Adient - information for read-across

All,

Adient management made several important observations on the call this week:

1) Especially since raising the additional 600m last month, the company has more than sufficient liquidity to trade through the crisis and management are looking to deleverage the company thereafter within the confines of the current structure. Both comments we agree with as per our previous analysis.

2) Premium and Japanese manufacturers continue to outperform the general markets in the Chinese rebound. This is not because they’d be shifting production between regions, but due to genuine resilience of demand in the upper segments. We find this information important wrt. to JLR and other British OEMS as well as some of the auto suppliers in Germany. 

3) Europe will emerge from Lock-down before the US. Up until not too long ago we thought the US would be the first to emerge, given its higher degree of central control and coordination (in theory). But with several European economies easing already and car plants across the continent to resume production within weeks, European manufacturers should benefit relative to US manufacturers. Notably the UK are expected to be the last Europeans to start (once again, see JLR etc.). 

4) European governments have not yet offered any glimpse of how they may want to flex redundancy costs in H2 of this year. 

5) First OEMs are approaching the company with plans to delay new vehicle introductions. While that is not entirely unexpected, its good confirmation and again important for some of the smaller British manufacturers with expensive plans of new introductions in coming years. 

We remain long Adient. The company burns approx. $175m / month during lock-down, which in the scheme of things is entirely manageable. 

Wolfgang