South Korean self-driving deal spins its wheels

HL Mando

10/06/2021 03:53

(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))