Manganese Bronze Share Discussion Threads

[shanksaj] 30/9/2008 11:01

Actually quite a lot that you might have thought should be on the ropes or near them are up this am. Anglo Irish Bank, Bank Ireland, Easyjet, Mitchell & Butlers, not to mention Manganese Bronze. There must be a name for a day like this... "a day traders day"? "a contrarian day"? "inverse day"? OK, so Easyjet might have risen because oil prices are falling. But some banks that have risen today might be bust tomorrow. Take a long term view, ie lets say 3 days, and we'll see where these are then! Added to short.

[davidosh] 30/9/2008 10:59

I suspect the low volumes means a few investors need to take profits from here to support elsewhere in their folio.

There are very few reasons to consider buying until the scale of the recall is fully known and all the costs accounted for. There could be a placing required IMO which would be much lower than here in this market.

[marben100] 30/9/2008 10:15

Duhhhhh. Global markets in turmoil. Most stocks in my porty down. This P.O.S. UP 7% this morning?

Beyond belief.

[macansy77] 29/9/2008 14:45

someone offloaded 720k this morning at 273, wonder who picked them up?

[shanklin] 29/9/2008 14:00

Starts...

"More than 5,000 black cabs are being recalled in a major £4 million operation after investigators discovered the cause of a series of mystery blazes."

Also

"A further 4,000 TX4 models built at a later date will then be recalled for similar treatment over coming months in what LTI says is a "confidence-boosting" move, even though it says the taxis are not at risk."

Mmm, are we really meant to believe that MNGS are spending 80% of the £4 million detailed in Friday's RNS on a confidence-boost despite the taxis being at no risk whatsoever? That's quite a lot of money to spend on confidence.

[davidosh] 29/9/2008 13:31

Does beg the question ....If only they could give one of those new unsold TX4s all those cabbies that are without a cab and the ability to work due to the recall. It may be that the cabbies will be trying to get new ones under the warranty though of course as one of the blogs stated that cabbies had lost confidence in the early models and would prefer replacements.

[verulamium] 29/9/2008 13:22

Good write up by Simon Cawkwell on t1ps.com today. Needless to say, he's short, and can't believe how the price has stayed so high despite the cab conflagrations. "800 taxis in a field outside Coventry waiting to be sold....worth at most 100p"

[cliffyburger] 29/9/2008 10:38

I agree with davidosh. MNGS is almost certain to make a loss this year. Given its cashflow problems, I expect it will have to renegotiate with its lenders, or opt for a rescue rights issue.

Either way, the current market cap of £50m is way too generous. By my reckoning, the MNGS share price ought to *at least* halve from its current level...

Cliff (short MNGS)

[davidosh] 29/9/2008 09:29

The p/e is false anyway even at the forecast 1.3p of eps as the statement on Friday and dramatically reduced sales in H2 so far means a profit simply cannot be possible IMO. Cashflow is crucial now so will the company need to raise money and will the banks be supportive ??

It is difficult not to be cynical when the company puts out a late Friday evening RNS too.

[shanksaj] 29/9/2008 09:23

Down 50p at one stage this am. Recovered some. The PE on this is still generous. Even if there were no fire problems and no drying up of sales it is still generous. This has a long way to fall.

[davidosh] 29/9/2008 08:40

TX4 sales are very poor at present...the company uses trade finance to keep production going. What are the implications there ? I cannot see the finance company wanting more produced when the current ones are not selling and the ones they have backed and paid for being recalled. Presumably they may even be able to recall loans themselves if concerned about the situation.

[judgement] 28/9/2008 21:42

You're right. Mercedes must be laughing their socks off.
Unlike selling standard road cars, the buyers of taxis tend to be well informed about their vehicles, and any current or historic issues. I'd be amazed in there were any UK TX4 sales at present. What's going to be the deal clincher - a free engine bay extinguisher? Mercedes couldn't have planned it better if they'd tried.

[shanklin] 28/9/2008 07:10

Judgement

Interesting point. There's some stuff on product liability here



No doubt, if they can recover some or all of the driver's loss of earnings from their insurers, premiums are going to be massively higher going forward.

Also, if there is any possibility that MNGS could have acted differently in some way, to have sorted out the problem more proactively and/or prevented the consequential loss being as large as now seems likely, it is going to provide a massive amount of wiggle room for the insurer.

Given that as yet MNGS seem not to have diagnosed the cause of the problem, this places the licensing authorities in a very difficult position, as they seek to balance the issue of public safety against the urgent need for taxi drivers to get back on the road earning income.

The only winners here seem likely to be Mercedes

[davidosh] 27/9/2008 23:52

The BBC claims an additional 1000 TX4s will need to be taken off the road and tested with work on them continuing to mid October



There must be real confusion amongst TX4 owners and drivers and does suggest that they do not really know what the cause is so will probably have to work on more in a 'belt and braces' cover all approach.

[judgement] 27/9/2008 23:24

From the last AR:

Product quality and liability

The Group is exposed to certain product liability risks which could give rise to
financial liability in the event of failure. The Group seeks to mitigate this
risk through selection of the highest-quality suppliers, maintenance of
demanding quality systems in our assembly and service operations and through
quality accreditation. The Group maintains insurance for public and product
liability and self insures against the risk of product warranty.

So, product liability or product warranty? Perhaps the £4m is warranty, and the loss of earnings is product liability?

[davidosh] 27/9/2008 18:46

I spotted this comment in this months Autocar....

SMMT have posted August's commerical vehicle sales figures:

light commericals less than 3.5 tonnes - Ford Transit class vans basically - down 25% in August compared to Aug 07. So that's a lot of jobbing builders, courier firms, florists? et. cutting back mightily. Don't look good.

Plus taxi vehicle registrations were down a monumental 51% and 38% year to date. As London Taxis International of Coventry hold 99% of the market that's real bad news for them; year-to-date sales up to Aug only 1,290 against 2,204 last year.


That was before the TX4 disaster and sales have now ground almost to a trickle so the cash inflows must be truly awful. By my calculations even without the additional £4m costs the sales would have meant a 300 cab shortfall on the break even level....that is about a £10m cash shortfall and revenue IMO will now only be around £70m for the year and not the £102m that was indicated in the incorrect house broker note.

Does this suggest the company will need to raise finance and how will the fundraising be done ? I cannot see the banks being supportive in this climate and will the trade finance still be available if the TX4s are not actually selling and stock is piling up off the production line.

[judgement] 27/9/2008 17:37

It will be interesting to see if the engine bay fire suppression system is offered as standard fit or a cost option on all new sales?!
Can't imagine there will be too many new sales, so probably won't make much difference!

[macansy77] 27/9/2008 13:05

the Times today reports that it's 1500 taxis currently off the road...

[shanklin] 27/9/2008 07:52

davidosh

If its 1000 taxi that are subject to the refit, and a total cost of £4m, that is £4k per taxi. Perhaps somebody with more knowledge of car mechanics/costs than me could advise on whether or not that sounds reasonable for the various actions described above.

If not, then should we assume it is (say) 4000 TX4 taxis at £1k each. It is unfortunate that LTI/MNGS are being so vague in these communications as to which taxis will be subject to the proposed actions.

[davidosh] 26/9/2008 23:38

A bit more behind the scenes information from LTI...


September 26, 2008

UPDATE ON TX4 UNDER BONNET FIRES

LTI have been carrying out a full and thorough investigation into the cause of the twelve under bonnet fires that have occurred over the last few months. LTI have employed independent fire investigators, the leading engineering company Ricardo and VM Motori, the manufacturer of the TX4 engine to assist them in the examination into the cause of the under bonnet fires.

LTI have identified a range of solutions designed to stop the type of under bonnet fire that has been experienced in the twelve early TX4s occurring.

The PCO and Licensing Authorities have been kept informed during the process of investigation and rectification. PCO officials are reviewing the results and considering the rework programme that LTI has proposed to enable drivers to begin using their TX4s that were affected by the suspension of their licenses.

LTI will carry out the following actions:

Replace the Exhaust Gas Recirculation pipe
Fit a thermal sleeve to the Exhaust Gas Recirculation pipe
Install a heat shield over the Exhaust Gas Recirculation pipe
Replace the bulkhead Noise Vibration and Harshness pad with one of a new design and material
Thoroughly inspect all pipe runs and wiring for evidence of unusual wear and replace as necessary
To rebuild driver confidence in the TX4, LTI will also fit a fire suppression system.

LTI have employed the services of Sigma who are a specialist rework company in the automotive industry and very experienced in carrying out corrective action programmes. Sigma will initially be based at Mann & Overton London on a day and night shift and will utilise thirty ramps and sixty technicians to initially rework approximately 50 vehicles per 24 hour period.

Drivers will be contacted by LTI in ascending VIN number order and will be requested to leave their vehicle at Mann & Overton for the day or night for the work to be carried out. It is important that drivers adhere to the booking system to avoid similar scenes at Mann & Overton when drivers tried to queue jump the inspection process. Only by following the designated process can LTI be assured that they have correctly reworked all the affected vehicles in the fastest possible time.

Once this rework process has begun in London it will immediately be extended to the regions to rework the vehicles outside of London as well.

LTI apologise again for the inconvenience caused and will work to ensure that the rework programme can be carried out in the shortest possible time.

ENDS


It is still not clear to me whether all this work will be done on just the 1000 cabs that have so far been recalled or whether ALL TX4s will eventually need this modification and reworking. If the later models do not need it done I must presume that they had a major design change in early 2007.

If there are 1000 only to complete then the whole programme will take about three to four weeks to undertake if working non stop on 24 hour shifts. I presume the PCO will at some stage advise whether they think the action is sufficient to allow each vehicle back on the roads.

On average even if the PCO allow each cab back on the streets after the work is completed then time lost will be about one month per cab which in lost earnings and cab hire charges must amount to well over £3m. There will be many months of uncertainty and lengthy discussions over who is responsible for payment of each part of the claims and repair work.

At least the information and acknowledgement of the problem has been made official now even though a late Friday announcement does seem a bit naughty considering the scale and importance.

[shanksaj] 26/9/2008 20:19

So, to summarize...

"We don't really know what is causing the fires so we are making three changes, and hopefully, one of these, or a combination of more than one, will fix the problem. Fingers crossed. Seeing as we don't know the exact cause it might be difficult to prove it is a design fault in the engine itself. This being the case it may be none of the cost can be passed on to the engine manufacturer. We realize that some investors are going to hit the roof when they read this, and wonder why they were not told directly earlier, so we have decided to put it out after hours and let tempers cool over the weekend."

Could it be that the fires are being caused by the manner in which the engines are being installed under the bonnet.... the installation did not fully comply with the recommendations of the engine manufacturer?

Does anyone know if this engine has been designed exclusively for use by Manganese?

[cliffyburger] 26/9/2008 19:18

Releasing a crucial RNS at 5.09pm, after the market close? Cheeky beggars. I expect these to fall further on Monday...

[davidosh] 26/9/2008 17:44

I think the PCO have insisted that the cabs will not be granted a licence back for public carriage until the company can guarantee that there will 100% not be another fire.

Any thoughts on how the company will be able to fund all these costs with very poor cashflow at present due to the very low level of sales which may possibly get worse.

[davidosh] 26/9/2008 17:30

LTI has now identified a range of solutions designed to prevent such occurrences and has today announced a product recall. The product actions include modifications to the emission control equipment, the heat management system and under bonnet insulation.




Having met today to review this issue, the board of Manganese Bronze expects the costs of the recall to be approximately £4m, and that this will be expensed in the current financial period to 31 December 2008. Manganese Bronze is already in discussions with its insurers and relevant suppliers to establish liability and opportunities for recovery of some of these costs.




When legal liability has been determined there may be additional costs for driver compensation for the period the vehicles are off the road.




...............


The necessary amendments and modifications sound very significant and will be more than a days work. Will these modifications or some of them be needed to the later TX4s as well ? Where will they find the number of mechanics needed to get them back and signed off as roadworthy by the PCO ?

Driver compensation after that will be a major issue and the question of liability of course.