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  • Writer's pictureMike V.

Weekend Reading

Bloomberg: Grim Start to U.S. Auto Sales Stirs Alarm

U.S. auto sales took a big step back in September, setting the stage for hefty incentive spending by carmakers struggling to clear old models from dealers’ inventory. Results were disastrous for leading Asian automakers Toyota Motor Corp. and Honda Motor Co., which both suffered double-digit declines that were worse than analysts anticipated. The poor performance suggests that overall deliveries of cars and light trucks could come in worse than the 12% drop anticipated by analysts, based on six estimates. The severity of the slide stokes fears that a long-anticipated car sales collapse may be arriving. The slowdown puts auto dealers already struggling with shrinking profit margins in an even more precarious position. With outgoing model-year vehicles clogging their lots, automakers had to pony up record incentives of more than $4,100 a vehicle in the third quarter, according to researchers at J.D. Power and LMC Automotive.

Toyota’s Across-the-Lineup Tumble

Toyota saw it sales plunge 16% in September, with both its namesake and Lexus luxury brands dropping by double-digit percentages. Deliveries fell for almost every model, including its best-selling RAV4 crossover and Camry sedan. While carmakers struggled with September being a shorter sales month, Toyota can’t entirely blame the calendar. Even on a daily selling rate basis, total deliveries were down 9.2%.

Honda’s Turbulent Two Months

Honda had a rough September after logging its best U.S. sales month ever in August. Deliveries fell 14% last month, a much worse showing than analysts expected. Major models that stumbled in September include the Pilot SUV (-40%), Accord sedan (-20%) and CR-V crossover (-15%).

Nissan Not as Bad as Feared

Nissan Motor Co. led declines among the major companies that reported Tuesday, as the Japanese carmaker continues to struggle in the post-Carlos Ghosn era. Deliveries decreased 18%, though analysts were expecting an even steeper drop of 21%. The models that slid most give reason to be downbeat about profitability. Sales of Nissan brand pickups and sport utility vehicles -- which tend to be more lucrative than passenger cars -- dropped 21%, and deliveries for the Infiniti luxury division fell 44%.

Subaru’s Incredible Run Ends

The Japanese carmaker’s run ended in September after 93 months -- almost eight years. Deliveries dropped 9.4%, with Tom Doll, chief executive officer of Subaru’s U.S. sales division, citing a rapid sell-down of older-generation Legacy sedans and Outback crossovers.

Palisade Powers Hyundai

Hyundai Motor Co.’s namesake brand may have weathered the month better than others in the industry, with sales slipping 8.8%. The South Korean company started U.S. deliveries of the Palisade, a three-row flagship SUV, in June. While it’s quickly become one of the carmaker’s better-selling models, Hyundai was unable to measure up against the numbers it posted a year ago. It still expects to have gained market share for the quarter, Randy Parker, Hyundai’s U.S. vice president of sales, said in a statement.

Bloomberg: Gold Holds Above $1,500

Bullion is heading for a weekly gain after a slew of data pointed to widening economic weakness, bolstering haven demand, with gold-backed exchange-traded funds posting 14 straight days of inflows. America’s service industries joined manufacturing in taking a big step back last month, while in Europe, reports showed the economy stagnated at the end of the third quarter. Global holdings in gold-backed ETFs have climbed almost every week since the start of August. They reached 2,529.6 tons as of Thursday, less than 50 tons below a record seen in 2012. Economic and political uncertainties combined with a negative interest rate environment are making gold very attractive to investors. Rather than just trying to make money, it’s more a question of not losing it, and that is where gold plays a really important part in portfolio management.

Bloomberg: VW in Talks With Peers to Share Its Electric Know-How

Volkswagen AG is in talks with other manufacturers on sharing the key technology underpinning its future Porsche and Audi electric car models, part of an effort to build scale and spread development costs. “There’s definitely interest,” Ulrich Widmann, head of development at Audi for the joint engineering project, said at a press briefing in Munich. “We’re having conversations. Sharing technology to generate scale effects is the only way to achieve the turnaround in electric cars, both economically and ecologically.” VW is making an unprecedented push to dethrone Tesla as the leader of premium electric cars while at the same time keeping at bay traditional rivals spanning Toyota to General Motors VW’s mass-market electric technology will debut with the company’s namesake brand’s ID. 3 hatchback in November. Deals to share electric know-how are already advancing, with Ford agreeing earlier this year to use VW’s main electric-car platform for a high-volume car in Europe. The pact is worth between $10 billion and $20 billion over six years and the manufacturers are in talks over adding a second model that would be based on VW technology.

Bloomberg: Tesla Labor Practices and Musk Tweet Broke the Law, Judge Rules

Tesla Inc. committed a series of violations of the National Labor Relations Act in 2017 and last year, a judge ruled. The electric-car maker illegally threatened and retaliated against employees, according to Amita Baman Tracy, an administrative law judge in California. A tweet that Elon Musk sent in May 2018, which suggested employees who chose to join a union would give up company-paid stock options, was among the incidents the judge ruled were in violation of the law. The judge’s order calls for Tesla to offer reinstatement and back-pay to a fired, pro-union employee, and to revoke a warning issued to another union supporter. The ruling also calls for the company to hold a meeting at its assembly plant in Fremont, California, that Musk must attend. Either he or an agent with the labor board must read a notice to employees informing them that the NLRB concluded the company broke the law.

Barron’s: GameStop Stock Has Been Blown to Bits, but Insiders Are Scooping Up Shares

“Big Short” investor Michael Burry told Barron’s in August that he was bullish on GameStop stock. The company has “the cash flow to justify a much higher share price,” Burry said. Four GameStop insiders have bought stock this month, the first open-market purchases by insiders since September 2016:

Gerald R. Szczepanski, the director who bought the most stock, paid $201,600 on Sept. 23 for 40,000 shares, an average per-share price of $5.04, according to a form he filed with the Securities and Exchange Commission. He now owns 115,527 shares, mostly acquired through grants of restricted stock.

Szczepanski’s purchase of GameStop stock is his first since he joined the board in July 2002, a few months after the company’s initial public offering that February. He is a former CEO of Gadzooks, an apparel retailer.

Kathy Vrabeck paid $105,800 on Sept. 24 for 20,000 shares, an average price of $5.29 each. Vrabeck now owns 79,327 GameStop shares. It’s her first purchase of the stock since she joined the board in June 2012. Vrabeck is a senior client partner in the consumer markets division of Korn Ferry .

Carrie Teffner paid $100,000 on Sept. 20 for 21,118 shares, for a per-share average price of $4.73. She now owns 55,469 shares. Teffner, chief financial officer of Crocs (CROX), joined GameStop’s board last year, and this is her first purchase of GameStop shares.

Raul Fernandez paid a total of $49,100 on Sept. 18and 24 for 10,150 shares, an average per-share price of $4.84. He joined the board in April and this is Fernandez’s first purchase of GameStop stock. He is vice chairman and owner of Monumental Sports & Entertainment, a private partnership that co-owns the NBA’s Washington Wizards, the NHL’s Washington Capitals, and the Capital One Arena in Washington, D.C.

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