Lots of talk and concern about the US auto industry today, not just the Big Three, but also the future of every other players, like the dealers and auto parts manufacturers. Wanna see stark illustration of how badly things look? Check out Dana Automotive Holding (DAN). At $1.32, where it currently trades, the the market cap is 2.3% of sales (market cap of $208 million, sales of around $9 billion). If the company could even eke out the tiniest sliver of profit, it could trade at a PE of 1.
And it’s not one of those cases where you have to look at enterprise value. The debtload is pretty light, since the company was already in bankruptcy once, relisting back in February. Shares debuted over $12.
The problem is that the market doesn’t believe Dana can make a profit on shrinking sales. If the automakers tank as hard as they’re expected to, it’s not easy for a manufacturing company to just dial back on production and adjust, even with more flexible labour agreements. So the company has $2.9 billion in equity — much of it proberty and equipment — but if they can’t make any money those assets, what difference does it make.
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