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American Axle & Manufacturing Holdings

American Axle is a leading Tier 1 automotive supplier manufacturing driveline and drivetrain systems as well as related components and chassis modules for light trucks, SUVs, passenger cars, CUVs and CVs. Geographically, AXL is highly concentrated in NA (US 53% of 2017 sales, MEX 22% and Canada 5%), with a meager 8% of sales sourced from Europe. Asia (9% of 2017 sales mix) and South America (3%) are two primary growth regions for the firm. Even following the MPG acquisition, AXL remains heavily reliant on GM's product success as GM accounted for 47% of total 2016 sales followed by FCA at 14% of sales mix. Even as GM will remain the key driver of AXL's performance in the near term, its backlog, at least, is heading in the right direction. Of the $875 mn 2017-2019 backlog, 60% is non-GM customers and 36% is outside NA, led by Asia and Europe. Also, Passenger car/CUV platforms accounted for 79% of the backlog, with NA light trucks were only 15%, and global light trucks and commercial vehicles were 6% combined. (24 Aug 2018)

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November 2018 US Company Recommendation Changes

US Company Recommendation Changes: 02 Dec 2018, 9:51 PM ET - Our monthly report provides executive summaries for the forty company recommendation changes made on North American companies during the month of November.

ESG and Automotive: Ratings and Methodology

Sector Analysis: 14 Nov 2018, 10:23 PM ET - In this piece we discuss our ESG Ratings framework as it pertains to the Automotive sector. We use a total of 13 distinct measures to score each of the 3 ESG parameters and then weight them individually.
Focused

American Axle 3Q18: Best Laid Plans

HY Note: 05 Nov 2018, 5:44 AM ET - Ending a post-MPG earnings streak characterized by operating strength and balance sheet improvement, AXL's third quarter results saw some weakness. Guidance was pared back and the firm's 2.0x net leverage target was pushed out: move to M/P.

FCA 3Q18: Inching towards IG?

Earnings Note: 30 Oct 2018, 10:10 PM ET - FCA is struggling with the challenging market environment alongside its auto-OEM peers, but continues to perform well and improve its balance sheet strength as it inches closer to IG ratings.

LKQ 3Q18: Focus on Delevering, New Share Buyback

Earnings Note: 25 Oct 2018, 7:44 PM ET - LKQ reported further margin pressure and lowered its FCF guidance, and announced a share buyback program. But deleveraging the balance sheet still remains a focus at LKQ as well.

China Autos: Slowing Demand Concerns

Sector Analysis: 18 Oct 2018, 7:02 AM ET - September passenger vehicle sales in China marked the third consecutive month of YoY declines. While YTD sales are still up 0.4%, 2018 is already shaping up to be the weakest growth year for the critical China automotive industry. 

IG Note: US Autos Underperformance – Long End Pain

IG Note: 15 Oct 2018, 3:49 AM ET - Autos is the worst performing IG Sector in the YTD18 period, with the long end bonds of Ford and GM driving the underperformance. 

HY Note: US Autos Underperformance

HY Note: 07 Sep 2018, 5:06 AM ET - Automotive is the worst performing sector YTD within US HY bonds with excess returns of -3.8% vs +2.3% for ML HY Index. We have had a negative view on all the names driving these negative returns including ATD, TEN, ADNT and TSLA. 

Delphi Technologies: Softer Outlook, Move To M/P

Earnings Note: 08 Aug 2018, 9:34 PM ET - Delphi reported a softer-than-expected of 2Q18 results and downwardly revised its FY18 guidance outlays. We view further credit metric improvement as limited over the near-term and, accordingly, move to M/P.

Cooper Tire: 2Q18 | Muted Outlook

Worth Watching: 06 Aug 2018, 10:29 PM ET - Cooper Tire (B1/BB) recorded modest 2Q18 results, reporting both top and bottom line contraction for the second consecutive quarter. The firm saw revenue fall 3.1%, driven primarily by lower tire volumes as well as the impact of weaker price an ..
Focused

American Axle: 2Q18 | Strong Execution

Worth Watching: 06 Aug 2018, 12:03 AM ET - American Axle (B2/B) reported strong 2Q18 results, as the firm continues to benefit from supportive customer demand trends across key product and markets. The firm saw top and bottom line growth once again this quarter, with revenue increasing ..

Cooper-Standard: 2Q18 | Mixed Performance

Worth Watching: 01 Aug 2018, 11:58 PM ET - Cooper-Standard (B1/B+) reported an all-time high for second quarter sales, but a weaker than expected volume mix and unstable market conditions impacted its bottom line. The company saw modest 2.1% revenue expansion, improving to a quarterly h ..

Meritor: 3Q18 | Keep on Trucking

Worth Watching: 01 Aug 2018, 11:57 PM ET - Meritor (B2/BB-) recorded healthy growth in its third quarter, despite the unfavorable impact of rising commodity costs. Sales were up 22.7% YoY, to $1.1 bn, driven by higher production across the board, and one of the highest North American ma ..

Autoliv: 2Q18 | Moving Forward

Worth Watching: 30 Jul 2018, 12:27 PM ET - Autoliv (A2/A-) reported steady growth in its second quarter despite rising raw material prices against the backdrop of rising trade tensions. Consolidated sales grew 11.5% to $2.2 bn, driven by a 4.2% positive impact stemming from currency tra ..

Tenneco: 2Q18 | Margins Pressured

Worth Watching: 29 Jul 2018, 10:40 PM ET - Tenneco reported strong second quarter results, recording top line expansion and still healthy bottom line performance. For the quarter, TEN's value-add revenue increased 8.0% (+6.0% constant currency), to $1.92 bn, supported by healthy growth ..

BorgWarner: 2Q18 | Steady Ahead

Worth Watching: 26 Jul 2018, 11:27 PM ET - BorgWarner (Baa1/BBB+) delivered a strong second quarter performance despite weaker than expected industry volume. The firm reported revenues of $2.69 bn, a 12.7% increase compared to the second quarter of 2017 (+7.3% organic). The expansion oc ..

Euro Auto OEMs: US Tariff Trials and Tribulations

Sector Analysis: 11 Jul 2018, 10:02 PM ET - We frame the potential financial implications of EU-US tariffs across Euro OEMs and while no OEM comes out as a winner, FCA sees less pain while JLR comes out as more exposed. 

Car Rental: Section 232, Used Cars, Fleet Risk

Sector Outlook: 11 Jul 2018, 11:52 AM ET - We ponder the Section 232 auto threats and the more immediate questions on used car prices, new vs. used car affordability, daily car rental fleet replacement cycles, and a fresh test of pricing power in car rental.

US High Yield Conference Transcript: Tesla

Transcript: 11 Jul 2018, 10:58 AM ET - We provide a transcript of our presentation on Tesla from the New York US High Yield Conference conducted on June 19th 2018.

American Honda Finance: Attractive New Issue

IG Note: 11 Jul 2018, 10:45 AM ET - American Honda Finance is in the market with 2Y floating as well as 2Y and 5Y fixed offerings. We  would view any new issue concession as an opportunity for investors to gain exposure to this high quality captive finance company.

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