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Das Beste Oder Nichts

25 June 2019 by jbchevrel

The auto sector has been little changed in CDS space, so far this week, despite different ongoing stories. On Sunday, Daimler (DAIGR) issued a profit warning (3rd time in 1 year), lowering its outlook for 2019 EBIT, “in the magnitude of the prior year” (meaning EBIT is more likely to grow in [-5%,+5%] than in previous guidance range [+5%,+15%]). This was reportedly due to 1/ higher provisions for various ongoing governmental proceedings 2/ some measures relating to Diesel vehicles. Furthermore, on Saturday it had been announced that DAIGR must recall 60k Mercedes diesel-working models in Germany (GLK produced between 2012 and 2015) after regulators found software aimed at distorting emissions tests. DAIGR said it would appeal against that decision, but on top of that, the ministry said that it was expanding its investigation into other models (incl. the C and E, for a total of 700k+ vehicles potentially). That was not a surprise, as Bild am Sonntag had reported in APR that regulators were looking into the GLK already. Financial implications for this can be big, both in Europe (VW had been fined €1B Audi €0.8B) and in the US (which one could expect to show a much less compromising attitude, given the context). So far this week, the 5y CDS is virtually unchanged (wider by a tiny +2bp) and the stock is down by -4%.