Carmakers' Ventures Add Value, Not Boom

FRAMINGHAM (03/20/2000) - The Big Three automakers have joined the rush to capitalize on the hot Internet market, spawning ventures such as an online trading exchange and partnerships to put Web access at drivers' fingertips. But the automakers won't be getting any dot-com-like returns, analysts say.

DaimlerChrysler AG in Stuttgart, Germany; Ford Motor Co. in Dearborn, Michigan; and General Motors Corp. in Detroit have recently unleashed a flurry of announcements about initiatives aimed at boosting their high-tech capabilities.

The three last month said they will cooperate on an Internet trade exchange for suppliers, and Ford last week said it will hook up with Sprint PCS Group to put voice-activated Internet and phone services in some of its cars.

Ford's stock bounced up 3.8 percent the day it announced its agreement with Kansas City, Mo.-based Sprint PCS. GM and DaimlerChrysler shares climbed 2.8 percent and 2 percent, respectively.

But, said Michael Bruynesteyn, an automotive analyst at Prudential Securities Inc. in New York, "it won't make a difference on the stock for a while."

The automakers' business-to-business exchange should cut production costs and generate a hefty revenue from the expected $750 billion in transactions at the site, according to a report by Dresdner Kleinwort Benson North America LLC in New York. And the move toward adding more services such as GM's OnStar global positioning technology will open up new revenue streams and increase the companies' profitability, analysts predicted.

"The key word would be ‘incremental,'" said Efraim Levy, an analyst at Standard & Poor's in New York. "However, in the long term, it's a net positive."

In the technology race, analysts give Ford and GM a clear lead over DaimlerChrysler, which has been slow to develop high-tech alliances. GM is likely a bit ahead of Ford, some analysts said, but it's far too early to call the race.

David Garrity, an analyst at Dresdner Kleinwort, also gives GM an edge. GM's stock is up 7 percent for the year, whereas the other two automakers have lost stock value. GM also has a larger stake in the companies' automotive exchange, Garrity said.

Standard & Poor's gives GM the highest rating among the three, projecting $10.26 in earnings per share and stock valuation growth of 10 percent to 20 percent during the next six to 12 months, according to Levy.

Ford and DaimlerChrysler are projected to have stock appreciation of up to 10 percent, with earnings per share of $5.95 and $6.70, respectively, Levy said, though those estimates don't focus on Internet initiatives alone.

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