Oct 28, 2008
Executive
Dan Coker - President and CEO Bud Marx - Chairman Barry Steele - Chief Financial Officer Jill Bertotti - Investor Relations
Analyst
Steve Denault - Northland Securities Rich Hoss - Roth Capital Partners Steve Dyer - Craig-Hallum Ian Ellis - Michael Capital Bob Jones - Wachovia Securities. [Jerry Harpenon] - Lord Abbott & Co.
Operator
Ladies and gentlemen thank four standing and welcome to the Amerigon Incorporated 2008 third quarter and nine month results conference call. During today’s presentation all parties will be in a listen-only mode.
Following the participation the conference will be open for questions. (Operator Instructions) I would now like to turn the conference over to Jill Bertotti; please go ahead.
Jill Bertotti
Good morning everyone and thank you for joining us today for Amerigon Incorporated third quarter and nine months 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 disseminating through PR Newswire this morning’s news release, announcing Amerigon’s results for its third quarter and nine months ended this September 30 2008, an email copy of the release is also sent to a number of conference call participants. If any of you need a copy of the news release you may download a copy from either the 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 a link provided on the events page of the Investors section of Amerigon’s website. Finally, I’ve been asked to make the following statements.
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 differ 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 results.
The liquidity and trading price of its common stock may be negatively affected by these and other factors. Please also refer to Amerigon’s Securities and Exchange Commission filings and reports, included but not limited to its Form 10-Q for the period ended September 30, 2008 and its Form 10-K for the year ended December 31, 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 period.
I would now like to turn the call over to Dan. Good morning, Dan.
Dan Coker
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 in 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 had frozen up and 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 CV program 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 are heading, but in general we believe that 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.
Barry Steele
Thank you, Dan. As I mentioned revenue was up for the quarter by $722,000 or representing 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 us 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 in 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, actually almost $2 million. That reflects increased spending on our advanced thermoelectric device program at BSSP.
The increase of BSSP spending of that increase was $562,000 and Bud will be talking about the excitement that we see on those lines. Selling, 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 tax is 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 tap in time. Our earnings per share was $0.03 for the quarter, that’s basic and fully diluted and that compares to $0.13 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 long-term to short-term, specifically because our auction rate preferred stock portfolio has now been liquidated. At the end of the quarter it was $11.5 million, but we re-classed it to a short-term basis because our broker dealer, Co-America bank has agreed and has actually now purchased back nearly 100% of those auctioned rated and 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.
Dan Coker
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?
Bud Marx
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 tasks (1) continue sponsoring this research and broader the family of materials and (2) to take what’s essentially a lump of material and another exciting part of this is that this is material that is easily producible; 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 BSSP in Amerigon really do for our daily bread, so it’s an exciting step.
What it means 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 carry 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.
Dan Coker
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 in Amerigon it’s an excellent investment and that program’s announced this morning as wells our quarterly earnings release. So 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.
Operator
(Operator Instructions) Your first question comes from Steve Denault - Northland Securities.
Steve Denault - Northland Securities
You made reference to the R&D spend, be it the $2 million level, likely to continue at that level going forward. Is that a mis-statement or should we still expect an absolute increase in that R&D spending in ‘09 and if so to what extent?
Barry Steele
What we’ve said in the third quarter was that we were going to raise our spending rate by about a half million dollars a quarter and the fourth quarter we expected to be in roughly that same range and that rate will carry forward in 2009. So it will result in a year-to-year increase, because the first two quarters are lower, but we are 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.
Steve Denault - Northland Securities
The tellurium impact in this is directed towards 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?
Barry Steele
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 first quarter this year, it’s taken the third quarter to catch up to us and as much as the tellurium market has decreased slightly, that will still take time to work its way through our system as well.
So we expect the tellurium issue will be here in the fourth quarter about the same rate.
Steve Denault - Northland Securities
How about for next year?
Dan Coker
We’re not very good at prognosticating the future, but all we can say is that the market peak for tellurium is really in the early part of the second quarter and has been slowly sliding down to the current rates. The current rate is 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 in the recent time.
Steve Denault - Northland Securities
Okay and my final question I guess is for you Dan. Considering that climate controlled seats are a 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 about, well if trucks and SUVs aren’t selling and automobiles are, light duty, economic automobiles, is there any thought in terms of accelerating migration toward some of those vehicles?
Dan Coker
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, Its not just 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 crossover utility vehicles or more mid sized utility vehicles and we continue to see strong interest from those group. The recent pressure though has opened 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 SU Vs 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.
Operator
Your next question comes from Rich Hoss - Roth Capital Partners.
Rich Hoss - Roth Capital Partners
BSSP expense, do I have this up right 11.50, the net number for the quarter?
Barry Steele
$1,000,187 is what I have for the quarter and net be at the expense.
Rich Hoss - Roth Capital Partners
Okay, perfect. What about pricing concessions from the manufacturers, are you seeing that at all?
Dan Coker
That’s a normal part of doing business in the automotive industry, but we have reacted to any 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.
Rich Hoss - Roth Capital Partners
Okay, so nothing out of the ordinary then.
Dan Coker
Nothing extraordinary.
Rich Hoss - Roth Capital Partners
ESPs look like they might have been above 70 bucks a seat this quarter, is that consistent and do you have any explanation of why that trend is higher?
Barry Steele
It’s primarily due to the mix and content from one vehicle program to another. That wouldn't be considering anything unusual, it could pick up slightly during the quarter.
Rich Hoss - Roth Capital Partners
Okay, but it’s not necessarily a seasonal thing. It’s just depending on what was sold or developed during the --
Barry Steele
The major driver there is some of our customers purchased the control unit through us, which is about a $20 cost per seat and some do not. So depending on which customer is sort of driving our revenue is where that will move.
Rich Hoss - Roth Capital Partners
I shouldn’t look at the higher ESPs as a run rate, though. I mean, it will fluctuate and I realize that, but it’s --
Barry Steele
We wouldn’t look for any significant movement in that direction really. It’ll just ebb and flow a little bit.
Rich Hoss - Roth Capital Partners
Okay and can you give 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 I guess if there’s potential for the additional platforms to contribute?
Barry Steele
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.
Rich Hoss - Roth Capital Partners
Okay and then lastly, SG&A 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?
Barry Steele
It would be probably more flat.
Operator
(Operator Instructions) Your next question comes from Steve Dyer – Craig-Hallum.
Steve Dyer – Craig-Hallum
A different way I guess of asking the previous caller’s question. I know that the delay in the F 150, the ‘09 rolling out and a lot of ‘09’s and the new GMT platforms, pretty much lasted the entire quarter.
To what extent are those being produced now? Is it still pretty quiet on the ‘09 front?
Dan Coker
It’s accelerating at least. They’re in production now and you’re right, they did start-up production lines for both the GMT 900 SUV’s and for the forward Ford F150 pick-up trucks.
There was only about a month worth of 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 again to a market there that is not the most popular space in the trade.
Steve Dyer – Craig-Hallum
Sure, okay and then relating to price concessions I know last quarter there was some talk about potentially if tellurium, if and when it’s stabilized at a level higher than you were accustomed to potentially being able to pass some of that along contractually even to the OEM’s, 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 or are we just going to have it eat it here for the time being?
Dan Coker
Well there’s always two things you can do. You can go and piss off your customer and tell them that they have to pay more because you are having to pay more and that’s an you ugly conversation as you characterized.
The other thing which we try to do normally, but we accelerate in pressured time is to try to find ways to either eliminator or minimize the impact of such materials or components as they may affect our cost. The easier way for us in terms of time is to go to the customer.
They are not very receptive at this moment to increases in materials or prices of any kind. In fact 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 that’s where we are really spending a lot of our effort right now.
Steve Dyer – Craig-Hallum
Okay, kind of makes sense. Kind of hopping over to BSSP 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 of just having the seat on the driver’s side, if that’s something that we’re seeing 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, how should we think about that and the ability to continue to drive towards smaller cars?
Dan Coker
Well we actually are seeing several people, particularly in that mid range vehicle, where the vehicle’s typically used in a commuting sense. We are seeing people express interest in having, additional creature comfort features for the driver’s side only.
In some cases, that makes very good sense. Anyway we’re seeing a few people look at that as an alternative.
Maybe some of that 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 BSSP team, are definitely trying to help us to find ways to reduce our energy draw so we that we can get in more vehicles or follow the current trend of getting into not only the front seats but also the rear seats of the vehicles that we're currently on.
Bud Marx
Dan, this is Bud. I think it’s true to say that over the past four, five years we’ve cut our power consumption essentially in half?
Dan Coker
That is correct.
Steve Dyer – Craig-Hallum
Okay, one more BSSP question with respect to the heat recapture application. Obviously great strides have been made, what is the next step there in terms is it a prototype?
When do we start working towards potentially commercial launch?
Budd Marx
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 an 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 open a pathway for a number of markets, including automotive, but automatically is as you all appreciate a long lead market, so we would anticipate uses earlier, but we’re still two, three years away from a product that incorporates that. We’ve got a number of steps between that, but this is very encouraging.
Steve Dyer – Craig-Hallum
Okay and then finally, Barry you touched a little bit on SG&A in Q4. Historically we’ve seen a little bit of a bump up there in coordination with the issue answer of options.
Do you expect to see that this year or is that kind of flat with the beginning of the year, the first three quarters more likely.
Barry Steele
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 would have some impact, but the amortization schedule right now would show that as being a similar expense as Q3.
Budd Marx
Was that question about the fourth quarter or about the year ‘09?
Steve Dyer – Craig-Hallum
The fourth quarter but I was moving to ‘09. So just again is that a good run rate to use for ‘09 or I would assume it would jump a little bit?
Barry Steele
There most likely would be some effects from standard inflationary pressure that we’ll experience. We’ll obviously be working to be cost conscious as we come to SG&A for next year as well.
Budd Marx
Yes, this is Bud. I certainly wouldn’t rule out the issuance of some options in ’09, but we’re mindful of the dilution effect, it’s one of 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, 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.
Operator
Your next questions come from Frank Christina – Michael Capital.
Ian Ellis – Michael Capital
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 the 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?
Barry Steele
They are all new vehicles, although I will point out that that does include sort of expansion of the GMP 900 programs.
Dan Coker
They’re new nameplates to us and we did have a big year plan. We didn’t plan on the end of the world in the automotive, but we did achieve all of our penetration goals that we had for the year and those numbers have been able to just about offset the general shrinkage of the market or restriction of the broad market.
Ian Ellis – Michael Capital
Looking ahead Dan, as we try to come up with a model of the company’s worth, we kind of forget about what the kind of sales are and what they’ve been and what they might be, but we’re looking at what the market penetration is. We’re trying to work out where we are on the S-curve in terms of penetration and adoption.
I mean, in a sense like we had a 40% increase in penetration this year, which means I’m very clear as to what the sustainable rate of penetration growth might be.
Dan Coker
This was an extraordinary year that we had. As Barry mentioned a Cadillac reserve for the climate control seats early on in the GMT 900 line was released and the other vehicles on a GNT 900 platforms were allowed this year for the first time to pick up the feature and many of them have and 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 in 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 4 or 5 new name plates come on board, which is back to our traditional norms.
Operator
(Operator Instructions) Your next question comes from Bob Jones - Wachovia Securities.
Bob Jones - Wachovia Securities.
Can you just quickly go over the major competitors to your various product lines including in-house development by the in-house automobile manufacturer?
Dan Coker
Okay. Well that’s a very good question.
The typical traditional competitors that we see normally in the market place are the people who make the resistance wire electric seat heaters, that 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 is kind of what we would 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 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 and China and many of the Asian countries. 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.
Barry Steele
You should also mention Denso which is another competitor, principally with Asian customers.
Dan Coker
Actually Denso is working with Toyota on basically a heated and ventilated design as well.
Bob Jones - Wachovia Securities.
Well, let me then just focus on the ventilated or 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?
Dan Coker
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. 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 that’s kind of it. Its driving factor is (1) will the people in that market segment buy it and pay for it and (2) do we have the electrical budget to be able to afford to put the feature on?
Barry Steele
Well, it’s fair to say also that our patent position is a substantial determinant to people just sort of walking into this marketplace.
Dan Coker
The question was really more directed to why aren’t we getting broader penetration.
Bob Jones - Wachovia Securities.
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?
Dan Coker
Actually that’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.
.
Operator
(Operator Instructions) Your next question comes from Bob Jones - Wachovia Securities.
Bob Jones - Wachovia Securities
Gentlemen, I’m sorry; no one else asked a question, so I’ll ask one more. Stocks at 255, so your 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 systems. Any sort of thoughts on the stock price here?
It hasn’t been at this level in quite some time?
Dan Coker
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 industry 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?
Bud Marx
No, I think you’ve covered that very well. We, 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 whether this storm that’s in the automotive markets and stay on track for the products that we said we’re going to develop for the future.
Operator
Your next question comes from [Jerry Harpenon] - Lord Abbott & Co.
Jerry Harpenon - Lord Abbott & Co.
Dan, forgive me. My question was really much along the line of the past requester.
I too see the positive aspect of your company, standing in a very strong head wind in regards to your industry and my one concern would be you have made the re-purchase program announcement, although I think my peer groups a little bit tainted by these announcements and that they are just lip service. So if I could beg of your patients 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.
Why wouldn’t someone just want to buy this whole thing up now?
Dan Coker
Well we certainly, we believe 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 and 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 negotiations. 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.
Operator
Your next question comes from the line of Steve Denault - Northland Securities.
teve Denault - Northland Securities
Yes, I was just hoping you could provide a little bit of color in terms of some of your largest customers and the 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?
Dan Coker
Well the biggest re-organization that’s being looked at right now in the marketplace is general motor’s possible acquisition of the Chrysler corporation, which might actually long-term be helpful for us, because we have a lot of good business with 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 a sound financial condition. Ford Motor Company has very wisely taken a position where they logged in cash and available credit lines to be able to whether the current storm and 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.
Operator
Your next question comes from Frank Christina – Michael Capital.
Ian Ellis – Michael Capital
It’s Ian Ellis again. I have two follow-up questions; one is just on the power consumption issues, you mentioned that you have just the power consumption obviously CS from what it was.
What’s kind of the net impact today, because obviously using the cooling feature, the reduction in cabin temperature that’s required is also a net saving point or still a net power consumption point?
Dan Coker
Well, we use about 5 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 mass out to say that you would use less fuel by using the actively cooled seats as a delivery, particularly on what we call the time to comfort issues.
When car first starts off, typically if it’s warm whether conditions, people slam the air condition to max and then they’re trying to get up and go in a cool start engine, so 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. Delivering cool dry air through the seat surfaces does actually prove improve the fuel economy of the vehicle.
Ian Ellis – Michael Capital
I mean, would that help you from a selling perspective if you had hard data on that.
Dan Coker
It would help if we had hard data and I would tell you, 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.
Ian Ellis – Michael Capital
Right, okay and then 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 has helped you break the ice in any respect on CCS?
Dan Coker
Well, yes we’ve always had a very good relationship with the people at 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 does allow us to expand our discussion points up and down the halls while we’re there.
Ian Ellis – Michael Capital
Can you see anything coming from that, specifically in CCS?
Dan Coker
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.
Operator
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.
Dan Coker
Well I think we pretty much summarized through all the excellent questions we received in kind of our overview. Amerigon and the auto industry 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 and 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 the last year and 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.
Again we thank you very much for your time. We thank all of our vendors and partners working with us and helping us and we ask everyone to go out and buy a car on their way home with the heat and cooled sheet.
Thank you very much.
Operator
Thank you ladies and gentlemen. That does conclude Amerigon Incorporated 2008 third quarter and nine months result conference call.
Thank you for your participation. You may now disconnect.