At the height of the credit crisis last year, more than one commentator talked about how some companies were going to make boatloads of money through bold investing. Count Leucadia National Corp. among the bold.
In its most recent earnings report, Leucadia (ticker: LUK) reported that its investment in AmeriCredit Corp., the subprime auto lending, climbed in fair value to $446.3 million on June 30 from $249.9 million at yearend 2008. Leucadia, which purchased about 25% of AmeriCredit on Dec. 31, 2008, for $405.3 million is in the black on the investment. On the revaluing of its investment for earnings purposes, Leucadia has made a modest $41 million. AmeriCredit is trading at just shy of $17 a share today, valuing Leucadia’s stake at about $558.3 million, meaning that if Leucadia were to sell its ACF stake today, it would reap about $153 million, a gain of about 38%.
But Leucadia would be foolish to sell its position at this point. Take a look at AmeriCredit’s most recent investor presentation. It rightly points out that (Slide 13) that “HSBC, Triad Financial, legacy Wells Fargo, Nuvell/National and Fireside, among others, have exited subprime auto finance space.” Additionally, AmeriCredit’s loan portfolio deterioration is starting to ebb — and that is before the credit markets truly are humming again for auto-backed securitizations.
At this point, Leucadia is playing with house money. A bold investor would continue doing that.
Read a transcript of AmeriCredit’s most recent earnings call here.
Wow, I never thought I’d be talking about Fiats here. 🙂
I’ve had more than a few Fiats, all but one of which were U.S. models – but I didn’t buy them new. One of the reasons I think Fiat can overcome its poor U.S. showing in the past is that there’s a whole generation of people in America (my age and under) who’ve never been able to buy a Fiat new and many have no idea what a Fiat is (when I would leave Fiats in New York parking garages, attendants would often ask me what they were – “VW? Nissan?”).
I’ve had about a half dozen Fiats, and every time I drove one people were interested in what they were and where I got them – most had never seen a Fiat and if they had, not one other than a Spider (the only Carter-era U.S. Fiat I’ve never owned).
I used to love Fiats and in particular, the Strada – which was a great car engineering wise (much of it originated in the Fiat 128, and lingered into the 1990’s as the Lancia Delta Integrale), but weird and very poorly made. The only ones to survive long enough for me to have them were the really good ones, and I’d honestly be surprised if more than 300 Stradas are still on the road in all of North America. Literally. I also had a green ’81 Brava that I liked, although its undersized GM TH180 hydramatic and 4:10 rear made it a mind-numbing car on long drives. The car was good, but poorly adapted for the demands of Americans. My X1/9 was a great car – and only one part broke during my whole ownership experience – a Bosch FI sensor.
My two Fiat 128’s were great cars, but one rusted out completely. The other survives in a Philadelphia area collection. Tales of Fiat quality, long waits for parts, and poor service are, however, legendary among Fiat fans, and in my family – which had a Lancia Beta when I was growing up. Even the Fiat dealers didn’t want to deal with that pretty-but-often-broken-contraption.
Today’s Fiats, however, would be barely recognizable in comparison to those old cars. Even the badges and logos are different. I would not put Fiat’s quality at the Toyota level, but as of a couple of years ago it was vastly improved over many other brands and about even with the Koreans. I think Hyundai and Kia have continued to improve to the point where they are on par with Toyota at this point, but only time will tell. Fiat isn’t quite that good, but they’re totally unlike the bad old days.
The last modern Fiat I drove was a 2001 Bravo 155 with lots of cool features and a strong turbocharged straight five (similar to what powers the Volvo C30 T5), and I loved it. It was, however, a whole different animal from the old cars.
If Fiat does return, they’ll face a huge legacy issue of problems with their cars in the 1970’s. They, like Peugeot, fundamentally misjudged American tastes and then failed to provide cars that were going to last – at a time when many Americans who were sampling imports were discovering Toyota and Honda for the first time.
But Fiat’s current lineup, excluding the vans and the too-strange Croma, are generally very good, exciting cars – in particular those that would potentially be volume leaders here – the 500, Grande Punto, and Bravo. They look and feel world class, and in general have shed most of the reliability issues. Fiat could make a good go of it by offering us cars that are like VW, but cheaper and with more personality, and despite the history, they face easier acceptance than imports from China and India.
I worked for Lucadia in the 90’s under American Investment Bank in non-Prime auto finance. they are a brilliant group of investors, they will make a boat load of $ on Americredit and in this environment.