>>> Chemring/Ultra tie-up could break defence deal drought

Chemring/Ultra tie-up could break defence deal drought

Dealreporter personnel pick out pre-event ideas by combing through transcripts, stock exchange filings, analyst reports and news stories. This raw data is combined with proprietary insights and commentary to produce an exclusive report that offers short and long-term ideas (No investment action should be taken without further investigation). If you have any ideas for coverage please email europeflash@acuris.com

It has been at least a decade since a pure-play UK-listed defence sector operator with a market value of GBP 500m or more has become a target, according to Dealreporter data.
Even a long-mooted tie-up between Cobham [LON:COB] and Meggitt [LON:MGGT] still looks some way off, this news service reported yesterday (23 May).
But there is one potential combination which could break that barren run - a possible tie-up between Ultra Electronics [LON:ULE] and Chemring [LON:CHG].
A merger between these two is a possibility, a banker tells the Flash. Both have been struggling in recent years, along with much of the sector, and need to find a way to improve performance. Finding synergies in a combination of the two businesses might be one way to reboot their ailing fortunes.
Ultra, in March, saw its own attempts to increase scale scuppered by the US Department of Justice (DoJ). The DoJ asked for additional information on an agreed USD 234m transaction with underwater warfare specialist Sparton. Eight months after its announcement in July 2017, Ultra and Sparton agreed to terminate the deal.
On the rebound, Ultra could seek out a deal with Chemring. Valued at GBP 590m, Chemring is larger than Sparton but still probably digestible. Combined, the two companies would have GBP 155m of net debt and GBP 202m of trailing-12-month EBITDA. In a takeover scenario, Ultra could fund in the region of GBP 250m as cash consideration in a transaction and maintain pro-forma leverage at 2x EBITDA. It is possible that this could be stretched if there is a compelling case for synergies, though it looks like a large part of any consideration would need to be funded by Ultra in equity.
Among mid-tier UK defence players, Meggitt [LON:MGGT] has the highest net debt to EBITDA ratio at 1.9x.
Chemring has faced takeover speculation on numerous occasions in the past. An unnamed bidder was reportedly interested around the time of a 2016 rights issue. Earlier, in 2012, Chemring held formal talks with private equity group Carlyle, though discussions ended without an agreement.
As well as a decent number of potential buyers, there’s also potential on Chemring’s shareholder register. Occasional activist investor Sterling Strategic Value owns 6.7% of the business.
Barriers to a deal between Chemring and Ultra include UK political sensitivities around the country’s industrial and defence industries. Melrose’s [LON:MRO] acquisition earlier this year of conglomerate GKN bore out that sentiment – politicians openly campaigned against the deal even though both parties were headquartered in the UK.
Then there are US regulators to satisfy. Ultra’s rejected attempt on Sparton means it, too, is likely to tread carefully. Both Ultra and Chemring generate around half their sales in North America.
Another possible obstacle to a transaction is Chemring’s high sector-relative price-to-earnings ratio, which would weigh on potential earnings accretion for Ultra if, as is likely, equity needs to be issued as consideration. Chemring trades at 16.5x versus mid-tier UK defence peers, including Ultra, Cobham [LON:COB], Meggitt and Qinetiq [LON:QQ.] that trade at an average 15.1x. Ultra trades towards the low end of the group at 13.6x.
Chemring, however, trades at a sizeable discount to the sector on an EV/sales basis, at 1.2x versus the sector average of 1.8x. On EV/EBITDA multiples, it also trades below peers, at 8.3x versus 9.8x. These prevailing sector multiples imply Ultra could pay a premium of 20% to 50% on Chemring’s GBP 2.13 share price, at yesterday’s close.
It has been a long wait, but perhaps Ultra and Chemring can bring the industry’s deal drought to an end.

(Bus.ofFashion) LVMH Pumps Over $60 Million Into Lyst

LVMH Pumps Over $60 Million Into Lyst
Fashion platform Lyst has forged a strategic partnership with the world’s largest luxury conglomerate as the e-commerce market heats up.

LONDON, United Kingdom — Three years ago, Groupe Arnault, the family office of LVMH chairman and chief executive Bernard Arnault, joined venture firms Accel, Balderton and others to inject $40 million into fashion search platform Lyst.
Now, Lyst and LVMH are deepening their relationship with a new round of funding led directly by the French luxury conglomerate.
The terms of the transaction were undisclosed, but market sources suggest Lyst has raised as much as £50 million to £100 million ($66.5 million to $133 million). Sources put LVMH’s contribution to the round at about 90 percent of total. As part of the deal, LVMH chief digital officer Ian Rogerswill join Lyst’s board.
Before this latest investment round, Lyst — essentially a digital shopping mall that aggregates millions of fashion products from brands, department stores and boutiques under one virtual roof — had attracted $60.5 million in funding, putting the total sum the company has raised to date at well over $100 million.
Lyst hit a gross merchandise value of $325 million in the year to March 2018, according to the company, and Morton said gross merchandise value is “approaching half a billion dollars this year.”
The business takes a commission on sales, implying actual revenues of much less than that. In the year to March 2018, Lyst generated $21 million in net revenue. The platform became EBITDA positive in December 2017 and was “very close to EBITDA break even for the whole year,” said Morton.
Lyst plans to use the new funding — and tap LVMH’s deep international expertise — to drive global expansion. Currently, 60 percent of Lyst’s revenue comes from the US, 30 percent from Europe and 10 percent from Asia, but Lyst was only available in English until the recent launch of a French site.
The London-based start-up plans to launch in Germany and Spain next. “That’s not just language, but a globalised experience that’s in tune with local market dynamics, because the French customer is clearly different from the British customer or the American customer,” explained Morton.
Lyst also plans to invest in product development, allowing users to search and discover fashion products in new ways, partly inspired by innovation in the music industry, where Morton and Rogers first met several years ago. (Previously, Morton was a venture investor at Balderton Capital, a backer of Spotify, while Rogers worked at Beats Music and then Apple Music.)
Specifically, Lyst aims to allow consumers to discover fashion items by entering search terms like “Kardashian dress” or “job interview” much like they can find Spotify playlists that are perfect for workout sessions or weekend barbeques.

“Spotify was just a search platform. You had to search by artist or DJ, and it was quite a useful experience, but it was only helpful if you knew exactly what you wanted,” Morton explained. “But then we realized: customers don’t only search that way, they also searched by a mood, or by occasion or by other culturally relevant hooks.”
“If music is a leading indicator for consumer behaviour and distribution online, then I think that giving people help with finding what they want is really important,” added Rogers. “There are tens of billions of songs on Spotify and there are millions of SKUs on Lyst — and when you have that scale of availability, human beings need some help getting through that.”
Luxury e-commerce is growing fast. The portion of personal luxury goods purchases that happen online — now about 9 percent of total — is expected to hit 20 percent by 2025, according to Bain & Company. And both Morton and Rogers believe that luxury e-commerce purchases won’t plateau, as some suggest, but continue to grow at a more stable rate, possibly reaching a majority of luxury sales.
“As Bernard Arnault says, the customer is the boss and there's not one way that customers will shop online,” said Rogers. “Sometimes they will buy from a brand, sometimes they'll buy from a boutique, sometimes they'll buy from marketplace and sometimes they'll use a search engine like Lyst."
"I think search is going to be the starting point for customers in a lot of cases — search is a killer app on the internet,” he added. “LVMH is investing across the spectrum.”

>>> Elliott confirms ThyssenKrupp stake, sees scope for 'operational improvement

Elliott confirms ThyssenKrupp stake, sees scope for 'operational improvement'

Elliott Management has confirmed that it is a "significant shareholder" in ThyssenKrupp [ETR:TKA]. However, the activist said its stake does not exceed 3%, "the thresholds mandating disclosure under applicable German laws". The investment comes at a time when the company's planned joint venture with Tata Steel is under the scrutiny of activist investor and 18% shareholder Cevian Capital.
Further to recent media speculation, funds advised by Elliott Advisors (UK) Limited (“Elliott”) confirm that they are significant shareholders in thyssenkrupp AG (“thyssenkrupp” or the “Company”). The funds’ position in ordinary shares is such that it does not exceed, as of today, the thresholds mandating disclosure under applicable German laws. Elliott will make any disclosure regarding its holdings in the shares of thyssenkrupp no later than when and as required by German law.
Elliott’s approach to its investment in thyssenkrupp is consistent with its approach to all its investments. Elliott has spent significant time and resources analysing the Company, performing exhaustive research on its prospects, competitive positioning and valuation. Elliott believes thyssenkrupp has significant scope for operational improvement which would benefit all stakeholders and looks forward to engaging in a constructive dialogue with them in the near future, including with the supervisory and management boards.
Link to the original source.

>>> Premarkets

CS

Autos         -1%    US started investigation on car imports

Aryzta        -10%   Q3 results weak, EBITDA expected 9-12% below targets

Bawag         UNCH   Net profit 2% light vs CS, CET1 14% vs 13.7% CSe

Cap & Count   +10%   Considering split into two companies. REIT + Homebuilder

Cosmo          M/P   CS DOWNGRADE to UNDERPERFORM (CRL overhang)

Daily Mail     R     1H adj rev GBP746M, adj pretax GBP103M

Deut Tel      -1%    CMD - Capex higher, dividend mixed

Deut Bank    +0.5%   AGM comments, reduce headcount, more from CEO at 9.30

Electrocomp   +1%    No's inline, good start to the year

Inchcape      M/P    Emerging/Australasia offsetting UK/Europe, outlook unch

Intertek      +1%    Organic growth 4% vs CSe on 3.2%, guidance unchanged.

Kingfisher   -2-3%   Q1 LFL -4% vs CS est -2.9%, challenging start to year

Miners       +0.5%   Copper -0.15%, Brent +0.65%, Iron Ore +0.20%, China -0.10%

QinetiQ      +1-2%   FY revs 833m vs cons 820.6m, Op Profit 122.5m cons 112m

Smurfit Kap    R     FT report 3 top holders demand SKG enter talks with IP

Spire          M/P   Revenues to the end of April are in-line with expectations

TalkTalk      +5%+   Q4 Revs 3.5% light, looking to sell B2B business

Tate & Lyle    M/P   Pre-tax profit meets estimates, guidance underwhelming

United Utils   +1%   FY revs GBP1.74B est GBP1.74B, pretax slightly ahead

Vontobel       M/P   Buying Notenstein La Roche from Raiffeisen

Ypsomed       -10%   FY results inline, guidance light

 

ML

S.KAPPA - 3 top s/h's demand that SKG ends refusal to engage with IP (35).+2-3%

CAPITAL & COUNTIES - Is considering splitting into two listed companies(301)+2%

GO AHEAD - Reads well. Sees FY results slightly ahead of expectations (1887)+2%

QINETIQ - Revs of £833mn, +3% organic YoY, with op profit of £122.5m (250)..+2%

UNICREDIT - Could o/perform on Turkey rates being raised overnight by 4%(16)+2%

BBVA - Could outperform on Turkey rates being raised overnight by 4% (6.5)..+1%

UNITED UTILS - 1% beat, achieving operating outperformance 1st time (807).+0.5%

ERICSSON - Chairman Leten bought 44,380 shares at a price of SEK 65.08(66)+0.5%

MINERS - Copper -0.2%, Iron ore fut +0.2% with BHP OZ -0.09%, RIO OZ -0.77%.u/c

PARAGON - Numbers for H1 look in line but capital has fallen by 40 bps (552)u/c

IBERDROLA - Spec it's put 368MW of cogeneration plants in Spain on sale (6).u/c

TATE - Sales £2.71b pretax looks a miss but adjusted the EPS is a beat (609)u/c

INCHCAPE - Inline with strength in EM/Aus offsetting weaker UK/Europe (739).u/c

MEDICLINIC - PS of 30p, up 1% y/y, is all in-line with trading update (680).u/c

UNIBAIL - Westfield shareholders have voted through the Unibail deal (191)-0.5%

DAILY MAIL - Inline but a heavy weight of caution over biz and H2 (758).....-1%

BOVIS - CMD. Looks will highlight operational progress made to date (1266)..-1%

KINGFISHER - Challenging with Q1 LFL sales miss at -4% vs est of -2.8% (289)-2%

IBSTOCK - Suffered a slow start to the year in both the UK and the US (283).-3%

ARYZTA - Revenue €811.4M vs FactSet €891.9M; organic growth (1.2%) (18).-10-15%

 

Shore

INTERTEK - Grp revs +4.4%,organic +4%,on track to deliver targets...........UNCH 

UTD UTILITIES - FY revs +1.9%,PBT -2.4%,outperforming regulatory contract...UNCH 

TATE - FY sales-1%,PBT+13%,sees FY19 EPS growth at low single digit range....-1% 

IBSTOCK - volumes begin to normalise,performance weighted to H2..............+1% 

HENRY BOOT - sees FY in line despite the poor weather.......................UNCH

PLUS500 - intends to apply for main market listing...........................+1%

HSS HIRE - Q1 rev +5.2%,EBITDA well ahead of prev yr,positive trends continue+1% 

GO-AHEAD - Sees uplift in rail outlook for Fy.Fy seen slightly ahead.........+2% 

KINGFISHER - Q1 lfl -4%(Est-2.8%).B&Q -9%(Est-7%).Challenging start to yr....-4% 

PARAGON - H1 pft 73.4m.Divi 5.5p.Sees lending for year to remain strong......+1% 

TALKTALK - Fy rev 1.56b(Est1.7b).Fy ebitda 223m(Est230.4m).Divi 1.5p.........-2%

 DAILY MAIL - Performance in line.Sees slower revenue growth in H2............-2% 

 ELECTROCOMPONENTS - Fy ptp 173.1m(Est170.4).fy divi 13.25p...................+1% 

YOUNG & CO - FY revs +3.9%,PBT +1.5%,divi +6%,optimistic for yr ahead......UNCH

 CAP & COUNTIES - considering a demerger resulting in 2 listed companies......+3%

 MEDICLINIC - in line final divi 4.7p , CEO to continue as non exec..........UNCH 

WIZZ AIR - Rev's a miss, free cash $980m fleet expansion to continue.........-2% 

QINETIQ - beat to estimates, maintains guidance see modest organic growth....+1%

 

RBC PRE-MKT INDICATIONS

 

*ARZYTA:                 -15% profit warning again, starts cost cutting plan.

*DAI/BMW/VW:           -2% WSJ: Trump looking into new tariffs on imported vehicles.

*DEUTSCHE BANK:        +1% group update; job cuts, reduce costs to €22B in '19.

*DEUTSCHE TEL:           0% sees sales & profit growth through '21, positive commentary.

*FLUGHAFEN WIEN:        +1% Q1 EBITDA 3% ahead, raising EBITDA guidance for FY'18.

*GO-AHEAD:                +1% trading statement positive, uplift in rail outlook for FY'18. 3

*IBERDROLA:               +1% CONFIDENCIAL: decided to sell 19 co-generation plants.

*INTERTEK:                 +2% Q1 top line touch better, FY'18 targets confirmed.

*KINGFISHER:              -5% Q1 sales miss, negative impact from weather & closures.

*ORSTED:                    -4% fails to win contract for Massachusetts Offshore Project.

*PARAGON:                  +1% H1 numbers in line, raises views for FY'18 commercial lending.

*TALKTALK:                  +4% H2 revenues 4.3% ahead, FY'18 guidance in line.

*UNITED UTILITIES:         0% FY'18 small miss @ net level, beat @ operating line.

*WIZZ AIR:                   -1% FY revenues miss, weak into numbers.

 

>>> Barclays CEO and chairman split over interest in bid for Standard Chartered

Barclays CEO and chairman split over interest in bid for Standard Chartered - reports
24 MAY 2018
Barclays’ [LON:BARC] chief executive Jes Staley and the FTSE-100 bank’s chairman John McFarlane are in disagreement about a potential takeover bid for UK-based rival Standard Chartered [LON:STAN], The Timesreported. The newspaper did not cite a source for the information.
An Ft.com report on Wednesday, 23 May said McFarlane was interested in a potential merger with Standard Chartered and that he had the support of Barclays International chairman Gerry Grimstone. The report cited people briefed on the situation for the information.
The Times report said Barclays and Standard Chartered are trying to downplay the merger speculation.
McFarlane’s interest in a deal with Standard Chartered is in contrast to Staley, who has been trying to pull back from the Asian and African markets to focus on London and New York, the item said.
The report quoted an analyst who said the Barclays board’s “apparent” difference of opinion with Staley does not create a good impression and would leave the bank vulnerable to further activist shareholder campaigns.
As disclosed in March, the activist investment firm Sherborne has acquired 5% of Barclays’ shares. The firm’s founder Edward Bramson has met with senior Barclays directors including Staley and McFarlane to inform them of his opinion that the bank needs to shrink its investment banking arm to return cash to shareholders.
The article went on to quote a Standard Chartered spokesperson who said the bank is focused on execution of its strategy and declined to comment on such speculation.
Separately, an analytical report in the Financial Times quoted one of Barclays’ ten biggest shareholders, who said the mooted tie-up with Standard Chartered would establish “another HSBC” by combining the two banks’ strength in emerging markets and the West. The shareholder has recently met Mcfarlane and said Barclays is clearly considering all options, although the level of detail remains to be seen.
Barclays would be able to sell investment banking and credit cards via Standard Chartered’s emerging markets business, the item said. A deal could also have merits on the basis of funding, as Standard Chartered’s cheap deposits in Asia could lower the merged group’s cost of funding, the report added.
However, the two banks have limited geographic duplication, meaning there would be little room to cut costs, the article said.
Wednesday’s Ft.com report said Barclays also considered Credit Suisse [VTX:CSGN], Deutsche Bank [ETR:DBK] and Singapore’s DBS [SGX:MU7] as potential merger partners, without citing a source for the information. The same report also appeared in Thursday's Financial Times newspaper.
Barclays’ market capitalisation stood at GBP 35.71bn (EUR 40.75bn) at the close of trading in London on Wednesday, while Standard Chartered was valued at GBP 25.44bn.

NYT : Apple, Spurned by Others, Signs Deal With Volkswagen for Driverless Cars

SAN FRANCISCO — Apple once had grand aspirations to build its own electric self-driving car and lead the next generation of transportation. Over time, the tech giant’s ambitions ran into reality.

So Apple curtailed its original vision, first by focusing on software for self-driving cars and then by working solely on an autonomous shuttle for its own use with employees. Now, the tech giant has settled for an auto partner that was not its first choice.

In recent years, Apple sought partnerships with the luxury carmakers BMW and Mercedes-Benz to develop an all-electric self-driving vehicle, according to five people familiar with the negotiations who asked not to be identified because they were not authorized to discuss the matter publicly. But on-again, off-again talks with those companies have ended after each rebuffed Apple’s requirements to hand over control of the data and design, some of the people said.

Instead, Apple has signed a deal with Volkswagen to turn some of the carmaker’s new T6 Transporter vans into Apple’s self-driving shuttles for employees — a project that is behind schedule and consuming nearly all of the Apple car team’s attention, said three people familiar with the project.

Apple’s deal with Volkswagen, which has not been previously reported, and the failure of its talks with other automakers reflect the continuing travails and diminished scope of the company’s four-year-old car program.

The project has suffered from repeated changes in direction that have hurt morale and led to hundreds of departures from its peak of more than 1,000 members two years ago, five former Apple employees said. They added that the project lacked a clear plan beyond the vans, including any near-term commercial goals.


The fits and starts have most likely put Apple even further behind in the race toward the self-driving future. Waymo, the self-driving business spun out of Google, as well as start-ups and some carmakers have been testing various autonomous vehicles on public roads for years. Some of the programs have hit hurdles — Uber on Wednesday said it was shutting down its self-driving operations in Arizona and laying off about 300 employees in the area — but many have already gathered extensive data on autonomous driving patterns to improve their technology.

Apple declined to comment.

Apple originally began its car project — known internally as Titan and T172 — in 2014. At the time, Apple planned to build a single vehicle that would upend society and industry, in what would be the automotive version of the iPhone. The company set to work on an electric driverless car with a lush interior reminiscent of a lounge or living room, where passengers face each other instead of the road, according to two early employees of the project.

Apple enlisted software programmers, automotive engineers, rocket scientists and the industrial-design team of Apple’s design chief, Jonathan Ive, to reimagine the car. They entertained a series of unconventional concepts, including augmented-reality or holographic displays embedded in windshields and windows, a sunroof made of a special polymer that reduces heat from the sun, and windows with adjustable tints — like those on Boeing’s new 787 Dreamliner jets.

Two former Apple employees also recalled how their colleagues built a model of a sport-utility vehicle with four seats facing each other, which some employees tested by sitting inside, similar to a design Mercedes advertised in 2015.

As recently as 2016, Apple planned to spend hundreds of millions of dollars to build research and development labs around its Cupertino, Calif., campus, including a machine shop and labs for electric car batteries, according to interviews and documents about the plans viewed by The New York Times.

Members of the car project soon found that even designing and building fundamental parts of a new car was not simple. Apple initially intended to build the car in-house, with preliminary discussions of an Apple automotive plant in the south of the United States, two former employees said. But those plans quickly shifted to finding a manufacturing partner to build — but not design — the cars.

Two former employees said Apple’s requests of partners gradually evolved. At first, the company asked for help building an Apple-designed vehicle. Then, it began asking potential partners to provide foundational car pieces like the chassis and wheels. Eventually, Apple requested that potential partners retrofit their own vehicles with Apple’s sensors and software.

In late 2015, Apple bought two Lexus S.U.V.s and hired a Virginia firm called Torc Robotics to retrofit the vehicles with sensors, a project known internally as Baja, one former employee said. Apple now has more than 50 of the S.U.V.s and uses them for data collection and limited self-driving tests. In early 2017, California regulators authorized Apple to run self-driving tests on public roads with three of the S.U.V.s

But Apple did not partner with Lexus, and it has long sought a formal partner. The company first worked with Magna Steyr, a Canadian-Austrian contract manufacturer that has produced low-volume vehicles for other automakers, like the Mercedes G-Wagen, according to two former employees. A few dozen Magna Steyr employees joined Apple’s car team in California but gradually left after the partnership ended.

BMW was long Apple’s top choice, given its focus on high-end but mainstream products, former employees said. Many Apple executives, including the company’s chief executive, Timothy D. Cook, also drive BMWs. Mr. Cook visited BMW as early as 2014 to discuss a partnership, and those on-and-off negotiations continued for years. But a person close to the talks said any deal now appeared dead because both Apple and BMW wanted to own the customer experience and relationship.

Apple’s other favored choice was Mercedes-Benz, internally code-named Bruce, according to one former employee. The two companies held partnership talks for more than a year, said three people familiar with the discussions. But those negotiations were halted because of similar disagreements over control of the experience and data, said one person close to the talks.

Apple also met with Nissan in Japan, BYD Auto in China and sports-car maker McLaren in Britain, among other companies, one former employee said. None of the talks resulted in a deal because either the automaker was reluctant to give up control to Apple or Apple was holding out for a more attractive partner.

Late last year, Apple found that partner in Volkswagen. Buffeted by a scandal around cheating emissions tests — and lagging some rivals in development of self-driving cars — Volkswagen jumped at the chance to work with Apple, former Apple employees said. Volkswagen’s code-name at Apple is Jetstream, one of them said.

Now, at a lab near Turin, Italy, run by a Volkswagen subsidiary called Italdesign, the companies plan to remake Volkswagen’s T6 vans as electric self-driving shuttles, these people said.

The frame, wheels and chassis of the T6 vans will remain, but Apple is replacing many components, including the dashboard and seats, said two people familiar with the project. Apple is also adding other computers, sensors and a large electric car battery, they said. The shuttles will ferry employees between two of Apple’s Silicon Valley campuses, and will include a driver behind the wheel to take control if needed, as well as an operator in the passenger’s seat tracking the van’s performance.

Executives leading Apple’s car project had told Mr. Cook that the shuttle would be completed by the end of 2018, but that deadline will be missed, one former employee said. It is unclear whether Apple’s partnership with Volkswagen will extend beyond the shuttle.

NYT : Trump Initiates Trade Inquiry That Could Lead to Tariffs on Foreign Cars

Trump Initiates Trade Inquiry That Could Lead to Tariffs on Foreign Cars

President Trump has initiated a sweeping trade investigation into whether autos imported into the United States pose a threat to national security, a move that could ultimately result in tariffs on foreign-made cars and further strain relations with global allies.

In a statement released on Wednesday evening, the Commerce Department said it had begun an investigation “following a conversation” with Mr. Trump. The announcement followed a statement from Mr. Trump, in which he said he had instructed the commerce secretary, Wilbur Ross, to consider initiating an investigation into imports of cars, trucks and auto parts “to determine their effects on America’s national security.”

“Core industries such as automobiles and automotive parts are critical to our strength as a nation,” Mr. Trump said.

In a separate announcement, the Commerce Department said that imports of passenger vehicles had grown from under a third of cars sold in the United States 20 years ago to nearly half today, while employment in the sector had declined. Automobile manufacturing has long been a source of technological innovation in the United States, and the investigation would consider whether the decline of the auto industry threatens to weaken the American economy by reducing research and development in cutting-edge technologies, the statement said.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Mr. Ross said.

The investigation, which will take months to conduct, will be carried out under the same legal statute that the administration used to impose tariffs on steel and aluminum imports. The statute gives the president broad authority to restrict imports that threaten national security.


In remarks on Wednesday afternoon, Mr. Trump appeared to link the new trade investigation and continuing talks over the North American Free Trade Agreement. Those negotiations have largely stalled over auto rules, including how much of a car’s content must be manufactured in North America — and in the United States — to qualify for Nafta’s zero tariffs.

The Trump administration has tried to use the steel and aluminum tariffs as a bargaining chip to persuade other countries to voluntarily restrain their metal shipments to the United States or make other trade concessions. The administration may be looking to use the auto tariffs similarly, as leverage to force concessions from trading partners like Canada and Mexico.

“I think your autoworkers and your auto companies in this country are going to be very happy with what’s going to happen,” the president said on Wednesday afternoon as he prepared to board Marine One. “Nafta is very difficult. Mexico has been very difficult to deal with. Canada has been very difficult to deal with. They have been taking advantage of the United States for a long time. I am not happy with their requests. But I will tell you, in the end, we win.”

“Our autoworkers are going to be extremely happy,” he added.

In a Twitter post on Wednesday morning, the president also hinted at the pending announcement.

“There will be big news coming soon for our great American Autoworkers,” Mr. Trump said. “After many decades of losing your jobs to other countries, you have waited long enough!”

But the proposal appeared to provoke a swift backlash from the car industry. Some auto industry representatives said they worried that the plan could raise prices for cars and trucks in the United States, and end up leading to a less competitive American industry and fewer choices for American consumers.

“If these reports are true, it’s a bad day for American consumers,” said John Bozzella, the chief executive of Global Automakers, a trade group. “To our knowledge, no one is asking for this protection.”

In an April 2017 memo, the White House described several sectors as “critical elements of our manufacturing and defense industrial bases, which we must defend against unfair trade practices and other abuses.” That included vehicles, along with products like steel, aluminum, aircraft and semiconductors.

The Trump administration has already deemed imports of steel and aluminum a threat to national security, saying foreign metals are degrading the United States’ manufacturing base. It is also considering tariffs on as much as $150 billion of Chinese imports as retaliation for China’s forced coercion of American intellectual property, which the administration has also declared a threat to national security.

Trade experts said a finding by the administration that imported autos pose a national security threat would most likely prompt legal challenges at the World Trade Organization. The European Union, Japan and other allies are already challenging the Trump administration’s claim that imports of steel and aluminum put American national security at risk. Extending that argument to automobiles would probably be met with even greater skepticism.

Chad Bown, a senior fellow at the Peterson Institute for International Economics, pointed out that 98 percent of American imports of passenger cars last year came from five American allies: Mexico, Canada, the European Union, Japan and South Korea.

“This is not about national security,” Mr. Bown said. “After the steel and aluminum high, President Trump has now become addicted to tariffs. He is now clearly abusing this national security law simply to get his tariff fix. And this law is the easiest access he has found.”

Mr. Trump has made the auto industry a major focus of his economic policy, seeing carmakers as an example of an American sector weakened by global offshoring.

While carmakers have welcomed some of the measures proposed by the Trump administration, they have chafed at the White House’s approach to Nafta and its steel and aluminum tariffs, which they say will raise prices and ultimately be passed on to consumers. Many auto suppliers also depend on China, with which the White House is locked in a trade dispute, for parts they cannot source in the United States. China recently said it would lower tariffs on imported United States autos as part of a peace offering, but the potential trade war with China has put several companies on edge.

Many inside and outside the auto industry say the administration’s approach could backfire by raising prices for American-made products, potentially slowing sales and encouraging more companies to move abroad.

Phil Levy, a senior fellow at the Chicago Council on Global Affairs, criticized the idea as “an unusually ill-conceived trade move.”

“It seems to imagine a world in which each country produces its own automobiles and then they swap them back and forth. In fact, we live in a world in which viable auto companies are heavily involved in global supply chains,” he said. “It would harm U.S. consumers at the margin, while undermining the global trading system and inviting certain retaliation.”

>>> What to look at today - 24th of May 2018

Japan stocks led declines in most Asian equities, with the yen extending gains amid more twists and turns on trade and lingering emerging-market risks. The dollar was steady and 10-year Treasury yields extended their decline below 3 percent. Automakers were the biggest drag on the Topix index, as the yen surged after President Donald Trump ordered consideration of a probe into automobile imports. Shares fell in Australia and South Korea, and rose in Hong Kong. All major U.S. equity benchmarks rose Wednesday after minutes from the most recent Federal Reserve meeting showed American central bankers in no hurry to accelerate the pace of rate hikes even as the economy continues to improve. Oil slipped.

Nikkei -1.15% HAng Seng +0.01% CSI -0.38% Shanghai -0.23% Shenzen -0.17%

Eur$ 1.1706 CNH 6.3858 CNY 6.3918 JPY 109.47 GBP 1.3367 CHF 0.9932 RUB 61.3917 WTI$ 71.61 -0.32%

S&P -0.16% EuroStoxx -0.03% FTSE +0.01% DAX -0.09% SMI +0.10%

Macro :
- Italy’s President Asks Conte to Form A Government


Keep an eye on :
- AC FP : Accor May Expand to 40 Hotel Brands Within Five Years, CEO Says
- ARCUS NO : Arcus First Quarter Ebitda Misses Lowest Estimate
- ARYN SW : Aryzta Third Quarter Revenue EU811.4 Mln
- AYDEN IPO : Adyen Existing Shareholders to Sell About 15% Stake in IPO: FD
- BAB LN : Babcock in talks with BAE over joint bid for Royal Navy contract - FT
- BG AV : Bawag 1Q Pretax Profit Falls 4% as Regulatory Charges Weigh
- BBVA SM : BBVA Receives Bank of Spain MREL Requirement
- BMC US : KKR Is Said to Be in Exclusive Talks to Buy BMC Software: NYP
- CAPC LN : *CAPITAL & COUNTIES CONSIDERING SPLIT INTO TWO LISTED COMPANIES
- CAI AV : CA Immo First Quarter FFO I EU27.7 Mln
- CBK GY : Commerzbank Pretax Estimates, Rating Cut at Morgan Stanley
- DBK GY : Deutsche Bank’s Structured Derivatives Trading Head Said to Exit
- DBK GY : Deutsche Bank Targets 2019 Adj. Costs at EU22b
- DIS US : ESPN and UFC In New Five-Year Pact, Package Deal To Cost $1.5b
- DNO NO : DNO Gets $47.23M Payment for February Tawke Crude Oil Deliveries
- ERICB SS : Ericsson Chairman Bought 44,380 Shares at SEK65.08 a Share
- GIMB BB : Gimv Full Year Net Income EU107.1 Mln
- HMB SS : H&M’s 2Q Set to be Soft, 2H Key to FY Profit Outcome: Jefferies
- IMMO BB : Immobel Acquires 30% of Shares of Urban Living Belgium NV
- KPN NA : Royal KPN to Pay EU0.013/Sh in Cash in Special Interim Dividend
- MC FP : LVMH’s Arnault makes further investment in Lyst in ecommerce push
- KN FP : Natixis Names Champion, Delay, Fraisse, Marie to Exec Committee
- NDA SS : Nordea Apologizes for EU500 Notes Used in Laundering, TV2 Says
- NOVOB DC : Novo Could Cut U.S. Prices 30-40% Without Middle Men: Berlingske
- ORSTED DC : Orsted Fails to Win Contract for Massachusetts Offshore Project
- PPB LN : Paddy Power Betfair to Combine U.S. Unit With FanDuel
- PRY IM : General Cable Gains on Report Not Being Probed by DOJ
- RIO LN : Rio’s $3.5b Grasberg Exit Would Beat Valuation, Macquarie Says
- SAB SM : Banco Sabadell Notified of MREL Requirement
- SDR LN : Schroders to Buy Minority Stake in Singapore-based WeInvest
- GLE FP : SocGen Shareholders Approve New Four-Year Term for Bini Smaghi
- GLE FP : SocGen Has No Exposure in Iran, Deputy CEO Lebot Says
- SWECB SS : Sweco’s New CEO Plans Hiring Spree to Drive Organic Growth
- TALK LN : TalkTalk Is Said to Sell Part of Customer Base to Daisy: Sky
- TEF SM : Telefonica Hires Javier Solana: Vozpopuli
- TIT IM : Italy Regulator to Review Telecom Italia Grid Spinoff Thursday
- TCG LN : Thomas Cook to Refurbish Part of Aircraft Fleet, Debus Tells BZ
- UCG IM : UniCredit: Finja Carolin Kuetz New Chief Transformation Officer
- UL NA : Westfield Holders Vote to Approve Takeover by Unibail-Rodamco
- UQA AV : Uniqa First Quarter Net Income Gains, Helped by One-Time Sale
- VONN SW : Vontobel Buys Notenstein La Roche From Raiffeisen for CHF700m
- VOW3 GY : *APPLE IS SAID TO SIGN DRIVERLESS CAR DEAL WITH VOLKSWAGEN: NYT
- YPSN SW : Ypsomed Full Year Sales Beat Highest Estimate