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BREAKINGVIEWS-South Korean self-driving deal spins its wheels

Thu 10th June, 2021 3:53am
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Refiles to add stock code.) By Antony Currie MELBOURNE, June 10 (Reuters Breakingviews) - Hived-off electric- and autonomous-vehicle units are the models investors want to drive. It’s one reason why General Motors GM.N boss Mary Barra and her team keep getting hounded about the idea. An attempt by South Korean car-parts maker Mando 204320.KS suggests how important it is to get the engineering right. The $3.1 billion company, which supplies Hyundai Motor 005380.KS and others, looks well-placed to make a success of splitting up, at least on paper. While the newly named Mando Mobility Solutions arm will focus on self-driving technology, the rump also aims to be a “highly focused EV solutions” business. That ought to be a twofer for shareholders, unlike the old Delphi Automotive. In 2017, the then-$23 billion supplier renamed its autonomous and connected division Aptiv APTV.N and carved out its legacy powertrain business. While Aptiv has since almost doubled in value, rival BorgWarner BWA.N picked up the rebranded Delphi Technologies last year for just $1.5 billion. Moreover, both of Mando’s units generate revenue and earnings, unlike many of the electric-vehicle and self-driving startups raising money by going public or merging with blank-cheque firms. At 10%, Mando’s estimated EBITDA margin for 2021 is lower than Aptiv’s 15% or so, per Refinitiv. Even so, that should be more than enough to entice investors wanting to inject capital into the sector. Trouble is, Chief Executive Chung Mong-won’s new strategy isn’t quite as bold as it sounds. He and his team will retain full control over Mando Mobility, which means there will be no benefit from having more focused management, one of the main reasons for splitting off a business. No new money is coming in either. Mando’s shares tumbled 10% on the news, defying the typical uplift from a carve-up. If Mando secures approval from shareholders for the new structure, there may be new developments, including finding fresh capital. Chung’s insistence on keeping both hands on the wheel, however, could curb interest from outsiders. The best way to lure them in would be to properly spin off Mando Mobility and let it drive unassisted. Follow @AntonyMCurrie https://twitter.com/antonymcurrie on Twitter CONTEXT NEWS - South Korean car-parts maker Mando said on June 9 that it plans to “split off” its autonomous-driving business, which will be renamed Mando Mobility Solutions. The parent company, which intends to be a “highly focused EV solutions” business, will retain full managerial control over the new entity. - Shares in Mando, which is 30% owned by conglomerate Halla Holdings, were down more than 9% in morning trading on June 10. - For previous columns by the author, Reuters customers can click on CURRIE/ <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Mando press release https://www.prnewswire.com/news-releases/mando-announces-strategy-to-advance-into-specialized-ev-solutions-and-autonomous-driving-companies-path-for-achieving-9-trillion-krw-revenue-by-2025-301309057.html ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe | Editing by Jeffrey Goldfarb and Katrina Hamlin) ((antony.currie@thomsonreuters.com; Reuters Messaging: antony.currie.thomsonreuters.com@reuters.net))
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