INTRODUCTION
1.1 An overview on the global automobile market
The automotive industry is characterized by rapid growth and unexpected sales declines, influenced by factors similar to those in the electrical and apparel sectors, including foreign direct investment (FDI), global production, and international trade Operating primarily as an oligopoly, achieving a competitive advantage remains a crucial strategic goal for all major players in this dynamic market.
The automobile industry exhibits homogeneity, leading to common market trends that impact organizations (Williamson et al., 2004) Significant growth opportunities are emerging in countries like India, Brazil, and China, driven by low-cost skilled labor, which attracts foreign direct investment (FDI) and promotes trade liberalization through the World Trade Organization (WTO) (T.J Sturgeon et al., 2009) As companies pursue global integration, they are also forming regional alliances, resulting in the dispersion of final assembly plants across various nations (Molnar, 2009) Additionally, the supply chain is evolving, with suppliers increasingly vertically integrating to manage complex subsystems, moving away from traditional tier-based structures (Molnar, 2009).
This research examines the business performance and intrinsic values of four major automotive companies: Daimler AG, General Motors Company, Ford Motor Company, and Bayerische Motoren Werke Aktiengesellschaft Focusing on their operations in the US and Europe, the study seeks to enhance understanding of the automotive market leaders and offers investment recommendations for potential investors.
1.3 Research questions and objectives of the study
The automotive industry is experiencing significant growth, driven by advancements in technology and increasing consumer demand for electric vehicles Investors looking to capitalize on this trend should consider leading companies such as General Motors, Ford, Daimler AG, and Bayerische Motoren Werke AG, which are at the forefront of innovation and sustainability It is advisable for investors to conduct thorough research, assess market trends, and evaluate each company's strategic initiatives to make informed investment decisions.
This thesis provides credible investment recommendations for the four leading companies in the automotive industry by analyzing key macroeconomic factors It investigates the automotive sector through market volume, market shares, development trends, and a five forces analysis Furthermore, the study evaluates financial ratios and calculates fair value to support final investment recommendations.
The study employs a top-down approach, beginning with macroeconomic analysis, followed by sector and company evaluations It primarily concentrates on analyzing financial statements to gauge company performance and utilizes valuation models to establish the business's fair value.
This dissertation consists of five chapters, beginning with Chapter 1, which offers an overview of the study's focus and objectives Chapter 2 delves into macroeconomic analysis, examining the current state of the global economy as well as two specific regions.
This article examines the multifaceted influences on the automotive industry, including political, economic, socio-cultural, technological, environmental, and legal factors, alongside key macroeconomic indicators such as GDP, CPI, and IPI Chapter 3 focuses on industry analysis, highlighting essential indicators and competitive forces within the market Chapter 4 delves into company analysis, evaluating business models, strategies, and product lines, while utilizing financial statements to assess key financial ratios The research employs a SWOT matrix for company evaluation and valuation models to determine fair company values, ultimately providing investment recommendations Chapter 5 concludes the study by summarizing findings, discussing limitations, and emphasizing critical investment insights.
MACROECONOMIC ANALYSIS
World economic outlook for 2019
In 2019, the global economy encountered significant risks, primarily due to the US-China trade war and Britain's exit from the European Union, known as Brexit, alongside escalating geopolitical tensions This environment led to stagnation in global trade and a subsequent slowdown in economic activity across major economies Despite some progress by the year's end, uncertainty loomed, posing challenges for the economic outlook in 2020.
The US-China trade war, which began in early 2018, is a significant destabilizing factor for the global demand economy Recent IMF research indicates that this trade conflict has led to a "simultaneous deceleration" in the world economy, affecting nearly 90% of countries, which are anticipated to experience slower growth in 2019 In response to the sluggish global economic growth, inflation falling below target, and uncertainties stemming from the ongoing trade war, the US Federal Reserve (FED) has reduced interest rates three times in 2019, bringing them down to 1.5-1.75%.
The US Economy
The United States boasts a stable political environment, yet it has encountered international criticism regarding its intervention policies in various regions around the globe.
The United States actively champions democracy globally, creating a stable political climate that, combined with its advanced infrastructure and technology, makes it a prime location for foreign direct investment (FDI) As a result, the country has consistently been the preferred choice for numerous multinational companies seeking investment opportunities.
The United States boasts the largest nominal GDP globally, reaching $22.44 trillion, and is home to influential companies like Apple, Google, Coca-Cola, and Microsoft that play a significant role in economic discussions.
2020) However, the 2009 recession had a serious impact on the US economy Many companies collapsed and the unemployment rate rose to alarming levels
In recent years, the U.S unemployment rate saw a decline in 2015, with income levels rising in 2016 (Williamson, 2016) However, the relatively high cost of the U.S labor force compared to countries like China, India, and Mexico has led many American companies to outsource jobs globally The onset of the U.S.-China Trade War posed additional challenges to the U.S economy Furthermore, the COVID-19 pandemic severely impacted economic stability, resulting in a 5% decline in growth during the first quarter of 2020 and marking the beginning of the 2020 recession (Amadeo, 2020).
The United States is the third most populous country in the world with a total population of about 329.13 million as of 2019 (TradingEconomics,
2020) The US still has a large aging population and can cause many problems, especially the labor supply
The United States is a highly diverse nation, with projections indicating that by 2020, nearly one in three Americans will have African, Asian, Latino, or Native American ancestry While many citizens embrace free thought, recent years have witnessed heightened racial tensions Although socio-economic mobility in the U.S rose significantly from 1950 to 1980, studies suggest a decline in this mobility since then, highlighting the challenges individuals face in moving between social or economic classes.
The United States has consistently led in adopting and implementing technology across various sectors This technological advancement has transformed numerous processes, resulting in the relocation of jobs and production facilities to other countries While this shift has enabled companies to lower production costs, it has also caused frustration among many Americans.
The United States is experiencing an unprecedented pace of technological innovation, yet it confronts significant competition from countries like China, South Korea, and India.
The United States boasts a rich variety of geography, climates, and wildlife, making it a top destination for tourists In 2019, the country attracted 79.26 million international visitors, highlighting its appeal as a diverse travel hotspot.
The United States is increasingly vulnerable to extreme weather conditions, having experienced 219 weather and climatic disasters since 1980 Notably, in 2017 alone, there were 16 such disasters, each incurring losses exceeding USD 1 billion (B Smith, 2018) The devastating wildfires in California in 2019 further highlight this issue Beyond the significant financial toll, these catastrophic events disrupt daily life in one of the world's most technologically advanced nations.
Each U.S state has a unique government structure and legal framework that influences local businesses The country ensures equal treatment for both citizens and foreigners, allowing foreign employees to anticipate fair trials within the justice system Additionally, the United States boasts a robust legal system dedicated to safeguarding Intellectual Property Rights.
Each U.S state has a unique government structure and legal framework that influences how businesses operate within its borders The country ensures equal treatment for both citizens and foreigners, fostering a fair business environment Additionally, a robust legal system is in place to safeguard Intellectual Property Rights, providing essential protections for innovations and creative works.
Real GDP increased 2.3 percent in 2019 (from the 2018 annual level to the
2019 annual level), compared with an increase of 2.9 percent in 2018 (BEA, 2020)
Figure 2 1: Real GDP in US from 2016 to 2019
In 2019, real GDP growth was driven by strong contributions from personal consumption expenditures (PCE), non-residential fixed investments, and government spending at both federal and local levels, alongside commodity investments However, this growth was partially countered by declines in private inventories and negative impacts from fixed investments in residential sectors.
In 2019, real GDP experienced a slowdown compared to 2018, primarily due to reduced non-resident fixed investment, personal consumption expenditures (PCE), and a decline in exports This downturn was somewhat mitigated by increased spending at both state and local levels, as well as federal government expenditures Additionally, the growth of imports in 2019 was lower than that of the previous year.
The inflation rate in the United States, determined by the Consumer Price Index (CPI), reflects the prices consumers pay for goods and services, including producer costs and taxes In December 2019, the monthly inflation rate was -0.09%, a decrease of 0.04% from November 2019 and an increase of 0.23% compared to December 2018 For the year 2019, the year-to-date inflation rate stood at 2.28%, matching the year-over-year inflation rate of 2.28% (Statbureau, 2020).
Figure 2 2: %CPI in US from 2010 to 2019
Source: Federal Reserve Bank of Minneapolis 2.2.2.3 Industrial production
In July 2020, U.S industrial production experienced an 8.2% year-over-year decline, following an 11.0% drop in June Economic growth is anticipated to continue slowing throughout 2020, primarily due to the impact of the coronavirus pandemic and associated containment measures, which are expected to significantly lower economic momentum below the previously forecasted 1.7% Despite some positive trends in the labor and property markets, the Federal Reserve has responded to the crisis with interest rate cuts and is likely to implement additional measures to bolster the economy.
Figure 2 3: Industrial Production Index in US in 2011-2020
Source: Federal Reserve Bank of ST Louis
European Economy
The European Union (EU) is a significant economic and political alliance comprising 28 member countries, including Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.
The European Union was established to foster peace in Europe following the devastation of World War II, and it has largely succeeded in this mission As a significant global player, the EU influences international economics and politics while collaborating with major world powers It is instrumental in promoting democracy, freedom, peace, and security on a global scale Although the EU maintains strong relations with the United States, some analysts argue that the US favors a fragmented and weakened Europe (Nougayrede, 2019).
The European single market is one of the greatest achievements of the EU
The European Union's single market encompasses around 500 million consumers and 21 million small and medium-sized enterprises (SMEs) as of 2019 Its primary goal is to eliminate barriers to business among member states by ensuring the free movement of goods, services, capital, and labor However, the free movement of people has sparked significant controversy and criticism from Eurosceptic political parties and others Despite these challenges, the single market has proven effective due to its vast size and its success in removing tariffs and minimizing administrative burdens through a unified set of rules applicable across all member states.
The Gross Domestic Product (GDP) in the EU in 2019 was $19.1 trillion It represented approximately 15.77% of the world economy (Economics,
In 2019, Germany, the United Kingdom, and France collectively contributed to over half of the European Union's GDP During this period, the United States emerged as the EU's primary export partner, while China was the leading source for imports Notably, machinery and transport equipment represented over 41% of these imports.
EU exports and 31% of EU imports in 2018 (EU, 2019) It also worth mentioning that some critics believe the EU favours the larger member
The European Union has established numerous free trade agreements with various countries, allowing its member states to engage in trade without incurring import taxes (tariffs) on the majority of goods As of September 2019, the EU has successfully implemented 40 free trade agreements, encompassing a wide range of products and services.
Europe boasts a rich cultural heritage, supported by the EU, but faces significant social challenges, including a notably lower female employment rate compared to men in many member states, largely due to family responsibilities and inadequate childcare (Schmidt, 2019) Additionally, the EU grapples with youth unemployment, an ageing population, income and wealth inequality, inefficiencies in hospital care, high pharmaceutical costs, and local unemployment Critics argue that low-skilled migrants from poorer EU nations affect job opportunities for locals in more developed economies like Germany, France, and the United Kingdom.
The European Union stands as a significant global player, particularly excelling in the realms of science and technology Countries such as Germany, Sweden, Finland, the UK, and France are recognized among the world's most technologically advanced nations The EU's contributions to science and technology underscore its status as a scientific powerhouse, highlighting its immense impact on these fields.
The European Union's technology and IT sector lags behind major economic players like the USA and China, partly due to a shortage of skilled IT professionals Leading companies in the tech industry, such as Apple, Alphabet, Alibaba, Amazon, Baidu, and Tencent, are predominantly based in the USA or China To compete effectively, the EU must cultivate its own tech giants and accelerate its progress in the artificial intelligence revolution.
The European Union is home to some of the world's most beautiful cities, making countries like France, Germany, the UK, Italy, and Spain top tourist destinations Tourism significantly contributes to the EU's economy, accounting for 3.9% of the GDP in 2018 and supporting around 11.9 million jobs.
However, the EU faces some enormous environmental challenges For example, air pollution is the biggest environmental risk to public health in Europe causing an estimated 400,000 premature deaths a year (Reuters,
In 2020, many EU member states did not meet air quality standards, and the European Commission's measures to address countries exceeding emissions limits have proven ineffective This situation contributes to significant environmental issues, including climate change, stratospheric ozone depletion, loss of biodiversity, major accidents, acidification, habitat deterioration, water pollution, forest degradation, and chemical risks.
The European Union (EU) operates under its own legal system, distinct from international law, which is highly regarded among member states In cases of conflict, EU law takes precedence over national laws, ensuring a uniform interpretation and application across all member countries This consistency enhances the accessibility, clarity, and transparency of legal frameworks within the EU However, this dominance of EU law has faced opposition from many Eurosceptics who advocate for the primacy of national legislation.
From 2000 to 2019, the EU experienced significant volatility in annual GDP growth Between 2001 and 2007, the economy expanded at a rate of 1% to 3% annually However, the financial crisis from 2008 to 2013 severely impacted the EU economy, resulting in a GDP decline of over 4%.
% in 2009 and then again slightly in 2012 Since then, the economy has progressively recovered, with annual growth rates around +2 % between
The euro area and EU Member States exhibited a similar trend, although the extent of fluctuations varied among them Notably, Greece, Croatia, Spain, Portugal, and Cyprus experienced a more profound impact from the financial crisis, enduring several years of consecutive negative GDP growth.
In the EU, both investment and consumption experience three distinct phases similar to GDP, though investment tends to show greater volatility Following the recovery from the financial crisis, there has been a consistent growth in both investment and consumption.
2015 and 2019, at around +4 % and +2 % per year respectively (Eurostat,
Inflation in the EU is tracked using the Harmonised Index of Consumer Prices From 2001 to 2007, the annual inflation rate averaged approximately +2% However, between 2008 and 2011, the inflation rate experienced significant fluctuations, decreasing from 3% in 2011 to 0% in 2015, before rising again to 1.5%.
Asia – Pacific Economy
The Asia-Pacific economy is significantly influenced by government intervention, with China's single-party political system and the leadership in South Korea and Singapore driving rapid growth However, territorial disputes among neighboring nations have created instability, hindering regional progress Furthermore, escalating tensions between China and the U.S have adversely affected trade activities in Japan, Australia, and other countries reliant on exports.
Finally, a high level of corruption is still a main concern for foreign investment in the region (Eades & Cooper, 2010)
Despite the escalating tensions between China and the U.S., the Asia-Pacific region is experiencing robust growth, driven by low labor costs and favorable foreign investment conditions International companies are increasingly relocating to China and Southeast Asia, while Singapore emerges as a burgeoning financial hub and India and South Korea establish themselves as technology hotspots In contrast to the significant impacts of the Covid-19 pandemic on global economic powerhouses, the proactive measures taken by many countries in the Asia-Pacific have facilitated a quicker economic recovery.
The Asia-Pacific region, home to over 4.6 billion people, is the largest in the world, with 50.9% of its population residing in megacities and urban areas Characterized by a young demographic, with an average age of around 33 years, this region benefits from a substantial workforce and high consumption demands, driving rapid economic and social development However, improvements in healthcare and increased life expectancy have led to a rapidly aging population, which poses a significant threat to future labor supply.
The Asian-Pacific region has experienced significant technological advancements driven by its young population and government initiatives aimed at fostering innovation Despite these improvements, challenges such as lax financial market regulations, a complex banking system, and cumbersome entry procedures continue to hinder international investment in this promising area (Standard Chartered, 2019).
Global warming and rising sea levels have significantly hindered economic and social development in the Asia-Pacific region, particularly affecting coastal megacities Additionally, pollution from human activities is a pressing issue, as China, India, and Southeast Asia serve as major global manufacturing centers The region's rapid industrialization and urbanization, coupled with weak environmental regulations, have exacerbated the pollution problem.
Between 2013 and 2017, the region experienced robust GDP growth, averaging around 4.5%, surpassing the performance of the OECD and most developed countries However, factors such as prolonged policy uncertainties, the escalating trade war between China and the U.S., disappointing growth from major trading partners, and the Covid-19 pandemic have contributed to a significant economic slowdown across the region Forecasts indicate that Japan, Australia, and South Korea are likely to enter a recession, while China, India, and Southeast Asia are expected to maintain modest growth rates.
Figure 2 7: Rapid GDP Growth in Asia-Pacific region
Figure 2 8: 2020 GDP forecast for Asia-Pacific region
Amidst the global economic downturn, particularly in 2020, declining consumer confidence and plummeting oil prices have led to lower-than-target inflation rates in many Asia-Pacific nations In response, several Asian central banks have significantly reduced interest rates to stimulate investment and spending, aiming to rejuvenate their economies in 2022.
Figure 2 9: Average inflation of Asia-Pacific over the 1980 – 2020 period
Source: (IMF, 2020) Figure 2 10: Policy rate forecast for Asia-Pacific
Industrial production has been a key driver of rapid growth in the Asia-Pacific region over the past few decades, with China, Japan, and India leading as the largest manufacturing nations South Korea is recognized for its high-tech exports, while Southeast Asian countries are emerging as new manufacturing hubs Despite the severe impact of the Covid-19 pandemic on industrial production, a swift recovery is anticipated in 2021 for most major economies in the region, fueled by robust stimulus packages.
INDUSTRY ANALYSIS
Industry Overview
Over the past few centuries, the global automobile market has experienced significant growth, achieving revenues of 5.3 trillion dollars.
Despite the ongoing uncertainties caused by the Covid-19 pandemic, economic experts project that the automotive market will reach revenues of $8.9 trillion by 2030, with 38% of this revenue generated from new vehicle sales (Wagner, 2020).
From 2000 to 2020, the automotive market experienced significant growth, with annual production nearly doubling from approximately 50 million vehicles in 2000 to about 98 million in 2019 This surge in production is closely linked to global economic growth, as evidenced by sharp declines in output during economic crises.
Figure 3 1: Global automobile production volume
As of 2019, Toyota and Volkswagen dominate the automotive market, collectively holding nearly 20% of the total share, with Ford, Honda, and Nissan following closely In terms of country-specific production, China has emerged as the largest car manufacturer, while the United States and Japan rank second and third, respectively.
Figure 3 2: Global automobile market share in 2019, by brand
Source: (Statista, 2020) Figure 3 3: Global automobile production in 2017, by country
Electrification is crucial for achieving emissions-free vehicles, as it significantly reduces harmful substances, dust, and noise pollution from cars By utilizing electricity sourced from renewable energy, we can ensure sustainable mobility while eliminating CO2 emissions.
The rapid advancement of technology, particularly in artificial intelligence, is driving the increasing trend of autonomous vehicle development As these vehicles can operate without human intervention, even in complex traffic scenarios, it is essential to completely redefine individual transportation platforms.
Vehicle sharing services are gaining global popularity, particularly with the advent of autonomous vehicles that make the process more economical Users can conveniently book cars through an app, eliminating the need to search for available shared vehicles nearby.
The fourth significant growth trend in the automotive industry is the connected car, which enables seamless connectivity with external networks This technology allows vehicles to communicate with other cars and transportation infrastructure, such as traffic lights Additionally, it provides passengers the ability to work, browse the internet, and enjoy multimedia services while on the road.
In the coming years, car upgrades are expected to gain popularity due to rapid advancements in electrification, automation, connectivity, and shared mobility within the automotive sector Annual updates will focus on incorporating the latest hardware and software innovations, ultimately reducing costs for consumers.
Porter’s Five Forces Analysis
3.2.1 Threat of new entrants: Weak
New automotive brands encounter significant challenges, primarily due to the substantial investments required for car branding, production facilities, distribution networks, and skilled personnel The intense competition from established brands further complicates matters; without innovative and differentiated products, new entrants struggle to capture market share While access to raw materials may be straightforward, achieving economies of scale remains a daunting task for smaller companies Additionally, entering new markets can be hindered by high import duties imposed by governments to protect local industries Overall, aside from Tesla, it is challenging for new brands to make a notable impact on the global automotive landscape.
3.2.2 Bargaining power of suppliers: Weak
In the automotive industry, the majority of suppliers are small, resulting in weak bargaining power against major manufacturers Consequently, these suppliers must adhere to the regulations established by car manufacturers Prominent brands like Ford, Daimler, BMW, and General Motors wield significant influence due to their ample access to raw materials, making it easy for them to switch suppliers and further diminishing the bargaining power of smaller providers.
3.2.3 Bargaining power of buyers: Moderately strong
Buyers in the automotive industry, including both individual consumers and corporations purchasing fleets, have significant bargaining power due to their price sensitivity They can easily switch to brands offering better vehicles at lower prices, which highlights the competitive nature of the market However, the risk of reverse integration is minimal, leading to a moderately strong influence of buyers on pricing and product offerings.
While alternatives to cars, such as buses, taxis, and trains, exist, none match the convenience of car ownership With a personal vehicle, you have the freedom to travel whenever you want, eliminating the need to adhere to public transportation schedules Additionally, owning a car enhances personal convenience and status, reducing the appeal of alternative transportation options.
3.2.5 Competitive Rivalry in the industry: Very strong
In the automotive industry, a limited number of brands hold significant influence, facing high barriers to exit that can lead to substantial losses for those attempting to break into the market Customer loyalty remains strong, and although the industry has matured, competition for market share has intensified Brands target various market segments, often overlapping in their offerings, and compete on factors such as price, design, quality, technology, and customer safety.
The auto industry is characterized by intense competition, prompting companies to invest significantly in research and development, digitization, and enhancing customer experiences to boost sales and expand their customer base This fierce rivalry spans both high-end and compact car segments, driving brands to prioritize customer satisfaction and strive for superior service Additionally, automakers are focusing on expanding their sales and distribution networks while placing greater emphasis on after-sales support to maintain a competitive edge.
COMPANY ANALYSIS
General Motors Company
General Motors (GM) is a leading global automaker that designs and manufactures a diverse range of vehicles, including cars, trucks, and crossovers, tailored for various markets The company prides itself on its innovative technologies and specialized designs for each of its brands Chevrolet has gained recognition for its electric vehicles, particularly the Bolt and the electric-gasoline Volt model Additionally, GM's Cruise brand is renowned for its autonomous vehicles, which are actively tested on city streets.
General Motors (GM) has introduced 180 cars, showcasing their commitment to environmental sustainability through innovative designs The company has successfully reduced the weight of 14 new car models by approximately 357 pounds each, while enhancing the efficiency of electric vehicle batteries, allowing the Chevrolet Bolt to travel up to 238 miles on a single charge These advancements contribute to a significant reduction of around 312,000 metric tons of CO2 emissions and save 35 million gallons of gasoline annually.
General Motors (GM) employs a dual strategy of focused branding and targeted markets to enhance customer choices globally The Chevrolet brand is dedicated to electric vehicles, while Cruise specializes in self-driving technology, primarily targeting North America Additionally, GM caters to the Chinese market with local brands such as Baojun and Wuling.
General Motors (GM) continuously reinvests in cutting-edge technologies and innovations, ensuring they stay aligned with emerging social trends This proactive approach to operations and product development provides GM with a significant competitive advantage over other automotive companies.
GM is the first pioneer in the industry
Figure 4 1: Sale by region of GM 2019
General Motors (GM) is a key player among the "Big Three" automakers in the United States, with North America being its primary market In 2019, North America represented 43.63% of GM's sales, totaling approximately 3.37 million vehicles Meanwhile, the Asian/Pacific, Middle East, and Africa regions collectively accounted for nearly half of GM's overall sales.
Asia/Pacific, Middle East and Africa
Europe vehicles (GM, 2019) So North America and China are targeted market for
General Motors (GM) aims for a future characterized by zero crashes, zero emissions, and zero congestion With a century of experience and a strong brand reputation, GM is advancing towards this vision through innovations in electric and self-driving vehicles Current strategies are projected to add over $30 in hidden value to the company's stock price.
General Motors (GM) is a leading player in the automotive industry, renowned for its production of affordable electric vehicles The company pioneered innovations such as the electronic starter and airbags Currently, the Chevrolet Bolt EV stands out as one of the most popular electric cars in the United States, capable of traveling 238 miles on a single charge GM is dedicated to an electric future, with plans to launch at least 20 new all-electric models by 2023, emphasizing improved fuel efficiency.
GM aims to develop a self-driving car, with a focus on large-scale integration and testing their Cruise vehicles on California streets to meet government safety standards The company plans to launch Cruise in U.S cities in 2020, pending government approval, which could significantly boost their stock price Autonomous vehicles present lucrative opportunities, potentially generating billions in revenue from non-drivers, including the disabled, elderly, and those without licenses.
GM’s strategies continue focus on innovation to keep clean and green surrounding environment on each vehicle they manufacture For the latest
14 new vehicles, GM made lighter car which reduce about 357 pounds per vehicle, reduce 312,000 metric tons of CO2 emissions and save 35 million gallons of gasoline each year
General Motors (GM) is implementing a cost-cutting strategy by shutting down low-demand production lines, such as those for Opel and Vauxhall, to safeguard its profitability Additionally, GM is focusing on emerging markets, particularly India and China, where increasing customer demand presents new revenue opportunities.
GM holds a dominant market leadership position in North America and China, the two largest automotive markets globally In China, GM's extensive operations through various joint ventures and ownership of local businesses establish it as the largest foreign car manufacturer by sales This strong presence in key markets significantly enhances GM's global market leadership.
The company boasts a diverse product portfolio featuring well-known brands such as Chevrolet, Buick, Cadillac, GMC, and Opel, with subsidiaries located globally This extensive range of products is available in various geographically diverse markets, showcasing the company's international presence and adaptability.
In 2019, GM invested $6.8 billion in research and development to enhance its design and development capabilities, focusing on creating new products and improving existing ones This robust investment not only boosts customer satisfaction but also drives revenue growth for the company.
In recent years, General Motors (GM) has faced significant product recalls due to defective parts, impacting its brand image and sales Notably, around 3.5 million vehicles, including popular models like the Chevrolet Silverado, GMC Sierra, Cadillac Escalade, and Chevy Suburban, were recalled for braking issues in models produced between 2014 and 2018 These recalls have not only harmed GM's reputation but also led to a decline in sales, highlighting the critical relationship between product quality and brand perception.
The global automobile industry has experienced consistent growth over the past decade, and this trend is anticipated to continue in the future As a leading player in the market, General Motors stands to gain significant advantages from this ongoing expansion.
The rising demand for hybrid electric and alternative fuel vehicles is driven by growing concerns over carbon emissions and the need for sustainable development General Motors (GM) stands to gain from this trend, as the company is making significant investments in the development of plug-in hybrid electric vehicle technology.
Ford Motor Company
Ford Motor Company is a leading global automotive and mobility enterprise, specializing in the design, manufacture, marketing, and servicing of a comprehensive range of Ford vehicles, including cars, trucks, and SUVs, alongside its premium Lincoln luxury line.
The company operates in three segments, including Automotive, Mobility, and Ford Credit In which, in term of revenue, in 2019 automotive segment contributed $143,599m, Ford credit gained $12,260m and mobility just had
Figure 4 7: Revenues of Ford in 2019
The automotive segment encompasses the global sale of Ford and Lincoln vehicles, along with service parts and accessories It also covers the associated costs related to the development, manufacturing, distribution, and servicing of these vehicles and their components This segment reflects both the revenues generated and the costs incurred in these operations.
Automotive Ford credit Mobility following regional business units: North America, South America, Europe, China (including Taiwan), Asia Pacific Operations, and Middle East & Africa (Ford, 2019)
Ford's "One Ford" plan embodies the company's business strategy, focusing on expanding market share and achieving global success This comprehensive approach is built on four key pillars designed to strengthen Ford's position in the automotive industry.
- Restructuring businesses to maintain profitability at the moment and change mixed business models
- Promote the development of new products with high use value to meet the needs of customers
- Improve teamwork morale and strength - teamwork
One Ford promotes a strong emphasis on teamwork and collaboration, driving all employees toward a unified goal of achieving success in the global marketplace This strategy prioritizes hard work and fosters a spirit of teamwork, ultimately aiming to enhance customer and partner satisfaction for Ford.
As a result, One Ford brings to the community the most sustainable values, reflected in:
- Good product: Shown in terms of high quality, eco-friendliness, user safety and intelligence
- Strong business: Based on the diversity of product structure and market share globally
- A good world: Demonstrated through the company's sustainable development strategy
Ford's commitment to its "One Ford" strategy is exemplified by its guiding slogan, "Go Further." To align with this vision, the company ensures a diverse range of vehicles that cater to various price points, consumer needs, and usage purposes, effectively meeting the demands of a global market.
Ford Motor Company boasts a diverse product portfolio that includes passenger cars, SUVs, commercial vehicles, trucks, and luxury vehicles, securing a 7.3% share of the global automotive market as of 2016 In the U.S market, Ford held approximately 14.1% of the share in 2019, ranking just behind General Motors To enhance its mobility solutions, Ford established Ford Smart Mobility LLC, focusing on developing technology platforms for connectivity in both owned and shared mobility services, further strengthened by the acquisition of the Chariot application.
Ford Motor is actively embracing emerging trends in vehicle connectivity and smart mobility, focusing on the development of autonomous vehicles for commercial applications like ride-sharing and parcel delivery The company has formed strategic partnerships with Lyft, Domino’s Pizza, and Postmates to enhance customer experiences In 2017, Ford established "Team Edison," a dedicated team for electric vehicle technology, and entered a joint venture with Zotye, a leader in the Chinese all-electric vehicle market These initiatives aim to expand Ford's electric vehicle lineup, targeting a total of 40 vehicles globally, including 16 fully electric models by 2022.
Ford Motor, through its subsidiary Ford Motor Credit Company LLC, offers a robust line of credit to customers via its dealership network, featuring a diverse portfolio of financing options These options are categorized into consumer and non-consumer segments, including retail installment plans and lease contracts tailored for leasing companies, fleet customers, government entities, and daily rental services Additionally, Ford Motor Credit provides wholesale loans to dealers for bulk purchases, helping to optimize inventory across dealer locations The company also benefits from interest rate supplements and support payments to dealers, enhancing its overall financing services.
Ford Motor's Lincoln brand has struggled to compete in the luxury vehicle market, falling significantly short of established rivals like Mercedes, Audi, and BMW In 2019, Lincoln sold approximately 210,000 units, a stark contrast to the 2,385,400 units sold by Mercedes-Benz Cars that same year.
Ford Motor Company has struggled to achieve sustainable profitability in developing markets such as Indonesia and Japan, leading to its exit from these regions The company also faces challenges in Latin America, the Middle East, Africa, India, and China, primarily due to its inability to produce large volumes of vehicles, which limits its ability to benefit from economies of scale Additionally, low-cost manufacturers in emerging Asian markets have successfully capitalized on economies of scale, offering cheaper alternatives and capturing significant market share To remain competitive, Ford must enhance its offerings in the compact vehicle segment across both developed and emerging markets.
The increasing demand for light commercial vehicles (LCVs) is driven by the growth of e-commerce, a trend anticipated to persist through 2020 Ford Motor Company has the opportunity to capitalize on this surge by forming strategic partnerships with e-commerce logistics firms, which could significantly enhance the company's revenue.
Ford is embracing new business opportunities driven by future trends in electrification and autonomous driving technologies The company plans to introduce 13 new hybrid models, including the F-150 and Mustang, as well as a transit custom plug-in hybrid in Europe and an SUV with an estimated range of 300 miles Additionally, Ford is dedicated to developing SAE level 4 fully autonomous vehicles by 2021, which will be designed without a steering wheel, brake, or gas pedal, preparing them for commercial use.
In the evolving landscape of connectivity and smart mobility, there is a critical demand for innovative solutions that enhance the movement of people and goods Mobility significantly influences various facets of life, including healthcare, wellness, employment, and access to essential resources like food and water This situation creates a unique opportunity to address global transportation challenges, ensuring the preservation and advancement of mobility for future generations.
Ford Motor Company offers Ford GoBike and Chariot, an app-based, crowd-sourced shuttle service currently available in select U.S cities, with plans for further expansion both domestically and internationally Additionally, Ford's City Solutions team, unique in the automotive sector, partners with municipalities to design, test, and implement customized mobility solutions that meet the specific needs of local communities.
The ongoing global financial crisis has significantly impacted domestic and export markets, leading to conditions of excess capacity Major economies, including the US, China, Japan, and Europe, are grappling with rising government deficits and high debt levels, adversely affecting the overall macroeconomic landscape and resulting in decreased sales volumes Additionally, escalating global commodity and energy prices have diminished vehicle affordability for mass consumers, further contributing to the decline in sales This slowdown has created excess capacity in key markets such as North America, Europe, and China, ultimately reducing overall profitability for companies These excess capacity conditions are expected to persist in the near future.
Daimler AG
Daimler AG (DAI) is a global automotive company with manufacturing facilities located across Europe, Asia, Africa, and the Americas In 2019, the company achieved a revenue of €172.7 billion, reflecting a 3% growth compared to the previous year.
The Mercedes-Benz Cars division specializes in manufacturing luxury vehicles, including the prestigious Mercedes-Benz and Mercedes-Maybach brands, with China being its largest market at 29% of unit sales, followed by Germany at 14% The division is also committed to electric vehicle production Additionally, it produces a diverse range of trucks, including light, medium, and heavy-duty models under brands like Mercedes-Benz and FUSO In 2019, the division recorded the highest unit sales in the NAFTA region at 41%, with Asia at 28% and the EU at 16% Meanwhile, the Mercedes-Benz Vans division focuses on developing and producing vans, primarily serving the EU market, which accounts for 60% of its unit sales, followed by NAFTA at 12% and Asia at 9%.
Daimler operates globally, with a significant presence in Europe, NAFTA, and Asia, where Europe remains its largest market, contributing 40% of the company's revenue The company is structured into five distinct divisions.
Europe NAFTA Asia Other markets
Mercedes-Benz VansDaimler BusesDaimlerMobility
Mercedes-Benz Cars 51%, Daimler Trucks 22%, Mercedes-Benz Vans 8%, Daimler Buses 3% and Daimler Mobility 16%
Daimler AG's strategy is built on four key pillars: reinforcing its core business, achieving global growth, leading in technology, and advancing digitalization To strengthen its core business, the company plans to launch new models across all car divisions The Trucks division will focus on effective investment and innovation in automation technology, while the Bus division aims to enhance efficiency to meet emission standards The Vans division will target new customer segments Daimler is also enhancing its presence in the Chinese market by building relationships with local firms to better understand market trends and customer needs Additionally, the company is investing €112 million in its R&D center in Beijing to support its internationalization strategy In terms of digitalization, Daimler is developing car-sharing services like Car2go and Moovel, as well as car rental services through CharterWay and online platforms like Mercedes Me.
Investing in research and development: Daimler plans to invest approximately €14 billion in property, plant and equipment in 2020 and
In 2021, Daimler invested nearly €19 billion in research and development, emphasizing future-oriented sectors such as digitization, autonomous driving, and electric mobility The company's significant growth rate and substantial market share drive its commitment to reinvesting in R&D, ensuring continued expansion and innovation.
Daimler prioritizes innovation, focusing on safety, efficiency, connectivity, and autonomous driving, holding the highest number of patents in automobile safety and security The success of the Mercedes-Benz brand is fueled by a new generation of vehicles, highlighted by a strong emphasis on SUVs and the progressive transition from traditional internal combustion engines to advanced technologies.
Mercedes-Benz boasts strong global brand equity, consistently recognized for its quality and luxury In the latest "Best Global Brands 2019" ranking by the esteemed US brand consultancy Interbrand, Daimler secured the 8th position, reaffirming its prestigious brand image This solid brand equity positions Mercedes-Benz to effectively pursue further business expansion opportunities.
Daimler is advancing sustainable solutions for individual mobility and future transportation, focusing on CO2-neutral options for combustion engine vehicles The company offers a comprehensive range of electrically powered cars, vans, trucks, and buses, alongside complementary mobility services Daimler is significantly expanding its product and service offerings to enhance profitability, comfort, and driving pleasure, while also improving range and optimizing charging infrastructure.
In 2016, U.S regulators mandated Daimler to reassess its emissions certification process following allegations that Mercedes BlueTEC vehicles emitted significantly higher nitrogen oxides during road tests compared to controlled lab conditions This led to multiple class action lawsuits in the U.S accusing the company of deceptive advertising related to manipulated emissions data Ongoing investigations pose a threat to Daimler's reputation, with the 2020 announcement revealing that the "Dieselgate" scandal had already cost the company up to €1.5 billion in 2019.
The hybrid and electric vehicle market is set for significant growth, with a McKinsey report predicting 120 million electric vehicles on the road by 2030 and a demand exceeding 7 million units by 2025 Daimler is implementing a three-pronged strategy that encompasses electric vehicles, hybrid models, and traditional combustion engines, while adopting a holistic approach to electrification through its new EQ technology and product brand This strategy includes the development of a modular vehicle family and a comprehensive ecosystem to support necessary charging infrastructure.
Bosch and Mercedes-Benz have advanced their collaboration on urban automated driving, marking a new phase since 2019 Their pilot project, featuring an app-based ride-hailing service, has successfully launched in San José, California, utilizing automated Mercedes-Benz S-Class vehicles.
Autonomous vehicles are paving the way for innovative business models in the freight and automobile sectors, particularly through Hub2Hub operations on US highways This technological advancement presents significant opportunities for logistics companies, including Daimler Trucks, which is consolidating its global expertise in autonomous trucking through its Autonomous Technology Group By collaborating with Torc Robotics, a leader in autonomous driving systems, Daimler Trucks is actively developing and testing Level 4 automation, positioning itself at the forefront of the industry.
4 technology on highways in the United States
Restructure of NAFTA under administration of President Donald Trump:
U.S President-elect Donald Trump warned German car companies he would impose a border tax of 35 percent on vehicles imported to the U.S market (Taylor, 2017) This announcement drew sharp reproaches from Berlin and hit shares This will increase the overall cost of the vehicle hence sales would drop as compared to now Further the political uncertainty in the run- up to the 2020 presidential elections and ongoing trade tensions could lead to a more pronounced reduction in corporate investment than previously assumed
Impact of Brexit on European automobile manufacturers and Daimler:
Germany exports more than 800,000 vehicles to the U.K (Schwartz, 2019) This is three times the volume Germany exports to China and in fact that's
Germany exports to the U.S are 30 percent higher, indicating significant market potential despite Brexit's impact on demand This situation could lead to substantial currency implications for earnings Additionally, prior to the EU referendum in 2018, Mercedes-Benz contemplated relocating production to the UK, specifically utilizing Nissan’s Sunderland plant, but ultimately opted against this decision following the referendum results.
The ongoing Covid-19 outbreak poses significant macroeconomic risks to the automobile industry, particularly for Daimler, which anticipates adverse effects on sales and production The company has indicated that these risks could hinder unit sales development and result in substantial negative impacts on production, procurement markets, and supply chains.
The company recorded net sales of €172,745m, an increase of 3.2% over
Net sales Gross Profit Net profit profit of the company was €48,063m, and increased as a percentage of net sales to 27.8% in 2019 from 24.8% in 2018
Bayerischer Motoren Werke Aktiengesellscharf
Bayerischer Motoren Werke Aktiengesellschaft (BMW AG), headquartered in Munich, Germany, serves as the parent company of the BMW Group The company's main focus is on the development, manufacturing, and sale of engines and all engine-equipped vehicles The BMW Group is organized into several segments, including Automotive, Motorcycles, Financial Services, and other entities.
The BMW Group stands as a leading global manufacturer of cars and motorcycles, ranking among Germany's largest industrial companies With its prestigious brands—BMW, MINI, and Rolls-Royce—the group dominates the premium automotive market Renowned for their exceptional aesthetics, dynamics, technology, and quality, BMW Group vehicles exemplify the pinnacle of engineering and innovation in the industry.
The BMW Group operates on a global scale and is represented in more than
140 countries The research and innovation network are spread over twelve locations in five countries Until 2019, the production network comprised a total of 30 locations in 14 countries (BMW, 2019)
Figure 4 18: Revenue by region and segment of BMW AG in 2019
In 2019, automotive segment contributed 74% of revenues for BMW Group It recorded a new level at 2,538 million deliveries to customers, which increased 2.2% compared with the figure in 2018 (2,483 million) (BMW, 2019)
Table 4 16: Sales of BMW's automotive segment in 2018-2019
Volumes also developed well for each of the Group’s brands The BMW
Europe Asia Americas Other region
In the financial services sector, other entities reported a 3.3% increase in units delivered to customers However, MINI experienced a slight decline, with 347,474 units delivered globally, down from 364,135 units in the previous year, marking a decrease of 4.6% In contrast, Rolls-Royce Motor Cars achieved a milestone by surpassing 5,000 units for the first time, delivering 5,100 vehicles, which reflects a 21.6% increase from 4,194 units in 2018, setting a new record for the ultra-luxury brand.
The BMW Group's lasting success is largely attributed to its unwavering commitment to future-oriented innovation Central to its corporate philosophy, the company prioritizes shaping individual mobility and developing innovative solutions to meet tomorrow's needs Consequently, research and development (R&D) play a crucial role in securing the BMW Group's long-term success as a premium manufacturer.
The BMW Group is dedicated to advancing new technologies, emphasizing emissions-reducing drivetrain systems, digitalization, and autonomous driving to redefine future travel experiences Success hinges on the ability to anticipate and meet customer needs across all technological fields, ensuring that developments provide real value As a premium manufacturer, the BMW Group prioritizes these innovations to enhance customer satisfaction and drive progress.
With this approach, the BMW Group strives to find outstanding solutions for the overall (mobility) needs of its customers
The BMW Group addresses the key trends shaping tomorrow’s individual mobility via the central topics of Design, Autonomous, Connectivity, Electrified and Services
High Research & Development investment: leading to high qulity products:
BMW prioritizes technological advancement in its product development, investing significantly in research and development, with expenses reaching €6.419 billion in 2019 The company is committed to enhancing its electric vehicle offerings and advancing automated driving technologies, which strengthens its market position and drives sales growth.
Balanced geographical revenues are crucial for long-term sustainability, as they provide diversified revenue streams from various regions By targeting a wide range of markets, companies can expand their reach and minimize risks BMW exemplifies this strategy with its robust presence in Germany, the USA, Europe, and Asia, showcasing a highly diversified target market for its products.
With decades of experience in green technology, BMW has been at the forefront of developing electric vehicles since the 1970s, positioning itself as a leader in environmentally friendly automotive solutions The company's commitment to producing eco-friendly engines not only aligns with the future of sustainable transportation but also offers significant advantages in an increasingly eco-conscious market.
BMW has developed nearly 20 car models that emit only 140g of CO2 per kilometer The company is committed to enhancing vehicle efficiency while also researching new, environmentally friendly, and cost-effective fuel alternatives.
Controversial vehicle recalls can significantly tarnish the reputation of automakers For instance, in October 2018, BMW recalled approximately 268,000 vehicles in the UK due to a potential fire hazard, with a total of 1.6 million vehicles recalled globally This followed a major recall in 2015, where BMW addressed faulty Takata airbags by recalling nearly 357,000 older models in the U.S and over 1.4 million worldwide Such recalls not only impact immediate safety concerns but also influence long-term customer perceptions and brand image.
Despite seeking government subsidies to mitigate the pandemic's effects, BMW's decision to distribute over $1.7 billion in dividends raises concerns about corporate greed, potentially alienating even its most loyal customers.
Several Lawsuits: BMW was involved in a number of lawsuits, including a breaking the law is a major weakness because it makes it difficult for consumers to trust the company (Neslen, 2019)
Expanding the product portfolio by introducing new series across various segments can significantly boost sales, providing customers with a wider range of choices within the same brand This strategy presents a prime opportunity for brands to enhance their market presence and attract more consumers.
Millennials and Gen-Z are becoming the leading consumers, necessitating flexible mobility solutions To attract this lucrative demographic, BMW has ventured into the car rental market and developed a car-sharing app.
Focus on Emerging Markets: According to Thomas Schaefer, director of
Volkswagen Africa, sub-Saharan Africa has the potential for 3 to 4 million new cars, this number has increased sharply from about 420,000 units in
2017 BMW can exploit the markets emerging, unsaturated (Bavier, 2019)
With the growing demand for eco-friendly transportation, BMW, a leader in the electric vehicle market, is well-positioned to meet the needs of environmentally conscious consumers seeking sustainable mobility solutions.
The rising costs of raw materials and labor are significantly impacting automobile brands, with BMW experiencing a notable increase in operating expenses in recent years This trend is compounded by intense competition for skilled labor within the industry, which further strains financial resources As a result, growing operating costs exert pressure on profitability, contributing to a decline in BMW's net profit, which fell from €7,064 million in 2018 to €5,022 million in 2019.
Conclusion and recommendation
This dissertation analyzes the performance of the top four automotive companies to offer reliable investment recommendations, resulting from a comprehensive examination of macroeconomic factors, industry trends, and company-specific data.
In Chapter 2, the macroeconomic analysis reveals that the world economy experienced slow GDP growth in 2019, with further deceleration anticipated in 2020 due to the significant impacts of the coronavirus pandemic Despite various monetary and fiscal policy measures implemented by numerous countries, global growth is expected to be markedly lower than the previous year While a provisional agreement in the trade dispute between the USA and China and reduced concerns over the UK's withdrawal from the EU provide some optimism, the overall economic outlook remains challenging.
At the start of the year, the EU generated a sense of optimism; however, the positive effects in these areas are expected to be significantly overshadowed by the repercussions of the coronavirus pandemic.
Chapter 3 provides a comprehensive analysis of the industry, revealing that despite the uncertainties posed by the Covid-19 pandemic, the market is projected to reach revenues of $8.9 trillion by 2030 While the market volume has seen rapid growth, it is also vulnerable to significant declines during periods of crisis.
The analysis of four leading automotive companies, including General Motors and Bayerischer Motoren Werke, reveals strong financial performance and share prices, despite a profit decline in 2019 due to economic challenges Daimler experienced low revenue growth and a significant drop in net profit, while Ford is facing financial distress, indicated by worsening financial ratios and a high bankruptcy risk The study employs various valuation models to provide investment recommendations based on a thorough examination of financial ratios and company valuations.
Table 4 22: Investment recommendation of four companies
Stock Target Price Market Price Recommendation
Limitations of dissertation
Historical financial statements serve as a foundation for analyzing a company's financial health and making future projections These reports also play a crucial role in valuation models However, past financial data may be outdated and not relevant to the current circumstances, potentially leading to an inaccurate assessment of a company's position and growth potential.
The study employed the Valuation Multiples Model and Discounted Cash Flow Model, which are fundamental methods for short-term investment recommendations To enhance the accuracy of these recommendations, it is essential to integrate additional analytical techniques, such as technical analysis and other valuation approaches.
Thirdly, the research model provides some inappropriate assumptions As a result, analysis and valuation are not always appropriate
Companies undergoing restructuring often encounter abnormal data changes, making it challenging to conduct in-depth analyses of their activities The assessment of financial indicators is particularly difficult due to time constraints and limited access to information.
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General Motors Company
Other non Oper./Financial Items 2,642 2,282 2,132 2,163 2,065
The WACC is defined in the table below:
- Risk free rate is the interest rate of 10-year government bonds
- Cost of equity = Risk free rate + (Beta * Market Risk Premium)
- Cost of debt = Pretax cost of debt * (1 – Marginal tax rate)
In which: Pretax cost of debt = Financial expenses/ (Loans + Long term debt)
- WACC = Cost of debt * Weight of debt + Cost of equity * Weight of equity
After-tax cost of debt 0.6%
4 Present Value of Free Cash Flow
Less: (Inc.)/Dec in Net Working
Less: (Inc.)/Dec in Net
Present Value of Free Cash
Ford Motor Company
Other non Oper./Financial Items 3,732 1,655 4,006 1,668 -930
The WACC is defined in the table below:
- Risk free rate is the interest rate of 10-year government bonds
- Cost of equity = Risk free rate + (Beta * Market Risk Premium)
- Cost of debt = Pretax cost of debt * (1 – Marginal tax rate)
In which: Pretax cost of debt = Financial expenses/ (Loans + Long term debt)
- WACC = Cost of debt * Weight of debt + Cost of equity * Weight of equity
After-tax cost of debt 0.5%
4 Present Value of Free Cash Flow
Less: (Inc.)/Dec in Net Working
Less: (Inc.)/Dec in Net
Present Value of Free Cash
Daimler AG
Other non Oper./Financial Items 88 317 268 275 -105
The WACC is defined in the table below:
- Risk free rate is the interest rate of 10-year government bonds
- Cost of equity = Risk free rate + (Beta * Market Risk Premium)
- Cost of debt = Pretax cost of debt * (1 – Marginal tax rate)
In which: Pretax cost of debt = Financial expenses/ (Loans + Long term debt)
- WACC = Cost of debt * Weight of debt + Cost of equity * Weight of equity
After-tax cost of debt 0.6%
4 Present Value of Free Cash Flow
Less: (Inc.)/Dec in Net
BMW
Other non Oper./Financial Items 34 631 1,103 934 224
The WACC is defined in the table below:
- Risk free rate is the interest rate of 10-year government bonds
- Cost of equity = Risk free rate + (Beta * Market Risk Premium)
- Cost of debt = Pretax cost of debt * (1 – Marginal tax rate)
In which: Pretax cost of debt = Financial expenses/ (Loans + Long term debt)
- WACC = Cost of debt * Weight of debt + Cost of equity * Weight of equity
After-tax cost of debt 0.5%
4 Present Value of Free Cash Flow
Less: (Inc.)/Dec in Net Working