Gentherm Inc (THRM) 2008 Q3 法說會逐字稿

Welcome to the Amerigon Incorporated, 2008 third quarter and nine month results conference call. During today's presentation all parties will be a listen-only mode. Following the presentation the conference will be open for questions. (OPERATOR INSTRUCTIONS) This conference is being recorded today, Tuesday, October 28, 2008.

I would now like to turn the conference over to Jill Bertotti, please go ahead.

Good morning, everyone, and thank you for joining us today for Amerigon Incorporated, third quarter nine month results conference call. Before we started today's call, there's a few items I'd like to cover with you, first in addition to the disseminating through PR news wire this morning's news release announcing Amerigon's results for its third quarter and nine months ended September 30, 2008, a copy of the release was sent to a number of conference call participants. If any of you need a copy of the news release you may download a copy at Amerigon website at www.amerigon.com or the Allen & Caron website at www.AllenCaron.com Additionally a replay of this conference call will be available via the link provided on the events page on investor section of the Amerigon's website. Finally I've been asked to make the following statement. Certain matters discussed on this conference call are forward-looking statements that involve risks and uncertainties and actual results may be different. Important factors that could cause the company's actual results to different materially from its expectations on this call are: risks that sales may not significantly increase, additional financing if necessary may not be available, new competitors may arise and adverse conditions in the automotive industry may negatively affect its result.

The liquidity and trading price of its common stock may be negatively affected by these own other factors, please also refer to Amerigon Securities and Exchange Commission filings and reports including but not limited to form 10Q for the period ending September 30, 2008, and its form 10K for the year-ended December 31st, 2007. On the call today from Amerigon we have: Dan Coker, President and CEO, Bud Marx, Chairman, and Barry Steele, Chief Financial Officer. Management will provide a review of the results, after which there will be a question and answer session. I'd now like to turn the call over to Dan. Good morning, Dan.

Good morning Jill, and thank you for hosting our call again today. We're going to follow our same procedure as we have followed for the past few quarters, where I'm going to give a very brief overview. Barry will review some details and then we'll ask Bud to give us an update on the advanced technology team. The third quarter for 2008, our revenues held up fairly well during the rather tough tumultuous times during the automotive industry. The credit markets have caused more consternation. We had begun to see some easing in the petroleum cost and then the credit markets worldwide have frozen up so that's caused more uncertainty with our base customer and their consumer of products. We did launch several new vehicles during the third quarter. And they have contributed revenue for us for the first time, which helped keep our revenues up despite the falling general market.

And our R&D programs are beginning to show some results and some announcements were made in the third quarter about some success programs there. We also announced formally the Sealy bed program during the year, during the quarter and are seeing some good progress there as well. But there are underlying concerns with the market and the consumers are not buying cars right now, so there's a lot of instability in the market, a lot of uncertainty as to which way we're heading, but in general, we believe Amerigon is still sound, doing well and holding our own in the market. So Barry will now give you some updates of the metrics of the quarter and then we'll turn it over to Bud. Barry?

Thank you, Dan. As Dan mentioned revenue was up for the quarter by $722,000 or representing about 4.5% over the prior year. On a year to date basis the increase was $3.5 million or 7.5%. A number of new programs helped us to raise the revenue for this quarter, but those were substantially offset by a decreasing volumes on our existing platforms, again, attributable to the overall market decline for automotive. Our gross margins showed a decline for the quarter, we showed 29.1% versus 32.5% for the prior year. This is largely attributable to higher material costs that we are incurring, specifically a substance called tellurium -- a metal called tellurium that's used in thermal electric devices. We also have some impact from the change of mix of programs, favoring more lower margin programs during the quarter. Our net research and development costs increased by $603,000 or 44% to $1.9 million or actually almost $2 million. That reflects new spending or increased spending on our advanced thermoelectric device program at BSST it. , the increase of BSST spending of that increase was $562,000 and Bud will be talking more about the excitement we see on those lines.

Selling and administrative costs were slightly down $114,000 for the quarter or 5%. That reflects primarily lower bonus costs that we expect for this year, offset partially by stock option compensation increases for a grant that was issued to employees in July of this year. Moving down our taxes reported at $648,000 or representing a 38% tax rate for the full year. In comparing to the prior year, that was a significant decrease, not only because of the decreased pre-tax income, but also because the prior year number for taxes included a one time benefit of $1.7 million associated with recording R&D tax credits that had been valued and determined at that point in time. Our earnings per share was $0.03 for the quarter. That's basic and fully diluted and that compares to $0.07 for the prior year. Or excuse me, that compares to $0.13, $0.14 for the prior year, again, the benefit for taxes is helping that number for the prior year by $0.07 per share.

Our cash and short-term investments, are at $26.7 million, that doesn't represent much of a change from the previous quarter, but it does show a reclassification for our investments from short-term to long-term -- from long-term to short-term, specifically because our auction rate preferred stock for the low has now been liquidated. At the end of the quarter it was $11.5 million, but we re-classed to a short-term basis because our broker dealer, [Co-America] Bank has agreed and now actually purchased back nearly 100% of shows auctioned rated preferred shares that we held. We do have a fully liquid portfolio now for the cash and short-term investments. Our depreciation for the quarter was $355,000 and capital expenditures for the third quarter is $358,000. And that should do it for the financial review. I guess I'll turn it back over to Dan.

Okay. Well thank you very much for the update, Barry. Bud, we'd like to get an update from you on the advanced technology group. How are things going?

Well the big news which we announced in the third quarter was that with significant help from us in terms of sponsorship, a researcher at Ohio State had developed a material that showed significantly enhanced efficiency properties at medium to high temperature. This is one material of a family of materials that we hope to develop, so we're not declaring success immediately with just this one version, but it does provide both proof of concept, and it provides a pathway to development materials that will perform across a range of temperatures and that's what we need to develop and open the new markets. So ahead of us is a task, one, to continue sponsoring this research and broader the family of materials. And two, to take what's essentially a lump of material and another exciting part of this is this is material that is easily produceable, so it's not being laid down atom by atom, which is a substantial opportunity when we talk about practical product development.

Anyway, we need to take this material and turn it into a functioning module, so we have to characterize it and metalize it and do the things that we at the BSST and Amerigon really do for our daily bread. So it's an exciting step. What it means is that the research money and development money that we've been spending, we belief is justified and we will expect to continue spending at essentially this rate in order to cary out successfully the tasks I just described. That's probably the new news. I'd say it's watch this space kind of news. But very encouraging. Thank you.

Thank you. Thanks a lot, Bud. Before we open the floor for questions, we should also point out that our Board of Directors has recently met and approved a stock re-purchase program, where we will be entering the market and buying back approximately $12 million worth of our shares. At the current market prices, our board feels like Amerigon is an excellent investment, and that program is announced this morning as wells our quarterly earnings release. With that news I think that pretty well sums up our overview, and we would like to turn the phones over to questions from the field.

Thank you, sir. At this time we will begin the question and answer session. (OPERATOR INSTRUCTIONS) One moment please for our first question. Our first question comes from the line of Steve Denault with Northland Securities, please go ahead.

Good morning, everyone.

Good morning, Steve.

You made reference to the R&D spend, it being at the $2 million level, likely to continue at that level going forward. Is that a misstatement, or should we expect an absolute increase in that R&D spending in '09, and if so to what extent?

Why don't I answer that. What we've said in the third quarter was that we're going to raise our spending rate by about $.5 million a quarter. And the fourth quarter we expect to be in roughly that same range, and that rate will cary forward in 2009. So it will result in a year-to-year increase, because the first two quarters are lower, but we're not anticipating an increase in the rate of travel from the third quarter forward. That's what we've said before, and that's what I think I said just now. .

Okay. Perfect. The tellurium impact and this is directed toward Barry, the impact on the gross margins in the third quarter, should we anticipate that that would have a lessening impact as we move forward considering that all commodities have come in substantially?

No. We think that it will be pretty consistent in the fourth quarter. Keep in mind that the tellurium market hit its peak late in the third quarter, or excuse me late in the first quarter this year, has taken till the third quarter it for it to catch up with us, inasmuch as the tellurium market has decreased slightly, that will still take its time to work its way through our systems with well. So we expect that the tellurium issue will be here in the fourth quarter about the same rate.

How about for next year?

We're not very good at prognosticating the future. All we can say the market peaked for tellurium really at the early part in the second quarter and has been slowly sliding down to the current rates. The current rates are still above our normal purchase history and they seem to be very stable at this level right now, and we are not certain as to which way they're going to go, but we certainly hope they go down, but they haven't fallen off like copper and steel and some of the other major commodities have in the recent time.

Okay. And my final question, I guess is for you Dan, considering that climate controlled seats are a creature comfort that consumers want and like, in your exposure to trucks and SUVs being what it is, has there been any acceleration in terms of the OEM thinking of about, well if trucks and SUVs aren't selling in a -- automobiles are, light duty, economic automobiles, is there any thought in terms of accelerating migration toward some of those vehicles?

Well, certainly it's a thought. We're working with lots of program people. The trend away from large SUVs and large trucks started several years ago. It's not just a -- this summer event. It's been a general slow trend, and that trend is continuing, and will continue. Those large SUVs and trucks are usually being replaced today by people migrating over to either cross-over utility vehicles or more mid-size utility vehicles and we continue to see strong interest from those groups. The recent pressure has open the door for us at a couple of new areas, what I would call the kind of upper middle range of vehicles are now looking to dress up their vehicles with more of these creature comfort type features in order to attract some of those customers away from the large trucks and SUVs into their categories. So we are seeing more interest, but of course, that will be down the road interests by some of these other platforms.

Okay. Thank you.

Thank you, sir.

Thank you. Our next question comes from the line of Rick Hoss with Roth Capital Partners, please go ahead.

Hi, guys. BSST expense did I add this up right, $1.150 million the net number for the quarter?

$1.187 million for the quarter net BSST expense.

$1.187 million. Okay. Perfect. What about pricing concessions from the manufacturers, are you seeing that at all?

That's a normal part of doing business in the automotive industry, but we are, we are, we have reacted to any requests, polite requests for pricing considerations and we have maintained our normal policies. There's no inordinate new pressure on us to slash our prices, but there is constant pressure on us to find ways to reduce the overall system costs, which we are engaged in with all of our partners, not only our customers but our vendors as well, to try to find ways to keep the overall system costs from climbing even as some of the material costs have gone up.

Okay, so nothing out of the ordinary then.

Nothing extraordinary.

ASPs look like they might have been above $70 a seat this quarter. Is that consistent, and do you have any explanation of why that was higher -- trended higher?

It's primarily do to the mix and content from one vehicle program to another.

Okay.

That wouldn't be considered anything unusual.

Okay.

It did pick up slightly during the quarter.

Okay. But it's just, it's not necessarily a seasonal thing. It is just depending on what was sold or developed during the --

The major driver there is some of our customers purchased the control unit through us.

Okay.

Which is about a $20 cost per seat.

Okay.

Some do not. So depending on which customer is sort of driving our revenue is where that will move.

I shouldn't look at the higher ESPs as a run rate, though. I mean, it will fluctuate I realize that, but it's --

We couldn't look for any significant movement in that, either distribution either, it will ebb and flow a little bit.

Okay. And then can you give, just, I guess an appreciation of the percentage of contribution this quarter from the new platform announcements that you announced last quarter? Just so we know what's driving the current number that we just saw and what, I guess, if there's potential for the additional platforms to contribute?

Well, I can say that incrementally in looking at Q3 year-over-year, we had revenue coming from new programs of about $7.2 million.

Okay. Okay. And then lastly, SG&A looked expenses looked like they came down a little bit. You talked about why. Would you expect with a lower number, assuming that the guidance falls where you said it would for the fourth quarter, do you assume a lower number there, or should we look at it just being flat?

It would be probably more flat.

Okay. Okay. Appreciate it. Thanks a lot.

Thank you. (OPERATOR INSTRUCTIONS) Our next question comes from the line of Steve Dyer with Craig-Hallum. Please go ahead.

Good morning, guys, thanks for taking my call. A different way I guess of asking the previous caller's question, I know that the delay in the F150, the '09 rolling out and a lot of 09s in the GMT platforms, pretty much lasted the entire quarter. To what extent are are those being produced now or is it still quiet on the '09 front?

It's accelerating at least. They're actually in production now. You're right they did start-up production lines for both the GMT 900 SUVs and for the Ford F150 pick-up trucks. There was about only a month's revenue for both of those vehicle platforms in our numbers for the quarter, so that is something that is just beginning to build, but again we're selling into a market there that is not the most popular space in the trade.

Sure. Okay. And then relating to price concessions, I know last quarter there was some talk about potentially if tellurium, if and when it stabilized at a level higher than you were accuse topped to, potentially being able to pass some of that along contractually even to the OEMs. I would assume with the fix that they're in, that is not a good conversation that's going well right now? Is there any hope of that in the future, are we just going to have it eat it here for the time being?

Well, there's always two things you can do. You can go and piss off you're customer and tell them they have to pay more because you're having to pay more and that's an ugly conversation as you characterized. The other thing which we try to do normally, but we accelerate in pressured times is to try to find ways to either eliminate or minimize the impact of such materials or components as they may affect our cost. The easier way for us to go is to try to in terms of time is to go to the customer, that is not -- they are not very receptive at this moment to increases in materials or prices of any kind. In fact, they, as we mentioned earlier, they are looking for additional price concessions wherever they can. So for us, probably the more strategic move is to do what we do best which is engineer things and redesign some of the features of our systems to try to accommodate a more expensive tellurium in our future designs and so that's where we are spending a lot of our effort right now.

Okay. Makes sense. Kind of hopping over to BSST a little bit. We've kind of long talked about bringing down the power consumption of the seats such that they're a viable alternative on cars with smaller alternators. Where are we in that process? And I was intrigued with the new maximum just having the seat on the driver's side, if that's something we're seeing by pursued by more car guys now in an effort to have the creature comfort. But in situations where the driver is the only one and the car 95% of the time, is that, how should we think about that and the ability to continue to drive toward smaller cars?

Well we actually are seeing several people, particularly in that mid range vehicle, where the vehicle's is typically used in a commuting sense. We are seeing people express interest in having, I'd say, additional creature comfort features for the driver's side only. In some cases, that makes very much -- very good sense. And we're seeing a few people look at that as an alternative. Maybe some of that is power -- available power is riding on that decision as well. But I'd say that in general, we are always trying to find more efficient use of electricity in the car, and we are driving all of our systems, our advanced BSST team are definitely trying to help us to find ways to reduce our energy draw so we can get in more vehicles, or follow the current trend and getting into not only the front seats but also the rear seats of the vehicles that we're currently on.

Dan, this is Bud, I think it's true to say that over the past four or five years we've cut our power consumption essentially in half.

That is correct.

Okay. One more BSST question with respect to the heat recapture application. Obviously great strides have been made. What is the next step there in terms of it is a prototype, when, when do we start working towards a potentially commercial launch?

Well, that's actually a really good question. We're after exactly that. What we'll call a gizmo for the sake of conversation. The material that has been developed, we're now testing and characterizing and working to put into a module is what we call a positive or P type material. We need a similar material on the negative side or end type so that we can marry the two into a device, and that's the focus of our efforts at this point. And when we've achieved that and harnessed it into a module, at that point we believe we'll be able to demonstrate quite superior power generation and heat recapture into electricity performance at medium to high temperatures. That would, I'd say, on a pathway for a number of markets, including automotive, but automotive is a, as you all appreciate, a long lead market, so we would anticipate uses earlier. But we're still, I'd say two to three years away from a product that incorporates that. We've got a number of steps between that, but, this is very encouraging.

Okay. And then finally, Barry, you touched a little bit on SG&A in Q4. Historically we've seen a little bump up there in coordination with the issuance of options. Do you expect to see that this year, or is kind of flat with the beginning of the year, the first three quarters more likely?

It will be more consistent with where we've been. We shouldn't see a bump up for options for the fourth quarter. I don't think we're expecting on issuing any, if we did it will have some impact. The amortization schedule we see right now would show that as being a similar expense as Q3.

Okay.

Was that question about the fourth quarter or about the year '09?

The fourth quarter but I was moving to '09.

Okay. Go ahead.

So just again, is that, is that a good run rate to use for '09 or I would assume it would jump a little bit?

There most likely will be some reflect from standard inflationary we'll experience, we'll obviously be working to be cost conscious as we come to SG&A for next year as well.

Okay. Very good. Thanks, guys.

Yes, this is Bud. I certainly wouldn't rule out the issuance of some options in '09, but we're mindful of the dissolution effect. It's one the reasons we're out there purchasing shares. So I think, in a way our SG&A this year including some options is a good proxy for our SG&A in '09. So -- but I would also say as Barry said, this is not our first rodeo. It's not a fun time, but I think we are going to take a hard look at our cost picture as we set our budgets moving into '09.

Okay. Thanks.

Thank you. Our next questions come from the line of Frank Gristina with Micro Capital. Please go ahead.

Good morning gentleman. It's Ian Ellis here for Frank. Barry gave out a number here $7.2 million in revenues on vehicles which were not providing CCS a year ago, which suggests to me a penetration rate has increased dramatically. Are any of those revenues on vehicles which are replacing platforms or vehicles which previously had CCS, or are these all new vehicles essentially representing a genuine increase in market penetration?

They are all new vehicles. Although I will point out that that does include sort of expansion of the GMP 900 programs. They're new name plates to us.

We did have a big year plan. We didn't plan on the end of the world. We did achieve all our penetration goals we had for the year and those numbers have, have been able to just about offset the general shrinkage of the market or restriction of the broad market.

Sorry. You could be the only automotive supplier who managed to did that. Looking ahead, then as we try to model what the company's worth we kind of forget about what current sales are, what they have been and what they might be. And we're looking at market penetration is we're trying to work out on where we are on the S curve in terms of penetration and adoption. What do you think is, I mean, it sounds to me you had like 40% increase in penetration this year, which means I'm very curious as what the sustainable rate of penetration growth might be.

This was an extraordinary year that we had. As Barry mentioned, a Cadillac reserve for the climate controlled seats early on in the GMT 900 line was released and the other vehicles on a GMT 900 platforms were allowed this year for the first time pick up the feature, and many of them have, and will probably, will maintain that in the future. So this was an extraordinary year and we think that 2009 will be another good year, but not anywhere near as big as this year was. So where this year we may have seen 10 to 12 to 14 new name plates come on board, in 2009, we'd be happy to see four or five new name plates come on board which is back to our traditional norms.

Right. Okay. That's helpful. Thanks a lot.

Sure.

Thank you. (OPERATOR INSTRUCTIONS) Our next question comes from the line of Bob Jones with Wachovia Securities. Please go ahead.

Thank you very much. Gentlemen, thank you for the call. Can you just quickly go over the major competitors to your various product lines including in-house development by the in-house automobile manufacturer?

Okay. Well that's a very good question. The typical traditional competitor that we see normally in the market place are the people who make the resistance wire electric seat heaters, that's the number one competitor for us. The leader in that group is the WET Automotive Group, a German company. And they are the number one supplier of the wire heater elements in the world, and they also have recently introduced a heated and cooled system to one of the GM platforms here in North America.

The next category which you've correctly identified are kind of what we call an in-house accommodation or development. Mercedes and BMW both use a system developed by Mercedes Benz which incorporates traditional wire mat seat heater in addition to a set of fans that draw in cabin air and provide passive ventilation as opposed to our active cooling and heating elements. We're seeing a lot of people now looking at -- in the developing countries, a lot of people are now looking at the ventilated seat as an entry level option for, as I mentioned the developing countries, India, China and the many of the Asian countries are, while they're not in a position to adapt the actively heated and cooled seats, they are looking at using our designs for heated and ventilated seats. So I hope that rambling answer gives you an idea of what we're looking at.

Yes.

You should also Denso, which is another competitor, principally in the -- with Asian supplier, customers.

It's actually Denso is working with Toyota, on basically a heated and ventilated design as well.

Well, let me then just focus on the ventilated or cooled -- active cooled design. Specifically we don't see a lot of competition, I guess, from active cooling alternatives. Why isn't that sector more attractive? Why aren't people adopting that? Why aren't you getting better penetration in that sector?

Well the active cooling requires two things. It requires a lot of power and a substantial cash price for the consumer to pay. It is a more expensive option than a simple ventilation design, and it does convert electricity into thermal energy. So a lot of vehicles, or many vehicles not a lot, but many vehicles do have restrictions on the amount of power that they're allowed to devote to these types of features. And that's the first thing that a platform designer has to come to grips with, is what are my consumers really looking for out of this vehicle? And what are they willing to pay for? So this is kind of the driving factor is, number one, will the people in that segment buy it and pay for it, and number two, do we have the electrical budget to Ford to put the feature on?

Got it. Thank you.

Well, but it's fair to say also that our patent position is a substantial deterrent to people just sort of walking into this marketplace, so entry --

The question was really more directed to why aren't we getting broader penetration.

Yes. I think it's fair to say that was the question. I appreciate the follow-up, but the real question was, why not broader penetration, why not a Mercedes or a BMW? I guess I fail to understand why at that price level we haven't made in roads into those vehicles?

Actually that's -- it's a mystery to us as well. A vehicle in those classes offering kind of an entry level technology is confusing to us as well. Any other questions?

At this time, I would like to give you a final opportunity to ask any other questions. (OPERATOR INSTRUCTIONS) And we do have a follow-up question from the line of Bob Jones with Wachovia Securities. Please go ahead.

Gentlemen. I'm sorry that no one else asked a question. So I'll ask one more. Stocks 255. So market is telling us we're going out of business here, and I don't mean to be flippant. I mean, I'm just reading it right off the screen. On the other hand, nothing that you've said today nor in prior calls suggests that that is the case. No debt to speak of, still making a little money, and while car sales are far from robust, nonetheless there's still lots and lots of platforms like BMW that are selling cars and could use your systems. Sort of any sort of thoughts on the stock price here? It hasn't been at this level in quite some time.

Well, we definitely agree with your thesis, that the company is sound. It's solid. It's profitable, we have positive cash flow. We have cash in the bank. We have no debt. And the business is basically on plan. We're not really experts at how you guys value businesses, but we do notice that we're standing in a bad area. We're standing a little too close to the automotive industry, and the automotive is basically being beaten down globally, and the entire world is in financial stress. So we don't think that the market understands the true value of where Amerigon is today, and is going to be going in the near future, and thus our Board has authorized us to invest some of our cash in buying back some of our shares at these price levels. Bud, would you like to add to that comment?

No, I think you've covered that very well. We believe we're in a strong position. We believe over the next three to four years that we have products that are going to really meet the needs in energy and fuel conservation, and we have a product -- Ian asked a question where we are on the S curve, and I think the 35% to 40% penetration is about right, because as was observed by another of our callers, our penetration in Europe is not very strong. We have a lot of opportunity there, and our penetration in the growth markets in Asia could certainly be stronger and improve, so we think we have a lot of opportunity. I think the challenge is up to us, one, to weather this storm that's in the automotive markets, and stay on track for the products that we've said we're going to develop for the future.

Thank you. Our next question comes from the line of Gerry Heffernan with Lord Abbott and Company. Please go ahead.

Good afternoon, everyone. And Dan, forgive me for my question was really much along the line of the past questioner. I too see the positive aspects of your company, standing in a very strong headwind in regards to your industry. And my one concern would be, you have made the re-purchase program announcements, although I think my peer group's a little bit tainted about these announcements in that they are just lip service. So if I could kind of beg of your patience here. Can you just give us a feel of just how aggressive you think you would be with this? I mean, honestly someone's got to question given the ramp of your business, the margins that you produce, that why wouldn't someone just want to buy this whole thing up now?

Well we certainly -- we believe that it's a good investment ourselves and so we do intend on aggressively buying shares in the marketplace within the guidelines set by the Board and that's a program that we are not providing lip service to. We are engaging in that activity beginning as soon as our legal limits, within our -- in our own trading policies expire tomorrow, we're going to start looking at getting into this as a great investment and that's what we see it as. Whether someone would want to buy us or acquire us, that's certainly someone else's decision to make when they come into the marketplace, but I wouldn't believe that it would be easy to buy the entire company at current price levels, and that would require some negotiation. So we're not terribly concerned at this point. The financial markets are pretty much frozen worldwide, and I think many of the people who would be interested in making investments in new technologies are on the sideline watching at this point in time frankly.

Great. Thank you very much, gentlemen.

Thank you.

Thank you. Our next question is a follow-up question from the line of Steve Denault with Northland Securities. Please go ahead.

Yes, I was just hoping you could provide a little bit of color in terms of some of our largest customers that have been ongoing concerns about their official stability. How would things or how would you anticipate things would play out in the event of some sort of re-organization with one of your large customers?

Well the biggest re-organization that's being looked at right now in the marketplace is General Motors possible acquisition of the Chrysler corporation, which might actually long-term be helpful for us, because we have a lot of good business at General Motors and we have very little business, actually no business today, at Chrysler Corporation, so that type of re-organization would be quite helpful for us. The rest of the industry is in quite sound financial condition. Ford Motor Company has, very smartly -- wisely taken a position where they logged in cash and available credit lines to be able to weather the current storm. I don't think they were planning on anything quite this dramatic. General Motors has a little bit less cash, but certainly are in position, I think to access the credit markets at a different level than many other corporations. All the rest of our customers worldwide are still in very good solid financial condition.

Okay. Thanks.

Thank you. Our next question is a follow-up question from the line of Frank Gristina with Micro Capital, please go ahead.

Oh, thank you. Yes, it's Ian Ellis again here. Two follow-up questions. One is, just on the power consumption issue mentioned that you have with just the power consumption. Obviously it's less from what it was. What's kind of the net impact today, because obviously using the cooling feature, the reduction in cabin temperatures that's required is also a net -- is a saving. Are we at a net saving point or still a net power consumption point?

Well, we use about five amps a seat in cooling, and that is fairly insignificant in terms of the overall draw on the car, especially when compared to the cooling of the cabin. We do not have any published studies but several of our customers have tipped us to the fact that when people have the heated and cooled seat, particularly the cooled seat feature, they're driving habits do tend to indicate that they use the air conditioning less frequently or less intensively when driving. And there is a hypothesis that that would, eventually that max out to say out that you would useless fuel by using the actively cooled seats as as a delivery point for the -- particularly on what we call the time to comfort issues. When car first starts off, typically if it's warm whether condition, people slam the air condition to max and then they're trying to get up and going in a cool start engine you're fuel economy is always the worst when you first start off.

We actually deliver cool dry air to the body directly within the first two minutes of the drive. So all those factors we do believe have some positive impact on the fuel economy of vehicles equipped with heated and cooled seats. And we believe that will be studied more dramatically. And we do have some evidence, people like the Toyota Lexis, 600 LH hybrid version of the LX 460, does have heated and cooled seats in all four positions, and they do link the air conditioning system and the seat delivery system together as one basic feature. So I think you're on the right track there that heated -- delivering cool dry air through the seat surfaces does actually improve -- we believe improve the fuel economy of the vehicle.

I mean, would that help you from a selling perspective if you had hard data on that?

It would help us if we had hard data. I would tell you that I think some of our customers actually have information on that, but they're not willing to share that with us, but there are people who are looking into it as -- definitely as a contributing factor as to how do we improve the fuel economy of the US fleet.

Right. Okay. And then on the question, I'm just triangulating some information in the public domain. It appears to me one of your partners on the BSST program with the Ohio State research is a leading European manufacturer. And I was wondering if that relationship is helped you break the ice in any respect on CCS?

Well, yes, we've always had a very good relationship with the people of Munich, the BMW folks are quite open-minded and they're quite progressive in their thinking and they quickly recognize the ability to generate passive electricity is a good thing for a car. And that -- it does allow us to expand our discussion points up and down the halls while we're there.

Can you see anything coming from that, specifically in CCS?

Well, I certainly would hope so. We haven't really had any opportunity to sit down and to make any announcements or commitments, but we do have a good working relationship with the BMW folks.

Okay. Great. Thanks a lot.

Thank you. And there are no further questions at this time. I would like to turn the call back over to Dan Coker for any closing remarks. Well I think we pretty much summarized through all the excellent questions we received and kind of our overview. Amerigon and the auto industry, our base customers, are seeing a dramatic reduction in demand. I don't think it's unique to our industry, but it is dramatic in our industry. Our company is lucky in that our Directors have guided us to stay conservative in our balance sheet. We have no debt. We have cash in the bank. And we have a good solid expanding base business that is moving forward, although it's difficult to see at times like this. The rest of the industry has shrunk off worldwide anywhere from 20% to 30%. And Amerigon is going to be even to last year, maybe slightly ahead this year. So I think that we're holding our own quite nicely. And again, our Board of Directors and our advisors see Amerigon at the current price levels as being an excellent investment, and we're planning on doing what we can to see that we take advantage of those investments here in the near future.

So again we thank you very much for your time. We thank all our vendors and our partners for working with us and helping us. And we ask everyone to go out buy a car on their way home with a heated and cooled seat. Thank you very much.

Thank you, ladies and gentlemen, that does conclude our Amerigon Incorporated, 2008 third quarter and nine month result conference call. Thank you for your participation. You may now disconnect.