Chipmaker Targets Hybrid Cars As Engine for Revenue Growth
WALL STREET WEST
An increasing market for hybrid cars is a chief target of International Rectifier Corp., the El Segundo-based chipmaker whose power management components wind up in a range of products, from computers to washing machines to automobiles.
Traditionally, the company has made parts that go into the cabin area of the car, said Graham Robertson, a company spokesman. But autos are requiring more sophisticated electronic components under the hood.
International Rectifier has reported recent contract wins from a number of major automobile manufacturers and suppliers for integrated starter alternators, electric power steering systems, engine preheat systems and direct fuel injection systems.
Electronic engine components are most prevalent in hybrid cars, which must operate on electronic power while the car temporarily turns off its gasoline motor at stops or at low speeds. Gasoline-powered cars can also improve energy consumption with greater use of electronic engine components.
International Rectifier reported net income of $29.4 million for the fourth quarter ended June 30, compared with $13.2 million for the like period a year earlier. Revenue rose 30.8 percent to $298.6 million. The stock has fallen 26.6 percent since the beginning of the year to $36.77 as of Aug. 5, tracking a general slump in the chip industry.
Last week, Toyota Motor Corp. said it would boost production of its popular Prius hybrid vehicles, while Ford Motor Co. kicked off production of the hybrid version of its Escape sport utility vehicle. Honda Motor Co. already makes two hybrid models, while Toyota and other manufacturers are about to introduce hybrids to the market, where demand has so far outstripped supply.
International Rectifier cannot disclose whether its products are on any of these models, Robertson said. However, the worldwide market for electronic automobile components is expected to rise to $11 billion in the next 10 years, Robertson said. If the company can hold its present market share, this segment of its business would be three times larger than the overall company is today.
“Fifty percent of the world’s energy goes into motors and 50 percent of that is wasted,” Robertson said. “We have the goal of saving that 25 percent of the world’s energy.”
In a major victory for private water companies, Los Angeles Superior Court Judge Carl West last week dismissed American States Water Co. as a defendant in 19 consolidated lawsuits that alleged the water company provided contaminated water to 2,000 residents of the San Gabriel and Pomona valleys.
The class-action lawsuits date back to 1997 when one of the largest cases, Adler vs. Southern California Water Co., a subsidiary of American States, was filed. The plaintiffs alleged that the company provided contaminated water from wells located on a federal environmental Superfund site. The plaintiffs claimed the water was contaminated with solvents used by aerospace manufacturers, notably Gencorp Aerojet in Azusa. None of the corporate polluters have been dismissed from the case.
“This is a very big win for the industry,” said Jim Gallagher, vice president of customer service for American States. “We had been expecting this would happen for some time now.”
West dismissed American Water from the case when plaintiffs were unable to demonstrate that the water company had violated any federal or state standard on contaminant levels, Gallagher said.
The case has been logjammed for years by a variety of procedural issues.
The defendants claimed individuals could not sue them if they had complied with all requirements and fell under the jurisdiction of the state Public Utilities Commission. The PUC began investigating the private water companies’ knowledge of groundwater contamination in 1998 and found American States in compliance with all standards, Gallagher said.
Los Angeles mutual fund giant Capital Group Cos. has already lost millions by holding onto shares of Delta Air Lines Inc., though it can expect to take an even bigger hit if Delta files for Chapter 11 bankruptcy protection.
Last week, Delta’s pilots’ union rejected a management proposal for $1 billion in wage cuts and other concessions that Delta’s Chief Executive Gerald Grinstein claims are necessary for the No. 3 airline’s survival.
Unlike mutual fund giant Fidelity Investments, which sold most of its holdings in Delta last year, Capital Group maintains a 13 percent stake, making it the airline’s largest single shareholder. It has an estimated 16.3 million shares split between Capital Guardian Trust Company and Capital Research and Management Co., according to the latest Securities and Exchange Commission filings available.
Since July 1, the value of Capital Group’s stake in Delta has fallen to $73 million from $114.7 million.
Delta shares have plummeted 70 percent in the past year to $4.50 a share on Aug. 5, from a high of $15.04 a share on Sept. 8, 2003.
A spokesman for Capital Group did not return calls seeking comment.
Primedex Health Systems Inc. has finally completed its financial restructuring after renegotiating the terms of its $150 million in long-term debt with two of its lenders, the company announced last week.
The Los Angeles-based operator of diagnostic imaging centers also was able to open a new $23 million revolving credit facility with Wells Fargo Foothill, a division of Well Fargo Bank that specializes in lending to troubled companies. Primedex plans to access the credit for working capital.
Primedex emerged from Chapter 11 bankruptcy last year.
It’s the Jobs, Stupid
Kei Matsuda, senior vice president and senior economist at Union Bank of California, has called the 2004 presidential election in favor of George W. Bush, based on changes in unemployment rates and their effect on the past six election elections.
In the presidential elections since 1980, the incumbent party has won every election with the sole exception of the 2000 race when payroll employment increased by more than 1 million nationwide during the 12-month period prior to the election. According to that formula, if the election were held today, Bush would win. The Bureau of Labor Statistics has reported that 1.5 million jobs have been created since August 2003.
Like any good economist, Matsuda gives himself an out, noting that the pace of job growth seems to be slowing.
“It is unlikely that (President Bush) can score many points from the improvement in job numbers. The drop in joblessness is small, and the rate has been flat for the last several months.”