Slowing Western car markets hit Nexteer IPO
The listing of car parts-supplier Nexteer Automotive will offer investors an opportunity to hitch a ride on the Chinese passenger-vehicle market, say analysts. But one of the biggest questions for the United States-based steering and driveline systems producer - which was acquired in 2010 by Pacific Century Motors (PCM), an investment arm backed by the Beijing municipal government - is how it can offset the downward pressure on selling prices of its products as slowing car markets in the US and Europe look inevitable.
The listing of car parts-supplier Nexteer Automotive will offer investors an opportunity to hitch a ride on the Chinese passenger-vehicle market, say analysts.
Battered by a profit squeeze in its sector, Nexteer's net profit fell three basis points to 2.7 per cent last year, while gross margin stayed at 12.3 per cent. Sales fell 3.6 per cent to US$2.2 billion, even though the China market posted gradual growth.
After an employee restructuring plan that cost US$7.4 million last year, the company will launch three new electric power steering programmes in the second half "to mitigate the adverse impact of overall pricing pressure from customers", according to a preliminary listing document.
Gearing ratio, a measure of financial leverage, fell sharply to 289 per cent last year from 550 per cent in 2010, when General Motors sold the company to PCM.
Aviation Industry Corp of China, a state-controlled parts manufacturer, then acquired a 51 per cent stake in PCM in 2011.