAX:
- Thyssenkrupp (TKA TH) +1.9%
- Telefonica Deutschland (O2D TH) +1.4%
- Aroundtown (AT1 TH) +1.4%
- TeamViewer (TMV TH) +1%
- K+S (SDF TH) -1.1%
- Hugo Boss (BOSS TH) -1.8%
- Hugo Boss Gets Only Negative Rating, Baader Cites Market Trends
SDAX:
- Heidelberger Druck (HDD TH) +3%
- MorphoSys (MOR TH) +2.2%
- VERBIO Vereinigte (VBK TH) +1.3%
- Deutsche PBB (PBB TH) +1%
- Uniper (UN01 TH) -0.5%
>>> Up
* Givaudan Raised to Buy at Citi; PT 3,300 Swiss francs
>>> Down
* Hugo Boss Cut to Reduce at Baader Helvea; PT 44 euros
* Rightmove Cut to Sell at Citi; PT 400 pence
* THG PLC Cut to Sector Perform at RBC; PT 50 pence
>>> Initiation
* Elisa Reinstated Neutral at Citi; PT 49 euros
* Embracer Rated New Buy at Deutsche Bank; PT 75 kronor
* Petrofac Rated New Hold at Peel Hunt; PT 125 pence
* Storebrand Rated New Buy at Berenberg; PT 99 kroner
* Tele2 Reinstated Neutral at Citi; PT 105 kronor
* Traton Rated New Equal-Weight at Morgan Stanley; PT 17 euros
* Unilever ADRs Rated New Equal-Weight at Morgan Stanley
>>> Call
* ‘Extreme’ Negativity Sends Buy Signal on Stocks, Bernstein Says
* European Packaged-Food List Prices Go Up, But Rarely Come Down
* Givaudan Raised to Buy at Citi, Negative on Novozymes Outlook
* Rightmove Downgraded to Sell as Citi Sees Further Downside Ahead
* Sinch Equal-Weight, Exposed to Low Growth Areas: Morgan Stanley
* THG Faces ‘Uphill Battle,’ RBC Downgrades to Sector Perform
Asian equities jumped on Thursday following the strongest day for US stocks since early August after the Bank of England unveiled a bond-buying program that triggered a global rally in government debt. Shares rose in Japan, Hong Kong and Australia, mirroring a 2% advance for the S&P 500, which snapped a six-day losing streak. Lingering caution was evident with small declines in US stock futures and the dollar’s advance against the pound and the yen. Investors remained alert to the threats posed by discordant moves from central banks over the past few days, with Federal Reserve officials adamant on further monetary tightening, the BOE unveiling a £65 billion ($71 billion) plan to support government debt and authorities in Asia trying to prop up weakening currencies. The pound fell nearly 1% on Thursday as the greenback resumed its rise against its Group-of-10 counterparts. China’s onshore yuan advanced for the first time in nine sessions, after the central bank issued a verbal warning against currency speculation. Federal Reserve officials continued to hammer home the central bank’s hawkish outlook. European Union officials unveiled fresh economic limits on Russia in response to further annexing of Ukraine. The new round of sanctions would bar sales of Russian oil by third party countries beyond a set price cap. The plan would inflict around $6.7 billion in economic pain on Russia. US after Hours MTN +4.5%, JEF +1.6% higher on earnings; Yellen wants to stay as Treasury Sec after midterms, according to Bloomberg Tax.
Nikkei +1.05% Hang Seng +1.20% CSI +0.51% Shanghai +0.53% Shenzen +0.65%
Eur$ 0.9682 CNH 7.1917 CNY 7.1899 JPY 144.48 GBP 1.0800 CHF 0.9797 RUB 58.0910 TRY 18.5302 WTI$ 81.67 -0.57% Gold 1,649.60 -0.63% BTC 19,538.40 -0.15% ETH 1,341 -0.70%
S&P -0.40% Nasdaq -0.63% EuroStoxx -0.06% FTSE +0.09% Dax +0.02% SMI +0.11%
Macro :
- Citadel Founder Ken Griffin Says Economy Has ‘Powerful Tailwind’
- U.S. Investor Bull-Bear Spread -40.8: AAII
Keep an eye on :
- AC FP : Accor FY Ebitda Forecast Beats Estimates
- BAVA DC : With Monkeypox Outbreak Slowing, Focus Shifts to Prevention
- BBVA SM : BBVA Announces Payment of Interim Cash Dividend vs 2022 Results
- BEN FP : Beneteau Sees FY Revenue +13% to +16%
- ENEL IM : Italy’s Enel Agrees to Gas-Price Increase With Algeria
- FLOW NA : Flow Traders Chief Risk Officer Britta Achmann to Step Down
- GSF NO : Grieg Seafood Puts New Investments on Hold While Assessing Tax
- HMB SS : *H&M 3Q ADJ. OPER PROFIT SEK3.01B, EST. SEK4.34B
- HLE GY : Hella Sees FY Adjusted Ebit Margin 5.5% to 7%
- HBH GY : Hornbach Holding 2Q Adjusted Ebit EU129.1M Vs. EU168.1M Y/y
- ORP FP : Orpea 1H Ebitda EU415M Vs. EU499M Y/Y
- PAH3 GY : Porsche Share Price Values Sports-Car Maker Close to Parent VW
- PDG LN : Hedin Mobility Implies May Change Position on Pendragon Stake
- RAA GY : Rational Sees FY Ebit Margin 21.5% to 22.5%
- RNO FP : Carmakers in Spain to Hike Wages by as Much as 10%: Expansion
- ROG SW : Eisai’s Alzheimer Success Leaves Many Questions Still Unanswered
- SFL IM : Safilo Gets Financing Deal Worth EU300M
- SNC PL : Sonaecom Says It Will Directly Hold a 26% Stake in NOS
- S30 FP ; Solutions 30 1H France Revenue EU221.9M Vs. EU270.3M Y/y
- SCATC NO : Scatec Targets to Invest NOK10b of Equity in New Power Plants
- STLA IM : Carmakers in Spain to Hike Wages by as Much as 10%: Expansion
- TEMN SW : Software Firm Workiva Is Said to Draw Thoma Bravo, TPG Interest
- TTE FP : TotalEnergies Braced for End of Cash Flows from Russia, CEO Says
- TTE FP : TotalEnergies May Sell Part of its 20% Stake in Adani Green
- UBI FP : Ubisoft Says ‘Skull and Bones’ to Now Release on March 9
- VOW GY : Volkswagen Says Porsche IPO Prices at EU82.50/Shr, Top of Range
- VOW GY : Carmakers in Spain to Hike Wages by as Much as 10%: Expansion
- WLN FP : Worldline to Buy 40% Stake in Online Payment Platform B.V.
Asos Revives Topshop, Topman for a New, Digital Generation
Both brands have a more inclusive offer, a new visual identity, digital-first strategy and their very own shopfront on Asos.com.
LONDON — After more than 18 months of ownership, Asos is ready to reveal the latest iteration of British cult clothing labels Topshop and Topman.
On Thursday the company will showcase a new visual identity for the sibling labels that it purchased in early 2021 from Arcadia Group, which filed for bankruptcy during the pandemic.
Inspired by signage from old Topshop and Topman stores, the visual identity will appear as a digital storefront on a stand-alone landing page on Asos.com. This is the first time Asos is dedicating a stand-alone storefront to brands in its portfolio.
A new monogram features interlocking Ts in a bid to unite the two heritage high-street brands under one banner and aesthetic. While Topshop and Topman had always been related, and shared shop floor space, this is the first time they’ve been marketed under one banner.
In an exclusive interview, Nikki Tattersall, an Asos veteran and the director of Topshop and Topman, said the e-commerce giant is introducing “reinvigorated collections with a laser focus on quality, design, fit and fabric.”
Price points are similar to what they were in the past, although Tattersall did not elaborate. She said Asos was “very much focused on finding the right value” and seeking the best possible fit, quality fabric and pricing.
Topshop and Topman will remain “head-to-toe” brands, offering accessories and product extensions in line with what customers want, Tattersall said.
Tailoring from the debut Topshop collection under Asos’ ownership.
There is a strategic focus on the brands’ most popular categories, including denim, dresses and tailoring. Tattersall said the design teams remain the same as those who worked under the ownership of Philip Green’s Arcadia.
Tattersall said Asos was keen to “harness the knowledge and expertise” of the creative teams and “reignite their creativity and autonomy. We’re putting the focus right back on fashion, and putting the customers’ needs at the heart of our decisions.”
She added that it was crucial for Asos to highlight the individual aesthetic of Topshop and Topman and ensure they stood apart from the other clothing brands in the Asos portfolio. That’s why they’ll have their own digital storefront and landing page.
While Asos has preserved so much of both brands’ DNA, it has also made changes. Asos has been working with the design teams on a “digital-first” approach. In the past, Topshop and Topman sold mainly through physical stores, although they did have an e-commerce element.
Tattersall said the two distribution channels were very different, and Asos has been working closely with teams on issues such as “phasing, timing, color options and styling” of the merchandise to ensure that the collections appeal to a customer who is buying online rather than browsing a shop floor.
Even in the darkest days of Arcadia’s financial woes, and last year’s transition to new ownership, Topshop and Topman continued to perform well on the shop floor.
Topshop and Topman sell through 106 Nordstrom stores in North America, and Tattersall said business in the region is booming.
“Our Nordstrom partnership is particularly exciting,” she said, adding that she made a recent visit to Los Angeles to lay out the new branding and strategy for the North American teams.
A look from the debut Topman collection under Asos’ ownership.
She declined, however, to say whether the revamped brands would have a physical presence outside of North America.
Under Asos, Topshop and Topman will have a wider reach globally and be delivered to 230 countries.
For the first time, Topshop and Topman will introduce “truly inclusive sizing” through the new Curve range, which covers sizes 18 to 28. That also applies to Topshop’s bestselling denim range, including the popular Jamie and Joni styles.
Asos has invested further in Topshop’s maternity, tall and petite collections, too. Tattersall said that inclusivity in terms of sizing, diversity of offer and audience appeal was “non-negotiable” for Asos.
For fall 2022, Asos will introduce a series of limited-edition pieces that it describes as “the purest expression” of the brands’ new vision. She said the limited-edition pieces have a more elevated, directional aesthetic, with key designs manufactured in the U.K., many of them at factories and workshops in London.
Tattersall said “taking stewardship of such a beloved institution has been a privilege. Over the last 18 months, we have done some incredible work, learning from the past, and from each other, to create something exciting and relevant for the future.”
Going forward, more collaborations — with music, pop culture, art and other creative industries — could be in the cards, Tattersall added. “We want to cement the brands’ place in fashion and culture, and partner with talent from various different avenues,” she said.
Until late 2020 Topshop was a multibrand emporium selling makeup, accessories, jewelry and even cupcakes from its buzzy ground-floor space on Oxford Street and its other U.K. stores.
Both Topshop and Topman have been around since the ’60s and have long been synonymous with youth culture in Britain. Many fashion designers, editors, PRs and buyers in the U.K. worked Saturday jobs at the two brands, or spent their weekends shopping in the stores.
It was under brand director Jane Shepherdson, who left in 2006, that Topshop became an internationally recognized retailer — and a destination on the London retail circuit. On her watch Topshop looked beyond the runways, and to the burgeoning street-style scene, for inspiration. She also tapped London fashion brands from Zandra Rhodes to JW Anderson to create capsule collections for the retailer.
Under former owner Green, Topshop would go on to broker celebrity deals with Kate Moss, Beyoncé, and Kendall and Kylie Jenner for clothing, lingerie and makeup. Topshop was also a headline sponsor of London Fashion Week, bankrolling its own, large-scale venue during shows and supporting designers including Shrimps, Molly Goddard and Charlotte Knowles.
As reported last year, Asos won the bidding race for Topshop, Topman, Miss Selfridge and HIIT, the flagships in now-defunct Arcadia.
The new Topshop and Topman interlocking T branding.
The price of the deal was 330 million pounds, minus the store portfolio, and some argued at the time that Asos picked up a bargain.
The online giant bought the brands, intellectual property and inventory in a deal that mirrors Boohoo’s acquisition last week of Debenhams.
Asos has since integrated the brands into its platform and their revenues and profits will be consolidated within the larger group.
Asos, which was already selling Topshop on its multibrand platform, said last year the overlap between its own customer base and that of Topshop was part of the attractiveness of the deal, as was the fashion retailer’s established presence in international markets, including the U.S. and Germany.
“The acquisition will help accelerate our multibrand platform strategy,” said Nick Beighton, then chief executive officer of Asos, who has since taken up the CEO role of Matchesfashion.
According to Euromonitor, the acquisition secured Asos’ place among the top five online players in the apparel and footwear e-commerce space, and allowed it to offer a “better balanced” product assortment between the Asos brand and third-party labels.
Last year’s sale also came with store closures and job losses.
While up to 300 employees working across the labels’ design, retail partnerships and buying departments moved over to Asos, thousands of jobs at the brands’ 70 or so physical stores across the U.K. were lost.
Hermès Banks on Luxury Retailing With New Madison Avenue Flagship
The 45,000-square-foot store replaces two smaller stores on the avenue.
NEW YORK — Hermès is making a major statement about the future of brick-and-mortar retail with the long-awaited opening of its massive new Madison Avenue flagship.
After more than eight years of planning, the French fashion house is finally opening the doors to a seven-story, 45,000-square-foot monument to luxury that will undoubtedly change the face of retail on the street. From the outdoor gardens and the cavalier on horseback on the roof to the expansive assortment that includes everything from saddles and dog beds to leather goods, diamond watches, rolling suitcases and ready-to-wear and accessories for men and women, the store joins the Ginza in Tokyo as the largest in the company’s 300-plus-unit fleet.
Four of the floors, or some 20,250 square feet, are devoted to selling space and a fifth is dedicated exclusively to repairs of Hermès products as well as artisan studios. The two lower levels are offices and stockrooms.
“There is no better tribute to retail,” said Florian Craen, executive vice president of sales and distribution at Hermès International. “Not only does it offer room for all our métiers, but it also offers the opportunity for enchanted discoveries and a place to smile.”
The store, at 706 Madison Avenue on the corner of 63rd Street, encompasses three buildings, one a former bank built in the Federalist style that dates to 1921, and two adjacent town houses that create an L-shape around the bank.
The store was designed by the Parisian architectural firm RDAI that was founded by Rena Dumas, the wife of the former chief executive officer of Hermès. It replaces the two smaller Hermès stores — one for menswear and the other for women’s — that have now been closed.
In the new location, there are two entrances on Madison Avenue. One is for the men’s store, which has been expanded from around 3,000 square feet to more than 6,000 square feet over two floors.
The other offers a preview of some of the highlights from each of the brand’s métiers. So upon entering, shoppers get a taste of the extent of the mix with scarves, jewelry, apparel, leather goods and beauty products all being offered. The main floor also features fragrances and makeup stations.
“As our stores are getting larger, it’s something we pay attention to now,” Craen said. “We’re very careful when we design our stores that there is an expression of all our métiers.”
And in addition to the products, the “extended scope of services” is also being featured with the repair department on the fifth floor that is now the main repair site in the U.S., as well as a concierge, VIP rooms in each department as well as bars.
Throughout the store are more than 150 paintings and pieces of art including a child’s hansom cab from 1830s London on the main floor that pays tribute to both Hermès’ heritage as well as New York City cabs, Craen said. “It’s a house of many stories.”
Some of the features of the former bank building were retained, including a plaque at the rear of the main floor dedicated to the founders of the Bank of New York, including Alexander Hamilton; the original staircase; the grillwork from the former entry to the safe deposit box area, and an antique clock that is still on the wall set to 7:06.
“It’s part of American history,” Craen said.
One of the biggest changes is the significantly expanded men’s store.
“We’re really excited about bringing men’s and women’s together again; they’ve been separate since 2010,” said Robert Chavez, president and CEO of Hermès USA. “That’s going to be a dynamic change for us. The other thing that is new for us are these multiproduct displays so people get a feeling for the extent of the offering that we have.”
In the men’s department, that includes neckwear, shirts, accessories and fragrances in addition to apparel.
The back of the men’s department also showcases some of the brand’s creative offerings such as bicycles, roller skates, skateboards, boxing gloves, dog tents and other novelty items. A selection of saddles is on display here too.
“That’s where we came from,” Craen said, adding that Hermès continues to provide equipment for the best riders in the world.
The second floor is a “men’s universe,” Craen said, showcasing ready-to-wear and footwear along with watches, gloves, bags, fragrances and a made-to-measure salon where customers can create their own suits, shirts, knitwear and other products.
“The breadth of the offering has been significantly expanded,” Chavez said. “We’ve never been able to offer this much before.”
Upon climbing the Portugese limestone staircase to the second floor adjacent to the men’s store is the home area with its assortment of dishes, blankets and furniture.
The third floor is home to a large fine jewelry and watch department. “We’re able to showcase fine jewelry like never before,” Craen said. There is also a large women’s accessories area for gloves, belts, hats and other products as well as the ready-to-wear. “No other Hermès store can present such a diversity of offering.”
The fourth floor is dedicated to leather goods and has a giant glass-fiber bas-relief wall designed from ink drawings by French artist Francois Houtin that feature American trees. A large skylight brings sun and light to the floor. The piece de resistance is a Miranda Brooks-designed roof garden that will be used to host special events and will also be open to clients.
Throughout the store are several seating areas where customers are invited to sit and relax, Craen said. There are wet bars on each floor and butler service for the first time so that shoppers can have coffee, Champagne or other beverages brought to them while they’re resting. There’s a display case on the fourth floor with a collection of leather bags from the 1920s and ‘30s on loan from the archive in Paris.
“We love to see our customers spending time here. The only reason for a store to exist today is to offer special moments that the digital world cannot offer.”
He continued: “Compared to the former stores, there is more space and more interactions with all the seating areas and private rooms.”
Although the artisan studios are currently private, Chavez said the hope is to eventually allow customers to interact with the craftsmen and see them work.
Craen said one of the primary reasons for selecting this location was not only its size but also the “characteristic of the building itself,” with its many windows that allow the light to flow in.
“It’s a very New York feeling that makes it feel more like an apartment.”
Each Hermès store is unique and designed to fit into the community in which it is located. Some are big and others are small. Craen used London as an example, saying it will soon have one of the largest units in the world as well as one of the smallest.
“We’ve always been like this,” he said, “this idea of having very different addresses matching the environment. The network is built on this juxtaposition of small stores and large stores — stores where there’s a lot of traffic and others that allow our clients to have very intimate relation with the brand.”
There are 32 stores in the U.S., Chavez said, which means there is “enormous potential to grow.” Some of the most recent additions include the 7,600-square-foot Austin, Texas, store that is not located in a luxury mall, but on South Congress Avenue, with its lively music and restaurant scene. “It’s a little bit of a renegade, but the response has been phenomenal.”
Other small stores are slated to open in Princeton’s Palmer Square, he said, as well as Aspen, Colorado, and Williamsburg in Brooklyn, New York.
The company no longer has a wholesale business, except for fragrances, but sells exclusively through its own network of stores as well as online. In reporting its first-half figures at the end of July, the company said sales rose 26 percent and the company achieved record operating profits of more than 42 percent for the first time. The gains were driven by strong growth in retail in the U.S. and China and the return of tourists to Europe.
Leather goods continue to represent around half of the brand’s sales and in the U.S., Chavez said, it’s shoes, fine jewelry and home products that are leading the way. “We’re becoming a lifestyle brand now,” he said. “We’re not just known for the scarves and bags anymore. And that’s great to see as we continue to expand our network across the country.”
E-commerce is also a growing business. The category launched in the U.S. in 2002, which Craen said caused “an earthquake in the company,” but it has turned out to be very successful and continues to grow. “Brick-and-mortar came back strong,” Chavez said, “but e-commerce is even stronger.”
And Craen said Hermès’ online presence not only leads to higher sales but also helps with name recognition. “You can find everything we make on hermes.com,” he said. “Our distribution is so limited that we needed to have a door wide open.”
Craen said that despite the challenging macroenvironment, Hermès continues to see “strong growth everywhere.” The goal is to continue to grow the brand in Europe, America and Asia, he said.
“It’s our job to adjust to an unpredictable and fast-moving world. And everything [that] is happening at the very moment was unplanned and couldn’t be foreseen. So we’re adjusting ourselves. We manufacture in France so we don’t have the complexity of supply chains where production is scattered across the world. We are confronted by inflation in France, but I would say we’re in a more manageable situation, because we are in full control of our manufacturing.”
Craen said that while retail may be garnering the most attention of late, Hermès remains first and foremost a manufacturing company. And as a result, it will continue to explore additional products and categories.
“There’s a constant flow of new product coming up so there will be a lot of extension of existing categories for sure in the future,” he said.
Electric vehicle push drives shift at car parts suppliers
BorgWarner buys charging groups while corporate cousin Aptiv benefits from portfolio of cables and wires
Carmakers’ loudly promoted investments in electric vehicles are sending tremors through a lower-profile but huge industry: their parts suppliers.
Suppliers that historically built components for internal combustion engines are feeling increasing pressure to adjust to battery power. It has not always been a smooth shift.
The challenges are encapsulated in two companies with ties to the former Delphi Automotive, which was once one of the largest suppliers in the US.
BorgWarner and Aptiv are not familiar names to most drivers, but their parts help build cars and trucks for manufacturers such as Ford and Volkswagen. Together they have more than 200,000 employees — more than Ford or General Motors alone.
Michigan-based BorgWarner has a long history producing parts for petrol-powered vehicles. It generated 19 per cent of its revenue last year from selling turbochargers, which use exhaust from combustion engines to rotate a turbine and boost power. “To make the transition to EV, they have to totally reinvent themselves,” said Luke Junk, an analyst at Baird.
As part of that reinvention, BorgWarner last week said it plans to buy a business of China’s Hubei Surpass Sun Electric that makes electric chargers for up to Rmb410mn ($58mn), its second EV charging deal in two months after purchasing California’s Rhombus Energy Solutions for $185mn.
The transition to electric vehicles is “probably more broad-reaching” for BorgWarner than for its carmaker customers, Paul Farrell, the company’s chief strategy officer, said in an interview. After all, “they’re still making cars on some level”.
BorgWarner jump-started its transformation two years ago when it purchased the power-train spin-off of Delphi Automotive, which itself was previously part of General Motors. The $3.3bn deal, the biggest in its 94-year history, further enmeshed BorgWarner in the business of supplying combustion engines with products such as fuel injection systems and ignition products,
But it also brought a key EV technology to the company: inverters which convert direct-current electricity stored in a battery into alternating current that can run a motor.
Acquisitions are part of BorgWarner’s plan to refashion itself for the electric era. Last year chief executive Frédéric Lissalde said the group plans for EV-related products to account for 25 per cent of sales by 2025, and up to 45 per cent in 2030, through a combination of organic growth, M&A and selling internal combustion-related businesses. In 2022, the company projects revenue from EV-related products will account for $850mn, or about 5 per cent of sales.
Dealmaking can bring companies new technologies to sell to their current customer base. According to Dealogic, the number of deals in the US auto supply chain for the year to date is 72, increasing from 49 for the same period two years ago.
“I didn’t hear CEOs worried about it until two years ago, like really starting to rethink their M&A,” said Kim Borden, a partner at McKinsey. “There are definitely people, even now, today, who are still coming to terms with the fact that their portfolio doesn’t match their future.”
Lissalde told investors last month that the company was on track to book $3.7bn in EV-related revenue in 2025. But chief financial officer Kevin Nowlan said plans to sell $3.5bn worth of internal combustion-related businesses were “temporarily on hold” until debt markets settle.
A different situation awaits Aptiv, which is how Delphi Automotive renamed itself after the power-train spin-off five years ago. Aptiv held on to other, mostly higher-tech, businesses of Delphi’s.
The businesses manufacture wiring harnesses, cables and connectors; engineer layouts for that electrical architecture; design systems for automatic braking and to prevent lane drifting; and also develop autonomous driving technology.
Electric vehicles need more of Aptiv’s wiring and connectors than traditional cars and trucks. The company could make about $500 per internal combustion vehicle if it sold every relevant product that it makes, Junk said.
On an EV, the per-vehicle sales balloon to $1,200. Suppliers such as Aptiv are “essentially making this transition with the same products”, the analyst said.
Aptiv chief executive Kevin Clark told investors this month that its business selling electrical architecture for EVs “was effectively profitable from day one” because the company already sells products “on one out of every 3.5 vehicles manufactured globally”.
Some car parts suppliers are simply “better positioned as this transition takes place”, said Fitch Ratings analyst Stephen Brown. “It’s those suppliers that are less well-positioned that are really having to focus on transforming their business”.