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General Category => Investment Ideas => Topic started by: PlanMaestro on May 22, 2012, 01:57:09 PM

Title: GM - General Motors
Post by: PlanMaestro on May 22, 2012, 01:57:09 PM
I never expected to say this but after its reemergence from bankruptcy General Motors looks very cheap. The history of Peter Lynch's investment in Chrysler in the early 80s, the investment that made Magellan, might be appropriate. There are also TARP warrants that seem mispriced.

P/S 0.22, P/E 6.3, $32B in cash and marketable securities with only $9B debt, all that for a marketcap of $34B. I have not gone through the cash flow details, the pension liabilities, accrued liabilities, or the product line-up but I imagine that others can jump on this.
 
Here are a couple of articles on the pent-up demand tailwind:

http://seekingalpha.com/article/605651-why-u-s-auto-sales-are-still-too-low?source=email_authors_alerts&ifp=0
http://www.economist.com/node/21548275
http://www.economist.com/node/17902837
Title: Re: GM - General Motors
Post by: hyten1 on May 22, 2012, 02:59:24 PM
they do have a decent size pension obligation, but even with that i still think gm is cheap, i have a position in it
Title: Re: GM - General Motors
Post by: beerbaron on May 22, 2012, 06:37:07 PM
I have not checked GM but my gut would tell me that after the bankruptcy the pension liabilities were brought back to a realistic assumption. When a company is operating normally it can play around with numbers, but when in bankruptcy a lot of people ask questions and you are forced to take more realistic assumptions.

BeerBaron
Title: Re: GM - General Motors
Post by: alertmeipp on May 22, 2012, 07:01:29 PM
how's GM's product line compared for Ford and Chrysler?

Title: Re: GM - General Motors
Post by: rogermunibond on May 22, 2012, 07:01:45 PM
http://www.ft.com/intl/cms/s/0/99245856-a0c4-11e1-851f-00144feabdc0.html#axzz1vY1q8W3Y

FT had a piece today on GM's troubles in Euroland with Opel.
Title: Re: GM - General Motors
Post by: 17thstcapital on May 22, 2012, 07:07:56 PM
Opel/Europe is a mess and likely will be so for a while.  Doesn't look like it will be easy for the company to get out of this mess. 

Pension + OPEB is around $25bn and will likely grow given low rates.....still very high but manageable given hefty cash balance. 

Looks like stock is trading at ~2x EBITDA.  Tarp warrants are attractive as is the mandatory convertible pfd which has a current yield north of 6%. 
Title: Re: GM - General Motors
Post by: bargainman on May 24, 2012, 08:55:33 PM
Do you know what the symbol for the preferred is? and the terms for conversion?  What about the warrants?  Thanks.
Title: Re: GM - General Motors
Post by: 17thstcapital on May 25, 2012, 04:48:02 AM
Do you know what the symbol for the preferred is? and the terms for conversion?  What about the warrants?  Thanks.

Info on the warrants:
http://www.gm.com/company/investors/FAQs/Warrants.html

Pfd has a mandatory conversion on 12/1/13.  Quarterly dividend of $0.59375.  Shares vary depending on price of the common but below $33/sh on the common, pfd converts at ~1.51 shares of common per 1 pfd.  Ticker: GM-PB.
Title: Re: GM - General Motors
Post by: PlanMaestro on May 25, 2012, 07:53:55 AM
I guess we are finally hearing our engines roar.

Pent-up demand to lift US car sales
http://www.ft.com/intl/cms/s/0/0d7518a8-a5a2-11e1-a77b-00144feabdc0.html#axzz1vdTZyhIt

Much of the predicted increase is a result of the sharp fall-off in sales this time last year as manufacturers worldwide struggled with the inventory shortage following the March 2011 earthquake and tsunami in Japan. Analysts said the Japanese manufacturers Toyota and Honda will show the biggest rises, with Toyota sales on track to jump 90 per cent from May 2011.
....

Detroit manufacturers are set to be led once again by Chrysler, predicted to post an above 30 per cent sales rise. Ford and General Motors are also expected to post increases following last month’s declines.

But analysts said other factors were also lifting demand and setting sales on course for a yearly pace above 14m for the fifth straight month. Estimates compiled by Bloomberg show a seasonally adjusted annualised sales rate of 14.45m cars this month, compared with 11.8m in May 2011.
...

Kelley Blue Book noted that car sales accounted for half of the 2.2 per cent annualised growth rate in the first quarter – a contrast with the normal pattern of demand in a recovery.

“At this point, it is almost as if the tail is wagging the dog,” said Alec Gutierrez, a senior market analyst. “During a typical post-recession recovery, we would expect to see auto sector gains being driven by broad economic growth. In the first quarter, the opposite was true, as auto sales were the primary driver behind GDP growth and have consistently been a bright spot in an otherwise slow-paced recovery.”

Title: Re: GM - General Motors
Post by: PlanMaestro on May 25, 2012, 07:57:47 AM
Investors drawn to subprime motor debt
http://www.ft.com/intl/cms/s/0/e19f58ee-a50e-11e1-b421-00144feabdc0.html#axzz1vdTZyhIt

Sales of subprime motor debt are climbing in a sign that one key area of the consumer credit market is recovering from the financial crisis with investors attracted by higher returns in the current low-yield environment. Sales of bonds that pool subprime motor loans, or those to borrowers that are not considered “prime” with the lowest risk of default, are running at more than $7bn so far in 2012 versus $12.4bn for all of 2011, according to data from Barclays.
....

Subprime motor debt losses during the financial crisis were far less than those suffered by investors in subprime mortgage debt. (...) According to data from Fitch Ratings, losses for subprime motor bonds peaked at 12-14 per cent of the collateral pool. That compared with losses of up to 50 per cent in pools of bundled subprime home loans.



Title: Re: GM - General Motors
Post by: TheEnterprisingInvestor on May 25, 2012, 07:56:47 PM
I am conflicted about GM.  On the one hand the liabilities are more in line, it looks superficially cheap (not as cheap when the pension obligation is considered), and there's probably a lot of operating leverage there with the pent up demand.  On the other hand its still a tough business with bad management and a tough European situation.  I've considered the warrants for some time but just can't seem to get interested enough to buy them.  As an owner of AIG warrants, I can't say that the overhang of government ownership or GM's history that bothers me.  Part of it I guess is that I just can't figure out what the misperception is on GM and part of it is an aversion to owning bad, capital intensive businesses.  Maybe its just so cheap with such upside that I need to bite the bullet and buy the warrants, I don't know.  I'd be interested to hear some more  from investors who are long (or perhaps short).
Title: Re: GM - General Motors
Post by: PlanMaestro on May 29, 2012, 04:37:12 PM
Why you can still “See the USA in your Chevrolet”
http://www.economist.com/node/21534795?fsrc=scn/tw/te/ar/from0to100

Since then a steady stream of attractive small cars has begun to restore Chevrolet’s fortunes, such as the Cruze, now America’s best-selling compact. Improvements in quality and finish have also been seen across Chevrolet’s whole range, notes Joe Phillippi of AutoTrends Consulting. But its revamped small-car range is the key to cracking Chevrolet’s biggest American challenge: as with its Detroit rivals Ford and Chrysler, its cars sell well in the Midwest but poorly in the coastal cities, especially among the young: Chevy’s market share is 23% back home in Michigan but just 6% in California.

Drivers’ perceptions may not yet have caught up with the quality of Chevrolet’s new line-up. Steve Witten of J.D. Power, which measures consumer behaviour, says it can take ten years for buyers to respond to such improvements: despite Toyota’s recent recalls, a smaller share of buyers reject its cars on quality grounds than reject Chevys. Mr Witten says most customers quickly narrow their choices down to a shortlist of just three models, though there may be 15 that meet their requirements. A good brand image is what gets a car onto such shortlists. So Chevrolet’s anxieties about its current ad campaign, based around the ponderous slogan “Chevy Runs Deep”, are understandable.

A year ago Chevy sacked Campbell-Ewald, the Detroit ad agency it had used for 91 years, dumped its old slogan of “Like a Rock”, and launched the new campaign through Goodby, Silverstein of San Francisco. Last month a GM executive publicly lamented that some of the new agency’s ads had not been top-grade. Now the carmaker is launching a sweeping review of its marketing efforts worldwide.
Title: Re: GM - General Motors
Post by: hyten1 on June 01, 2012, 10:09:08 AM
http://finance.yahoo.com/news/gm-announces-u-salaried-pension-170000670.html
Title: Re: GM - General Motors
Post by: hyten1 on June 01, 2012, 10:56:41 AM
good summary of GM pension liability and asset

http://edge.media-server.com/m/p/e85ut6n4/lan/en
Title: Re: GM - General Motors
Post by: PlanMaestro on June 01, 2012, 08:39:14 PM
good summary of GM pension liability and asset

http://edge.media-server.com/m/p/e85ut6n4/lan/en

Thanks Hyten, very interesting information.
Title: Re: GM - General Motors
Post by: PlanMaestro on July 06, 2012, 01:38:28 PM
Americans discover easy lending when it comes to automobiles
http://www.washingtonpost.com/business/economy/americans-discover-easy-lending-when-it-comes-to-automobiles/2012/07/05/gJQAdTiVQW_story.html

But there’s another, less-noticed factor: Investors and private-equity firms are rushing to buy securities made up of bundles of car loans, seeing these assets as both safe and lucrative. In the first six months of this year, the nation’s largest auto lenders, such as GM Financial and Santander Consumer USA, have pawned off $10 billion of their subprime auto loans on investors, a 20 percent increase over the same period last year. That gives these lenders more capacity to loan to consumers with questionable credit histories and, in turn, helps drive auto sales even higher.

It may seem surprising that private-equity firms and other investors are willing to pour billions into auto-backed securities after getting burned by similar mortgage-backed securities when the housing bubble burst. But, analysts say, the auto market is different than housing in several key respects.

For one, Americans appear to be less willing to default on their car payments than to walk away from their houses — even in the depths of the recession, auto loans performed better than most. And, in the event of a default, it’s easier for a lender to repossess a car and sell it off, especially right now, when prices for used cars are so high.

Yet the fact that the subprime auto market is expanding so rapidly — with some buyers paying interest rates in excess of 10 percent — has led to some concern.
Title: Re: GM - General Motors
Post by: Packer16 on July 06, 2012, 02:16:32 PM
I took a second look at GM and they appear cheap and not as capital intensive as in the past.  They only spent 4% or revenues on cap-ex and had EBITDA margins of around 8.6%.  The warrants (I bought the "B" warrants) appear to be a cheap way to play GM with some good upside leverage if GM's marlet cap doubles (which would put GM still at a discount to other multinational car firms).  With the car replacement cycle kicking in and an open financing market as desribed below, GM should be able to perform pretty well.   They also have some emerging markets exposure (about a 14% market share) to boot.


Packer   
Title: Re: GM - General Motors
Post by: beerbaron on July 06, 2012, 05:45:09 PM
I took a second look at GM and they appear cheap and not as capital intensive as in the past.  They only spent 4% or revenues on cap-ex and had EBITDA margins in excess of 20%.  The warrants (I bought the "B" warrants) appear to be a cheap way to play GM with some good upside leverage if GM's marlet cap doubles (which would put GM still at a discount to other multinational car firms).  With the car replacement cycle kicking in and an open financing market as desribed below, GM should be able to perform pretty well.   They also have some emerging markets exposure (about a 14% market share) to boot.


Packer   

They might run CapEx under their normalized rate. What's your estimate average CapEx for a car company?

BeerBaron
Title: Re: GM - General Motors
Post by: PlanMaestro on July 06, 2012, 06:54:20 PM
They might run CapEx under their normalized rate. What's your estimate average CapEx for a car company?

BeerBaron

The OEMs have been pushing the capital intensive activities to the suppliers for years. For example, Magna International can build a car almost by themselves, but they lack the distribution, brand and financing.
Title: Re: GM - General Motors
Post by: PlanMaestro on July 06, 2012, 07:40:41 PM
A Weight Hobbling G.M.
http://www.nytimes.com/2012/05/04/business/gm-profit-falls-but-surpasses-forecasts.html?pagewanted=all

Because the Treasury Department still owns a 26 percent stake in the company, G.M. remains saddled with pay restrictions that limit its ability to recruit new talent, a ban on corporate jets, and lingering image problems in the eyes of some consumers.

Company executives usually deflect questions about the effect of government ownership on their business, or their frustration with it. But in a rare interview on the topic, G.M.’s chief executive, Daniel F. Akerson, said he longs for the day that G.M. can finally say goodbye to its biggest shareholder.

“I try not to let it bother me,” Mr. Akerson said. “But the fact is it does bother me.”

The farewell celebration won’t be happening anytime soon. Based on G.M.’s current stock price of $22.37, taxpayers would lose an estimated $15 billion if the government’s shares were sold today. Unless the stock rose quite significantly, the chances are slim that the Obama administration would sell its 500 million shares before the November election and invite criticism from Republicans about the wisdom of the auto industry bailout.

Mr. Akerson said he has regular conversations with Treasury officials, but has never gotten guidance on when they intend to divest. “I don’t know what the government’s plan is,” he said. “I think it would be helpful if they would publicly state it.”

After pumping in nearly $50 billion to save G.M., American taxpayers owned about 60 percent of the company when it emerged from Chapter 11 in the summer of 2009. The government sold the bulk of its holdings at $33 a share in the company’s public stock offering a year later.

But the administration is not eager to sell the rest at a loss. “As with all of our investments, we try to balance the goals of maximizing taxpayer recoveries and exiting as soon as practicable,” said Timothy G. Massad, the assistant Treasury secretary overseeing the Troubled Asset Relief Program. “We don’t have a specific timetable, but we’ll continue to watch the market closely.”

Like partners in a three-legged foot race, both the company and the government are hobbled by their connection. Unless G.M. improves its performance and gets the stock price up, the government can’t sell without losing billions. At the same time, uncertainty about the government’s stake worries some investors and hurts consumer perceptions of G.M. cars.

In a survey last quarter of 30,000 Americans shopping for new vehicles, 32 percent of those who rejected a G.M. model said they would not consider buying from the carmaker because of the bailout.

While that is down from 59 percent in 2009, “G.M. still has quite a hangover,” said Art Spinella, president of the firm that conducted the survey, CNW Marketing Research of Bandon, Ore. “That’s a significant number of people who will buy something else because of the bailout.”

Chrysler, the other Detroit automaker to receive government aid, fared better in the most recent survey. The company paid off its federal loans last year, and just 22 percent of shoppers said they had avoided a Chrysler product because of the bailout.

Mr. Akerson said the negative feelings about G.M. were an unfortunate byproduct of the past struggles that led the company to seek government assistance.

“All we can do is put numbers on the board and hope people start to believe in our story,” he said.

Government ownership is also affecting G.M. internally. Mr. Akerson said the company has lost a half-dozen candidates for management jobs because of salary restrictions on companies getting TARP financing. G.M.’s search for a new head of human resources lasted months because several promising contenders balked at the uncertain time frame for the government’s exit.

The government’s ban on corporate aircraft is mostly a matter of inconvenience for Mr. Akerson and his senior staff members. He was stuck in a Paris airport for five hours last year after missing a connecting flight to China, and often spends an entire day traveling to remote factories for visits that last two or three hours.

“It is part of the deal,” Mr. Akerson said. “There’s no use complaining about it.”

He was more troubled by how G.M. had become, in his words, “a political football.” He still seethes about being called to testify before Congress in January about the safety of the Chevrolet Volt, which experienced battery fires after government crash tests. “I think the whole thing was politically driven,” he said.

Mr. Akerson also said he believed that politics were affecting the government’s decision to hang on to its G.M. stock. President Obama has been pointing to the turnaround at G.M. as a bright spot in the nation’s economy. But if Washington were to sell G.M. shares at a loss, the comeback story would be eclipsed by the cost to taxpayers for its rescue, he said.

“That’s why I don’t think they are going to sell in an election year,” Mr. Akerson said. “Right now, this is a positive for the current administration. If they sell it this year and don’t get all the money back, it’s not a positive.”
Title: Re: GM - General Motors
Post by: Packer16 on July 06, 2012, 07:42:29 PM
In looking at most of the large multinationals (Damlier, Ford, GM, Hond and Nissan) the cap-ex is 3 to 5% of sales except Toyota where it is closer to 7 to 8%.

Packer
Title: Re: GM - General Motors
Post by: CONeal on July 06, 2012, 10:01:57 PM
I don't have a dog in this fight but keep in mind that the pickups will come out with a new body style in 2013.  Might get a little push from the diehards upgrading.
Title: Re: GM - General Motors
Post by: CONeal on July 06, 2012, 10:10:28 PM
One other thought, if as of today the gov't would lose 15 billion, why can't they just take the 10 billion gain from AIG and sell GM at $33 and breakeven between the two and be rid of the headache?
Title: Re: GM - General Motors
Post by: Packer16 on July 07, 2012, 06:03:47 AM
Another way to look at GM is based upon seprating the net cash and the financing sub.  GM has net cash of $20 b for the auto co, net equity of $4.2b in its finance sub and $1.5 b in income from China JVs.  If the China JV is valued at 8x (the current mulitple of Tata) and the underfunded pension less tax shield and NOLs are subtracted along with the preferred the resulting non-operating assets value is $21.7 billion.  The total market cap is only $38 billion.  The resulting net market cap is $16.3 billion which over the past 2 years has generated on average $6.2 billion of FCF.  So GM is selling for a net of 2.5x FCF in a challenging economic environment.

I also reviewed the GM warrant terms and it appears they have the same anti-dilution terms as the TARP warrants but dividends can be issued with no change to the warrarts.

Packer       
Title: Re: GM - General Motors
Post by: hyten1 on July 20, 2012, 08:00:09 AM
for the auto enthusiast the new ATS from Cadillac is coming

http://www.autoblog.com/2012/07/19/cadillac-kicks-off-ats-marketing-with-new-global-video-series/
Title: Re: GM - General Motors
Post by: PlanMaestro on August 09, 2012, 05:45:21 PM
Still chewing this Morningstar analysis, but it looks excellent on a first glance

What's Really Changed At The New GM?
http://seekingalpha.com/article/790771-what-s-really-changed-at-the-new-gm

GM's U.S. hourly labor cost per North American vehicle produced has improved--down to $1,606 from $3,295 in 2005. Since the IPO, GM has disclosed that its break-even point for the all-important GM North America (GMNA) segment is now a U.S. industry sales rate of about 10.5 million units with 18%-19% share, compared with industry sales of 15.5 million and 25% share in third-quarter 2007. According to GM, retiree healthcare was about $4 billion of the $16 billion total U.S. hourly labor cost in 2005, so eliminating U.S. retiree healthcare obligations has helped im­mensely, as has reducing hourly head count by 57%. Also critical is that GM's U.S. all-in hourly labor cost is now about $56 per hour, compared with $78/hour under Old GM. For comparison, Toyota is about $55/hour. We think investors con­cerned with continued U.S. market share loss should consider that GM can break even at sales levels that occurred right after the collapse of Lehman Brothers and, as discussed in our report "Why U.S. Auto Sales are Still Too Low," we believe the U.S. is on its way back to normalized annual demand levels of between 16.1 million and 17.3 million units. GM has stated that it is able to run GMNA capacity at up to 150% utilization (three shifts with overtime) if U.S. industry demand reaches at least 16 million units.
....


At year-end, GM's U.S. hourly worker plan had a projected benefit obligation (PBO) of $71 billion and assets of $61 billion, while the U.S. salaried plan had a PBO of $36 billion and assets of $33 billion. The international plan was underfunded by $12 billion, for a total underfunding of $25 billion. We calculate the overall funding percentage to be 81.1%, compared with 79.2% at Ford. On June 1, GM announced a groundbreaking way to de-risk part of its U.S. salaried pension plan obligation, which has 118,000 retirees. GM will offer participants a buyout if they retired between October 1997 and Dec. 1, 2011--this would apply to about 42,000 people. Those who do not take the buyout, as well as U.S. salaried plan participants who retired before October 1997, will have their obligations transferred to Prudential (PRU) via a group annuity contract starting in January 2013. To compensate Prudential for assuming $26 billion of PBO, GM will transfer approximately $29 billion of plan assets to Prudential to purchase the annuity contract, funding $3.5 billion-$4.5 billion of this purchase from GM's existing cash rather than from the plan. The exact amount is uncertain as it depends on the take rate of the buy-out of­fers, which we expect to be low. The remaining $10 billion of U.S. salaried PBO will stay with GM and be underfunded by about $2 billion. GM will then freeze the U.S. salaried plan on Oct. 1, 2012, and workers will move into a 401(k) plan.
....


We stress that New GM continues to transform itself into a global automaker. We see tremendous economies of scale yet to be realized, as the firm only builds about 50% of its pro­duction on global architectures--far short of its planned 90% by 2018 (Ford will be at 85% by 2013). The important U.S. market will see 70% of GM's nameplates new or refreshed in 2012 and 2013. Critical GMNA product holes from cutbacks during the crisis will be filled next year with the highly profitable new generation of full-size pickups and the next-generation Chevrolet Impala full-size sedan. Cadillac finally will return to the compact segment with the ATS out this fall, and the new full-size XTS replaces the STS and DTS. In China, GM's largest market at 28% of global unit volume, the company is expanding capacity by 25% through 2013 and will launch more than 60 new and refreshed vehicles in the next five years. Opel will unveil 23 new models through 2016. These product innovations are possible because New GM is investing $8 billion a year in capital expenditure regardless of the state of the economy. Old GM would cut back on capital expenditure in hard times, which caused it to fall further and fur­ther behind competitors. We model nearly $9 billion of annual capital expenditure in the outer years of our five-year forecast period.
Title: Re: GM - General Motors
Post by: BargainValueHunter on August 09, 2012, 08:57:37 PM
Americans discover easy lending when it comes to automobiles
http://www.washingtonpost.com/business/economy/americans-discover-easy-lending-when-it-comes-to-automobiles/2012/07/05/gJQAdTiVQW_story.html

But there’s another, less-noticed factor: Investors and private-equity firms are rushing to buy securities made up of bundles of car loans, seeing these assets as both safe and lucrative. In the first six months of this year, the nation’s largest auto lenders, such as GM Financial and Santander Consumer USA, have pawned off $10 billion of their subprime auto loans on investors, a 20 percent increase over the same period last year. That gives these lenders more capacity to loan to consumers with questionable credit histories and, in turn, helps drive auto sales even higher.

It may seem surprising that private-equity firms and other investors are willing to pour billions into auto-backed securities after getting burned by similar mortgage-backed securities when the housing bubble burst. But, analysts say, the auto market is different than housing in several key respects.

For one, Americans appear to be less willing to default on their car payments than to walk away from their houses — even in the depths of the recession, auto loans performed better than most. And, in the event of a default, it’s easier for a lender to repossess a car and sell it off, especially right now, when prices for used cars are so high.

Yet the fact that the subprime auto market is expanding so rapidly — with some buyers paying interest rates in excess of 10 percent — has led to some concern.


http://blogs.barrons.com/incomeinvesting/2012/08/07/google-steering-cash-into-auto-abs-out-of-treasuries/?mod=BOLBlog

Quote
So far, asset-backed securities still represent less than 1% of Google’s cash. But the story notes how Google, the fourth-most cash-rich company in the S&P 100, joins such corporate titans 3M Co. (MMM )and Automatic Data Processing Inc. (ADP) that also have purchased asset-backed securities this year.

These ABS typically carry triple-A ratings, 3M’s treasurer notes that the auto and credit card ABS sectors performed relatively well during the financial crisis. The auto portion of a key ABS index has returned 2.34% this year on deals with an average maturity of just over two years, compared with 0.30% for comparable Treasurys this year. Some recent ABS have been priced to yield as little as 0.5%, but even that is a big bump over two-year Treasurys yielding 0.2%.
Title: Re: GM - General Motors
Post by: PlanMaestro on September 04, 2012, 11:12:48 PM
http://www.ft.com/cms/s/0/17858506-f68f-11e1-9fff-00144feabdc0.html#ixzz25ZaBEF9u

The big three US automakers have reported significantly stronger-than-expected domestic August sales, a rebound that is expected to be hailed at this week’s Democratic party convention. General Motors, which owns the Chevrolet, Cadillac and Buick brands, announced sales up 10 per cent on August 2011 to 240,520 vehicles on Tuesday, while Ford recorded US sales up 13 per cent to 197,249 vehicles. Chrysler, the smallest of the big three US manufacturers and whose brands include Dodge, Ram Truck and Jeep, said monthly sales rose 14 per cent against August 2011 to 148,472. All the figures were well ahead of analysts’ forecasts.
...

“Pent-up demand has been building for a while,” she said. “There’s a good chance that people will replace their old vehicles. The total light vehicle fleet’s average age is now close to 11 years old, which is pretty old.”

The sales figures showed smaller cars’ growing popularity. The manufacturers attributed this to rising fuel prices and significant improvements in new cars’ fuel economy compared with older ones. Chrysler reported passenger car sales up 21 per cent year-on-year to 40,895, while GM said sales of its Chevrolet passenger cars, including the new Cruze, Sonic and Spark models, were up 25 per cent on the same month last year. Ford reported car sales up only 7.1 per cent but attributed part of its 37 per cent year-on-year growth in utility vehicles to growing interest in more fuel-efficient compact utilities.






Title: Re: GM - General Motors
Post by: giofranchi on September 05, 2012, 12:19:16 AM
PlanMaestro,
I know that probably you won't care, because you don't hold him in much regard, but GM is Mr. Einhorn's second largest long position, just after Apple. It is a position he established in 2011 Q3, and below is what he had to say about GM:

"GM is the largest auto manufacturer in the United States. After the business failed under its legacy high-cost structure during the recession, the U.S. government bailed out the company and took over most of the ownership. Last November, GM completed an IPO of about 30% of its stock at $33 per share. The government continues to own about one-third of the company. After the IPO, the shares initially advanced to almost $40 before retreating. When the shares broke the IPO price, we determined that the shares were attractive, but only purchased a small position, believing that there might be a better opportunity later when the government exited the rest of its stock. Instead, during a weak third quarter where the market punished all cyclical stocks, the shares fell well below the
price where we planned to add to our position. We decided that the shares were cheap enough that we were more than fully compensated for the possible overhang of the government’s stake, and we established a position at an average price of $25.78 per share.

GM is being priced by the market as a cyclical company trading at less than 6x this year’s earnings. While some may see it as normal to value cyclicals at low multiples of peak earnings, we believe that 2011 is not a peak and, in fact, is below mid-cycle. Prior to the crisis, U.S. auto sales ran between 15 and 19 million units for many years. While sales have bounced from the recession low to about 13 million units, GM is poised to grow earnings from both a return to mid-cycle volumes, which we estimate to be 15 million units, and from a coming major refresh of its North American product portfolio. The market appears focused on GM’s “legacy liabilities.” However, the new GM does not
have pension and healthcare liabilities that are likely to over-run the company. Instead, GM sits with $33 billion of gross cash which represents nearly its entire current market capitalization. We see potential for GM to begin to return capital to shareholders over the next year. While we are cognizant of the various investment risks that include near-term global economic weakness and the government ownership overhang, we think these concerns are more than priced in at current levels and see significant upside even if the U.S. experiences a very slow "new normal" type of economic recovery."

giofranchi
Title: Re: GM - General Motors
Post by: PlanMaestro on September 05, 2012, 11:21:40 AM
PlanMaestro,
I know that probably you won't care, because you don't hold him in much regard, but GM is Mr. Einhorn's second largest long position, just after Apple.

Good for him. I don't have it. Think independently, think correctly.
Title: Re: GM - General Motors
Post by: PlanMaestro on September 05, 2012, 06:38:12 PM


Our retail sales meanwhile increased 11% versus a year ago. Here again all four brands posted increases, about 12% for Chevrolet, Cadillac and GMC, and 8% for Buick. This makes August our best retail month of the year. GM sales to fleet customers were up about 6% compared with the year ago and our year-to-date fleet mix is right in line with the 26% range that we have discussed before.

Now our most important highlight of the month is the outstanding performance of Chevrolet passenger cars which were up 25% in total and about 41% at retail compared with last August. The Sonic, the Cruze and the Volt all set new sales records and the Spark was off to a very good start with sales of more than 2600 units in the second month.

The Sonic which has now been on the sale of full 12 months has been a homerun for us. In its first year, we have sold 73,000 Sonics and the car has been number one in retail sales in this segment since April. August was also a very robust month for the Chevrolet Equinox crossover which was up 22% for its best August sales ever. I think this broad-based performance shows the power of the confidence message that we advertised for much of the summer, especially during the Olympics. It was a brand building message that really rang through with customers when they saw how much our product line-up has been transformed.

Of course, there were some exceptions to what on balance is a very good story. For example, the Malibu saw the decline but it wasn’t a surprise. As was the case in July we are in a bit of a quiet period between the sell-down of the old model which is nearly complete about 20 day supply and the launch of the high volume 2.5 liter four-cylinder models which are now arriving in showrooms.

As Don Johnson will tell you, our dealers are very excited about this next stage of the launch because the 2.5 liter Malibu will represent about three quarters of our mix. It will join the 2013 Malibu Eco which had its best sales month of the year and is the second best selling mid-sized hybrid of 2012. The big picture for our dealers and GM is even more compelling. The 2013 Malibu is one of seven Chevrolet passenger car nameplates that will be redesigned to all new in the 2011-2013 timeframe.

Now let’s turn to Cadillac. Last month we talked about how we were transforming Cadillac with a combination of excellent products and a brand experience custom tailored for our luxury customers. The pay-off has been recognition by JD Power as the most improved luxury brand, and a 21% increase in July sales. This month we delivered another double-digit sales increase driven by the Cadillac XTS large car and continued strong SRX and Escalade sales.

This renewed momentum will continue to build as dealers receive their first shipment of the all new Cadillac ATS, which are on the way as we speak. Here again the bid picture is very compelling. The addition of the XTS and ATS will give us our strongest showroom ever and coverage in 80% of the luxury market by volume, up from just 50% previously.

Turning next to Buick, the Verano has been a tremendous success for the brand. August marked its ninth consecutive monthly sales increase since launch. It helped Buick achieve its best retail sales month since September of 2007. When you also consider the GMC Acadia, sales were up 20% and the GMC Terrain were up 16%, it was clearly a good month for that channel.

Finally, our combined Chevrolet and GMC large pickup were up more than 6% year-over-year and 31% versus July. As we look at the pickup market, we are clearly at an inflection point. I say this because September usually marks an acceleration of the seasonal factors that favour higher truck sales this time of the year. And we’re also very encouraged by the continued sign of the housing recovery and the overall resilience of the U.S. economy. These are among of the reasons why we’re going to stay the course with the strategy that we have been following now for more than a year which is to compensate for launch-related downtime by carrying higher than normal truck inventories.
Title: Re: GM - General Motors
Post by: PlanMaestro on September 06, 2012, 10:09:17 AM
http://www.ft.com/cms/s/0/8a52a12a-f7a9-11e1-8c9d-00144feabdc0.html#ixzz25i6faUbN

GM Financial, the finance arm of General Motors, has taken advantage of investor clamour for higher-yielding securities by selling its largest package of debt backed by subprime auto loans so far this year.

The $1.3bn sale, which was sold at a record low rate, comes as a rally in such bonds has helped push this year’s total auto asset-backed security issuance above the total for 2011. Investor demand is already being reflected in increased financing options at dealerships, which last month helped propel US car sales to their highest rate in three years.
...

The value of subprime auto ABS sold since the start of this year had already hit nearly $13.2bn by the end of August, compared with $12.4bn for the whole of 2011, according to Barclays data.

The average yield GM paid on the debt was 1.5 per cent, its lowest ever and down from 1.9 per cent when it sold $1.2bn of subprime ABS in June.


Title: Re: GM - General Motors
Post by: PlanMaestro on September 06, 2012, 03:07:30 PM
Still chewing this Morningstar analysis, but it looks excellent on a first glance

What's Really Changed At The New GM?
http://seekingalpha.com/article/790771-what-s-really-changed-at-the-new-gm

A longer version
http://ibd.morningstar.com/ERR/500/GM.pdf
Title: Re: GM - General Motors
Post by: PlanMaestro on September 07, 2012, 11:09:31 AM
Blunt criticism of the Malibu 2013 and what could it mean regarding General Motors
http://www.forbes.com/sites/louiswoodhill/2012/08/15/general-motors-is-headed-for-bankruptcy-again/
Title: Re: GM - General Motors
Post by: txlaw on September 07, 2012, 12:41:13 PM
Blunt criticism of the Malibu 2013 and what could it mean regarding General Motors
http://www.forbes.com/sites/louiswoodhill/2012/08/15/general-motors-is-headed-for-bankruptcy-again/

Hmm, I see a trend with this guy's reporting/blogging:

-General Motors Is Headed For Bankruptcy -- Again
-Gasoline Prices Are Not Rising, the Dollar Is Falling
-Even the Warmists Don't Believe In Global Warming
-President Obama's 2012 Re-Election Prospects Suffer An Ominous GDP Report
-Electric Cars Are An Extraordinarily Bad Idea
Title: Re: GM - General Motors
Post by: PlanMaestro on September 07, 2012, 02:30:50 PM
Hmm, I see a trend with this guy's reporting/blogging:

-General Motors Is Headed For Bankruptcy -- Again
-Gasoline Prices Are Not Rising, the Dollar Is Falling
-Even the Warmists Don't Believe In Global Warming
-President Obama's 2012 Re-Election Prospects Suffer An Ominous GDP Report
-Electric Cars Are An Extraordinarily Bad Idea

He likes drama that's for sure :)
Title: Re: GM - General Motors
Post by: Olmsted on September 10, 2012, 07:19:33 AM
Quote
Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.

Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.

http://www.reuters.com/article/2012/09/10/us-generalmotors-autos-volt-idUSBRE88904J20120910

I know this is the legacy of pre-Chapter 11 decisions, but wow...

Though in fairness all of the per-vehicle loss estimate comes from development and tooling cost.  At least they are selling them above the cost of marginal production.
Title: Re: GM - General Motors
Post by: hyten1 on September 10, 2012, 07:39:59 AM
olmsted,

also note, in the article it also states toyota and nissan invested enourmous amount of money into their electric in technology as well (5 to 10billion dollars).

just want to point this out.

hy
Title: Re: GM - General Motors
Post by: Olmsted on September 10, 2012, 07:47:22 AM
Yes, agreed, and if they can use that technology development base in future vehicles it's not so bad.  The GM spokesperson in the article said the tech has already spilled over to some extent.
Title: Re: GM - General Motors
Post by: Olmsted on September 11, 2012, 09:13:15 AM
Upon further consideration the article was somewhat unfair and needlessly inflammatory.  Of course it will take many vehicles sold to work through a large up-front investment in technology and a factory.  It's all about whether they can sell Volts in volume and whether they can use the tech in forthcoming models.

I shouldn't have posted that article before thinking about it some more.
Title: Re: GM - General Motors
Post by: hyten1 on September 11, 2012, 10:23:19 AM
olmsted,

agree, the media like to sensationalize things and like to pick on GM (it is gov motor after all)

its funny how toyota and nissan spent 5 to 10bil, and they are being painted in the for positive light or no light at all, while GM is being painted as the dog.

don't give me wrong this tech spend is something we need to watch out for and make sure the return is adequate, but the article is very biases.

hy
Title: Re: GM - General Motors
Post by: rimm_never_sleeps on September 11, 2012, 11:13:24 AM
yep that "loss" is actually an investment in r and d that has a great chance at paying off big time.
Title: Re: GM - General Motors
Post by: Olmsted on September 11, 2012, 11:52:55 AM
agree, the media like to sensationalize things and like to pick on GM (it is gov motor after all)

its funny how toyota and nissan spent 5 to 10bil, and they are being painted in the for positive light or no light at all, while GM is being painted as the dog.

I was actually just thinking whether this could be read as a contrary sentiment indicator!
Title: Re: GM - General Motors
Post by: hyten1 on September 12, 2012, 09:48:39 AM
for those interested

http://www.autoblog.com/2012/09/12/cadillac-nabs-esquire-2012-car-of-the-year-laurels/
Title: Re: GM - General Motors
Post by: PlanMaestro on September 18, 2012, 08:46:36 AM
Bob Lutz says bullshit.

The Real Story On GM's Volt Costs
http://www.forbes.com/sites/boblutz/2012/09/10/the-real-story-on-gms-volt-costs/

The Volt “variable cost” (labor and materials, without revealing any confidential GM information), looks very roughly like this: A Li-Ion battery today runs about $350 per KWh. The Volt’s is 16KWh, so that’s roughly $6000. Add $4,000 for the battery pack structure, the cooling, the high-voltage wiring, the motor and the power electronics. So, that’s the electric portion. Add about 20 hours of assembly labor which we’ll round to a very generous $1000. The dealer net price is, say, $37,000. We now have $26,000 left for the rest of the car, which, cost-wise, is about equal to a Chevy “Cruze” which sells for around $22,000 retail! (And the Volt has no costly conventional transmission.) Thus, the “Volt”, by my estimate, is either close to “variable break-even” or may be on the cusp of a positive gross margin. Deduct the per-unit allocation for all fixed cost, depreciation and amortization and it is, surely, still “under water”….but not by much, and less and less so as the volume builds and other, higher-margin GM cars, like the Cadillac ELR, piggy-back off of the Volt’s initial investment.

Maybe the Volt, a first-generation technology masterpiece and the most-awarded car in automotive history, will never make a really decent profit. But succeeding generations of the same technology will. Meanwhile, the happy Volt buyers (most satisfied owners of any nameplate in the market) are getting more that they paid for. (Is that so bad?)


Title: Re: GM - General Motors
Post by: hyten1 on November 02, 2012, 06:51:18 PM
Top 10 most reliable american cars from consumer report

http://news.consumerreports.org/cars/2012/11/top-10-most-reliable-american-cars.html

8  out of 10 are GMs
Title: Re: GM - General Motors
Post by: PlanMaestro on November 05, 2012, 05:32:46 AM
On the road again
http://www.ft.com/intl/cms/s/0/8b6685bc-24fa-11e2-86fb-00144feabdc0.html#axzz2BJf3LTP6
Title: Re: GM - General Motors
Post by: PlanMaestro on November 08, 2012, 07:48:53 AM
Why Ford is more profitable than GM
http://www.autonews.com/article/20121106/BLOG06/121109911/why-ford-is-more-profitable-than-gm
Title: Re: GM - General Motors
Post by: hyten1 on November 13, 2012, 08:03:53 AM
one thing i have been thinking about is the universally accepted belief that GM has no competitive advantage.

does GM have competitive advantage?

consider these:

1. GM has been badly operated (not counting recently) for decades, decades!
2. GM has been saddle with HUGE pension obligations due to past management/unions (kind of related to above)

Now people can argue GM went into bankruptcy recently, but it took a 2008 like event to put them into bankrupty

also GM would not have had to file for bankrupty if they did want F did which was to raise tons of money before 2008 hit (not that could be attributed partially to luck for F and mostly due to bad management on GM part)


And GM is still around and kicking (I understand it went through bankruptcy)

now does GM have a competitive advantage?

I think GM is not your typical manufacturing company selling some widgets

the scale and complexity of cars provides some competitive advantage
Title: Re: GM - General Motors
Post by: txlaw on November 20, 2012, 10:06:06 AM
Don't think this got posted, but Berkowitz is in the GM B warrants now. 

http://www.sec.gov/Archives/edgar/data/1056831/000105683112000004/submission111412.txt

Pretty interesting given the board's discussions on how cheap these warrants appear to be.
Title: Re: GM - General Motors
Post by: PlanMaestro on November 20, 2012, 01:21:19 PM
Unions will not be again what they used to be …

Mexican Motors
http://online.wsj.com/article/SB10000872396390444083304578018462369529592.html
Title: Re: GM - General Motors
Post by: PlanMaestro on November 21, 2012, 02:35:11 PM
GM: more trouble in Korea
http://blogs.ft.com/beyond-brics/2012/11/21/gm-more-trouble-in-korea/#axzz2CtiLPTXR

But the early retirement scheme has sparked strong protests from GM Korea’s 15,000-strong union, after the company announced earlier this month that it will not produce its next-generation Chevrolet Cruze small car in Korea, stoking speculation that the company may shift the production to its loss-making unit in Europe. The current Cruze model is produced in South Korea’s Gunsan plant, accounting for 50-60 per cent of approximately 260,000 cars produced there. According to union officials, from 2014 the new Cruze model will be produced in five regions including Europe, the US and China, although the company said this has not been decided yet.

Union officials compared GM’s recent moves to “declaring a war” against them and sent a warning letter to GM Korea’s chief executive Sergio Rocha, complaining that the steps were taken without consulting the union first. “We have seen a series of crucial issues that will have a grave impact on labour relations in the past month. This signals a red light for GM Korea’s future,” said Choi Jong-hak, a union spokesman.

Choi also referred to GM’s recent efforts to take full control of its Korean operations by buying back a 17 per cent stake from state-run Korea Development Bank. KDB is the second-largest shareholder in GM Korea with the power to veto the carmaker’s decision. The two sides are currently in talks about the stake sale while the union opposes it.

GM has seen a falling market share in South Korea in recent years, as foreign carmakers struggle to compete with domestic rivals such as Hyundai Motor and Kia Motors. GM currently has a less than 10 per cent market share in Korea while Hyundai and its affiliate Kia control nearly 80 per cent of the domestic market. French carmaker Renault also had to shed 800 workers or about 15 per cent of its workforce in its Korean unit earlier this year.

Although Korea is a small market for GM, it is a key manufacturing base for the US company, with nearly 2m cars produced each year. GM Korea has served as a small-car production base, manufacturing about a quarter of the company’s Chevrolet-branded cars. GM has been doing well in Asia, with most of the gains coming out of Australia and Korea.
Title: Re: GM - General Motors
Post by: PlanMaestro on November 21, 2012, 06:31:22 PM
GM in $4.2bn deal for Ally unit
http://www.ft.com/intl/cms/s/0/5d10a5f8-3431-11e2-9ae7-00144feabdc0.html?ftcamp=published_links%2Frss%2Fhome_us%2Ffeed%2F%2Fproduct#axzz2CiGlJ5Zw

Ally announced it was selling its European and Latin American operation and its share of a Chinese joint venture to GM’s wholly owned financing subsidiary. The Detroit-based lender said it had agreed a price of $550m above tangible book value, or about $4.2bn at the current valuation.
Title: Re: GM - General Motors
Post by: PlanMaestro on November 28, 2012, 01:39:28 PM
also GM would not have had to file for bankrupty if they did want F did which was to raise tons of money before 2008 hit (not that could be attributed partially to luck for F and mostly due to bad management on GM part)

That post by hyten raised some very interesting issues and was surprised it did not spark a discussion. I agree with him that GM minus the unions and the legacy costs is a very competitive firm… maybe more than that.

Regarding the issue: was Mulally good or lucky?

A substantial part of his success was raising money just before the crisis. There is no way to deny that, and from what I've read that was pure luck with the timing.

However he simplified Ford a lot:

(http://farm9.staticflickr.com/8486/8228316120_0bf4e3f0f4.jpg)

None of this is rocket science. It's something that General Motors can do too… while adding their enormous scale advantage. Any steps in this direction would be a nice extra to the thesis.
Title: Re: GM - General Motors
Post by: txlaw on November 28, 2012, 01:45:11 PM
also GM would not have had to file for bankrupty if they did want F did which was to raise tons of money before 2008 hit (not that could be attributed partially to luck for F and mostly due to bad management on GM part)

That post by hyten raised some very interesting issues and was surprised it did not spark a discussion. I agree with him that GM minus the unions and the legacy costs is a very competitive firm… maybe more than that.

Regarding the issue: was Mulally good or lucky?

A substantial part of his success was raising money just before the crisis. There is no way to deny that, and from what I've read that was pure luck with the timing.

However he simplified Ford a lot:

(http://farm9.staticflickr.com/8486/8228316120_74b3f4963f.jpg)

None of this is rocket science. It's something that General Motors can do too… while adding their enormous scale advantage. Any steps in this direction would be a nice extra to the thesis.

Taking out the mortgage for liquidity, selling off non-core brands, and making one platform is something that Mullaly was pushing from the start, I believe, in addition to changing the culture there.

I happen to think the guy was good.

I like GM and think that it's very competitive.  I can't believe what they're earning even with money losing European ops.  Crazy.
Title: Re: GM - General Motors
Post by: PlanMaestro on December 03, 2012, 01:45:46 PM
Bad month for GM in a very strong month for the industry and they are spinning.

Auto Makers Post Strong November Sales
http://online.wsj.com/article/SB10001424127887323401904578156923665717236.html

Ford's F-series pickup line shot up 18% last month to 56,299 vehicles, the highest since 2005 for November. But GM's large pickup sales fell 8% as demand for Chevrolet Silverado pickup truck sales fell 10.4% and sales of the GMC Sierra dropped 2%.

GM said its inventory of unsold pickup trucks shot up to nearly five months of supply, and a company executive on Monday suggested slowing or cutting production could be in the offing.

A GM executive said on a conference call Monday that its pickup sales dropped in large part because rivals were offering big discounts on 2012 models that GM didn't match. GM launched 2013 pickup models earlier this year, and plans to launch a new generation of its large pickup lineup in mid-2013.

"December will be a whole new ballgame," said Kurt McNeil, vice president of GM's U.S. sales operations. "December is usually a strong month for Silverado, construction is rebounding and we expect to see a resolution in Washington [to the fiscal cliff]."

Mr. McNeil said GM would slow its truck production rather than match the competition's price cuts going ahead.

"Much of it was due to the amount of incentives from our competitors Ford and Dodge. We were shocked that Dodge had $5,000 off a vehicle. We haven't seen those levels in a long time," said GM Interim Chief Marketing Officer Alan Batey.

A Ford sales analyst said the sales incentives on the F-series were below the year-ago level and less than $100 a vehicle higher than in October. A Chrysler spokesperson was unavailable for immediate comment.

Industry wide, discounts rose about 4.4%, according to research firm TrueCar.com. Nissan led the industry increase with the heaviest discounts, about $4,273 a vehicle and up 45% over November 2011. GM's discounts were up 20% in November, year-to-year, while incentives for Hyundai Motor Co. 005380.SE +1.33% and Kia Motors Corp. 000270.SE +1.13% rose 29%

Incentives dropped for Chrysler and Ford by 22% and 21% over a year ago, respectively, Truecar.com said.

Title: Re: GM - General Motors
Post by: PlanMaestro on December 12, 2012, 02:58:31 PM
Honda Accord, Ford Fusion, Caddy ATS named 'Car of Year' finalists
http://www.autonews.com/article/20121212/OEM/121219949#ixzz2EshXAs1s

Seven automakers had multiple nominees, led by Ford Motor Co. with four: the Ford Fusion, Escape and C-Max and the Lincoln MKZ. Nissan North America had three: the Nissan Altima and Pathfinder and the Infiniti JX35. The others are General Motors with the Cadillac ATS and Chevrolet Malibu, Toyota Motor Sales' Toyota Avalon and Scion FR-S, Chrysler Group's Dodge Dart and Ram 1500 pickup, American Honda with the Honda Accord and Acura RDX and BMW's 3 series and X1.
Title: Re: GM - General Motors
Post by: hyten1 on December 12, 2012, 03:01:36 PM
gm is in the dog house right now, they have a bunch of new models coming out next year
Title: Re: GM - General Motors
Post by: CONeal on December 12, 2012, 04:05:06 PM
gm is in the dog house right now, they have a bunch of new models coming out next year

Not only that but they Are showing off the new model truck tomorrow and several people may just wait if they like what they see.  I've seen somewhere that trucks prices are bei g cut 13k off sticker bc they are having problems moving inventory. 

I've been looking for a Chevy on and off the last couple of months and have been disappointed.  Do they stock a damn truck with an interior color other than black?  The only time I've seen a color other then black is in the top end model.  The whole computer touch screen is also gibberish.  4 years from now the shit won't work and will be outdated and cost a couple k to fix. 
Title: Re: GM - General Motors
Post by: LC on December 12, 2012, 04:19:38 PM
4 years from now the shit won't work and will be outdated and cost a couple k to fix.
Welcome to America, where the shit breaks down, the insurance doesn't cover it, and the word "customer" really means "growing annuity!"
Title: Re: GM - General Motors
Post by: bookie71 on December 12, 2012, 05:49:48 PM
A lot of folks now think of GM as "Government Motors" and would not think of buying a Chevy pickup.  This could be part of reason that Ford is doing so well.
Title: Re: GM - General Motors
Post by: CONeal on December 13, 2012, 10:06:00 AM
Here is the 2014 truck

http://www.foxnews.com/leisure/2012/12/13/2014-chevrolet-silverado-and-gmc-sierra-revealed/
Title: Re: GM - General Motors
Post by: PlanMaestro on December 14, 2012, 01:14:45 PM
(http://farm9.staticflickr.com/8499/8273518706_533f716746.jpg) (http://www.flickr.com/photos/27516608@N00/8273518706/)

Ford aims at GM by showing new F-150 at Detroit show, report says
http://www.autonews.com/article/20121214/OEM03/121219909#ixzz2F3y2aENd

Ford, which declined to confirm its plans to show the truck, aims to launch the 2015 F-150 in the fall of 2014. GM will introduce its new trucks, the 2014 Chevrolet Silverado and GMC Sierra, in the second quarter of 2013.

The two largest American automakers are fierce competitors in the full-size pickup segment, which accounts for about 11 percent of the U.S. auto market. But in their latest redesigns, the two U.S. rivals have diverged in their focus, with Ford placing more emphasis on fuel economy.

In his note, Johnson said GM's new trucks will make the company more competitive in the pickup truck market and narrow the gap with Ford on prices. But "they will not displace Ford as leader in the highly profitable U.S. full-size pickup segment, unless Ford misfires on quality in its 2014 F-150 relaunch," he added.

Jockeying for profit

The F-series, which has been the best-selling U.S. vehicle for 30 years, and SUV derivatives such as the Expedition account for more than 90 percent of Ford's global profit, according to Morgan Stanley auto analyst Adam Jonas.

The current versions of the big trucks and related SUVs generate profit of $12,000 or more per vehicle and account for about 60 percent of GM's global profit, analysts said.

This kind of money often leads to jockeying for bragging rights over who has the toughest truck with the most towing capacity or highest fuel efficiency.

For example, GM ran a TV commercial during this year's NFL Super Bowl game depicting several Silverado owners arriving at a prearranged meeting point during the apocalypse. But one of their friends, a Ford driver, fails to show up, implying that Ford trucks are less rugged and durable.

Ford called on GM to pull the ad, citing insurance industry data that showed Ford trucks were safer. GM refused to comply.

This week, GM touted the new trucks' power and torque, as well as a quieter cab and additional safety features. Meanwhile, Ford is pushing to boost fuel economy of its new F-150 by 15 to 20 percent, in part by using lighter materials.

In its F-150 overhaul, Ford is looking to shave an average of 700 to 750 pounds from each vehicle through extensive use of aluminum as well as a redesign of components including brakes and axles. The prototype to be shown next month will provide strong visual clues to the design of the new F-150.
Title: Re: GM - General Motors
Post by: muscleman on December 15, 2012, 06:04:45 PM
(http://farm9.staticflickr.com/8499/8273518706_533f716746.jpg) (http://www.flickr.com/photos/27516608@N00/8273518706/)

Ford aims at GM by showing new F-150 at Detroit show, report says
http://www.autonews.com/article/20121214/OEM03/121219909#ixzz2F3y2aENd

Ford, which declined to confirm its plans to show the truck, aims to launch the 2015 F-150 in the fall of 2014. GM will introduce its new trucks, the 2014 Chevrolet Silverado and GMC Sierra, in the second quarter of 2013.

The two largest American automakers are fierce competitors in the full-size pickup segment, which accounts for about 11 percent of the U.S. auto market. But in their latest redesigns, the two U.S. rivals have diverged in their focus, with Ford placing more emphasis on fuel economy.

In his note, Johnson said GM's new trucks will make the company more competitive in the pickup truck market and narrow the gap with Ford on prices. But "they will not displace Ford as leader in the highly profitable U.S. full-size pickup segment, unless Ford misfires on quality in its 2014 F-150 relaunch," he added.

Jockeying for profit

The F-series, which has been the best-selling U.S. vehicle for 30 years, and SUV derivatives such as the Expedition account for more than 90 percent of Ford's global profit, according to Morgan Stanley auto analyst Adam Jonas.

The current versions of the big trucks and related SUVs generate profit of $12,000 or more per vehicle and account for about 60 percent of GM's global profit, analysts said.

This kind of money often leads to jockeying for bragging rights over who has the toughest truck with the most towing capacity or highest fuel efficiency.

For example, GM ran a TV commercial during this year's NFL Super Bowl game depicting several Silverado owners arriving at a prearranged meeting point during the apocalypse. But one of their friends, a Ford driver, fails to show up, implying that Ford trucks are less rugged and durable.

Ford called on GM to pull the ad, citing insurance industry data that showed Ford trucks were safer. GM refused to comply.

This week, GM touted the new trucks' power and torque, as well as a quieter cab and additional safety features. Meanwhile, Ford is pushing to boost fuel economy of its new F-150 by 15 to 20 percent, in part by using lighter materials.

In its F-150 overhaul, Ford is looking to shave an average of 700 to 750 pounds from each vehicle through extensive use of aluminum as well as a redesign of components including brakes and axles. The prototype to be shown next month will provide strong visual clues to the design of the new F-150.


I see so many super investors piling into GM, but not many into F.
They probably based their investment on cheapness. But as an auto fan, I think F is going in the right direction. 20% better fuel economy is a big thing. There will be some need for more powerful trucks, but fuel economy will probably draw better consumer interest.
In addition, I know that Ford's eco-boost engines are really good. Even though the power might be slightly less, it is able to output max torch throughout 1500 rpm to 5000 rpm.
My parents own a Volvo XC60, which uses the Ford ecoboost 2.0L engine. The weight is 4200 lbs, which is about 25% heavier than my VW CC. But I feel that it actually accelerates faster than my CC, which also uses a 2.0L turbo engine, built by VW.
Title: Re: GM - General Motors
Post by: hyten1 on December 15, 2012, 07:46:50 PM
muscleman

note the F 20% better is relative to current F-150

we don't know just yet what the new GM trucks few economy will be yet. GM have not announce their few economy for the 2013 new trucks

hy
Title: Re: GM - General Motors
Post by: muscleman on December 15, 2012, 09:31:24 PM
muscleman

note the F 20% better is relative to current F-150

we don't know just yet what the new GM trucks few economy will be yet. GM have not announce their few economy for the 2013 new trucks

hy

I see. I checked the above link for 2014 truck for GM, and they said their fuel economy will be improved also.
But I do know that at present, Ford's ecoboost engine is one of the best.
Title: Re: GM - General Motors
Post by: hyten1 on December 15, 2012, 10:51:22 PM
ford does have better fuel economy right now, but not by much

http://www.shopautoweek.com/articles/2012/05/pickup-truck-comparison-f150-vs-silverado-vs-ram.html

I think the marketing, branding (ecoboost) make it sound like F's fuel economy is miles ahead of the competition

i am interesting in learning what the final mpg for these next gen trucks would be, i guess we have to wait and see
Title: Re: GM - General Motors
Post by: PlanMaestro on December 17, 2012, 12:28:58 PM
GM pickup strategy: Zig as rivals zag
http://www.autonews.com/article/20121217/OEM03/312179978/gm-pickup-strategy-zig-as-rivals-zag

Last week's premiere of General Motors' redesigned full-sized pickups spotlighted the divergent truck strategies of GM and its Detroit 3 rivals.

Industry insiders had wondered whether GM would try to counter the success that Ford Motor Co. has had with its turbocharged EcoBoost V-6 on its F-150 pickup. Or whether it would use the sort of fuel-saving technologies that Chrysler Group put on its re-engineered Ram 1500, such as an eight-speed transmission or a stop-start system.

Instead, GM unveiled next-generation Chevrolet Silverados and GMC Sierras that will offer new small block engines with displacements similar to its current powertrain lineup. None will be turbocharged. All will be combined with six-speed transmissions. No hybrids will be offered.

Still, each engine choice -- a 4.3-liter V-6 and 5.3- and 6.2-liter V-8s -- will have better horsepower, torque and fuel economy than its predecessor, GM execs said. The EPA has not yet rated the trucks' fuel economy, and other details will be released early next year. The trucks are to go on sale by June.

Some dealers and pundits think GM played it safe with modest exterior styling changes and lack of a sexy powertrain technology. But some think that's a good move.

"If this truck can deliver substantial improvements in fuel efficiency and power, then it should do just fine" and "take some share," Morgan Stanley analyst Adam Jonas says. "There's just a ton of loyalty in the full-sized pickup segment."
Title: Re: GM - General Motors
Post by: PlanMaestro on December 17, 2012, 08:01:10 PM
GM idles Chevy Malibu plant, tries to clear glut
http://www.autonews.com/article/20121217/OEM01/121219892#ixzz2FNAELsoF

On Dec. 1, GM's inventory stood at 788,200 units, or a 106-day supply, the highest level since April 2009, a few months before GM's government-led bankruptcy. GM executives have said that inventories rose higher than their targets and that the company would take steps to reduce stockpiles.

Also this week, GM canceled shifts at its Lordstown, Ohio, plant, where the Chevy Cruze is assembled.

Stocks of the Malibu, which was redesigned for the 2013 model year, stood at a 164-day supply on Dec. 1. The vast majority of that inventory was of the 2013 models. Dealers had sold through most of their 2012 stocks this spring and summer amid heavy discounting to make way for the redesigned sedan.

GM also builds a smaller number of Malibu sedans at a plant in Detroit and Hamtramck, Mich.

Malibu sales have climbed 4 percent this year to 199,321 through November, but trail the industry's overall 14 percent growth. Malibu sales have dipped since August, when the redesigned 2013 model was fully rolled out.

The Malibu is squaring off in a competitive segment against the redesigned Volkswagen Passat, Toyota Camry, Nissan Altima, Honda Accord and Ford Fusion.

Last month, GM CEO Dan Akerson said GM accelerated a refresh of the Malibu to debut in the fall, just 18 months after the car's debut. A mid-cycle refresh typically happens three-year mark under GM's normal cadence.

Akerson said he was aware of the mixed reviews that the Malibu has received from the automotive press. He did not say that the refresh is being fast-tracked in response to sour reviews or slow initial sales.

Akerson called the planned changes a "mid-cycle enhancement" and said they would include a new front fascia. GM could be planning to incorporate the wider grille featured on the redesigned 2013 Chevy Impala and reskinned 2013 Traverse crossover, a new face that is expected to be incorporated across much of Chevy's lineup.
Title: Re: GM - General Motors
Post by: hyten1 on December 19, 2012, 05:51:17 AM
http://finance.yahoo.com/news/general-motors-spend-5-5-130155791.html
Title: Re: GM - General Motors
Post by: PlanMaestro on December 19, 2012, 05:54:19 AM
http://finance.yahoo.com/news/general-motors-spend-5-5-130155791.html

And no title or excerpt? hehehe. One cannot go on vacation internet-free w/o something big happening.
Title: Re: GM - General Motors
Post by: CONeal on December 19, 2012, 06:01:42 AM
I thought the gov't stake was valued at $53/share.  So are they saying they give up on trying to get all their money back?

edited b/c the average share price is more than $40.
Title: Re: GM - General Motors
Post by: txlaw on December 19, 2012, 08:25:17 AM
My understanding is that the government is taking a loss on the amount of money they put in.

Of course, it was essentially a fiscal policy move, and the returns the people will get from the government's involvement will be outstanding going forward.  That's just my view of the propriety of the "bailout."

B warrants are up quite a bit today.  I wish I had bought more.
Title: Re: GM - General Motors
Post by: txlaw on December 19, 2012, 08:09:41 PM
I can't stop trying to find out more info about this car:

http://www.cadillac.com/elr-electric-car.html

Detroit Auto show coming up next month.  It will be fun to see all the manufacturers' new models.
Title: Re: GM - General Motors
Post by: Palantir on December 21, 2012, 07:44:21 AM
This does look really cheap. This firm has 41B in Cash (42 MCap), and only 16B in debt, so the net cash position is like 24B, making the firm's EV = 18B.

Depending on what your FCFE projections are....but the "equity bond" yield (FCF/18) could yield anything from 7-15% on this....
Title: Re: GM - General Motors
Post by: MYDemaray on December 21, 2012, 07:47:36 AM
Don't forget the underfunded pension plan, which eats up most of the cash...
Title: Re: GM - General Motors
Post by: PlanMaestro on January 03, 2013, 02:57:28 PM
Canada: once dominant General Motors fell to third behind Chrysler.
http://business.financialpost.com/2013/01/03/ford-hangs-onto-canadian-sales-crown-in-2012-chrysler-bumps-gm-down-a-notch/

“We believe Ford’s top selling three-peat is the first such occurrence in the almost one-hundred years since GM overtook Ford to become the number one vehicle retailer in Canada,” he said. He said he believed Chrysler had not held the No. 2 sales spot either since sometime in the 1960s.

Despite GM’s troubles, Mr. DesRosiers said he believed Canada auto sales may reach a new peak in 2013, aided by the sales surge at South Korean and European brands.

“By any measure, it is safe to say that 2012 was the year that the European brands took the market by storm, followed closely by the Koreans,” he said. “Korean brands have established a significant presence at the bottom end of the market while the Europeans have gained footholds in the lucrative middle and high end segments.”
Title: Re: GM - General Motors
Post by: PlanMaestro on January 06, 2013, 09:44:10 PM
Reuss: Judge us in mid-2014
http://www.autonews.com/apps/pbcs.dll/article?AID=/20130107/RETAIL01/301079969/reuss-judge-us-in-mid-2014

That was the message last week from GM North America President Mark Reuss as he fended off questions about GM's 17.9 percent U.S. market share for 2012. That's down from 19.6 percent in 2011 and the first time GM has slipped below 18 percent since before the Great Depression, with the exception of the World War II years.

By mid-2014, GM will have executed the most extensive overhaul of its vehicle lineup in its history -- and maybe in the industry's history, Reuss says. That should help claw back market share that GM ceded in 2012, he implied.

"Our portfolio is the very oldest in the industry right now," Reuss told reporters and analysts after GM released its December sales figures. "If there's a switch that you're going to throw and say 'Judge us,' give us 18 months. And you're going to see the whole portfolio turned."

GM's December sales rose 5 percent, to 245,733 vehicles, trailing the industry's 9 percent growth. GM's sales for the year were up 4 percent, well below the industry's 13 percent gain.

Reuss and other GM executives acknowledged that the aging vehicle lineup -- made worse by product-development and investment delays stemming from GM's 2009 bankruptcy -- has hurt market share. They also cited the rebound of Japanese competitors, which reclaimed share they ceded after the March 2011 earthquake in Japan.

Despite those pressures, Reuss said GM did not want to resort to its old ways by dumping big incentives on vehicles in order to protect market share.
(…)

GM's major launches in the next 18 months will include:

• The next-generation Chevrolet Impala and Silverado and the GMC Sierra this spring.

• The next-generation Chevrolet Corvette by late summer.

• The Buick Encore crossover by February.

• The Chevy Suburban and Tahoe, GMC Yukon and Cadillac Escalade expected by the first half of 2014.
Title: Re: GM - General Motors
Post by: Edward on January 07, 2013, 01:14:41 AM
I love the Chevrolet Spark EV, coming in 2014 for 32,500$ before tax incentives. It has 100 kW (130 hp) motor, providing 400 lb-ft of torque, which is insane for such a small car.
http://www.autoblog.com/2012/11/27/chevy-spark-ev-unveiled-priced-under-25k-with-tax-incentives/

http://www.youtube.com/watch?v=SBpog3xkIJM
Title: Re: GM - General Motors
Post by: hellsten on January 08, 2013, 09:06:42 AM
As you all probably know, there's a story on GM in Grant's Interest Rate Observer Winter Edition:
http://www.scribd.com/doc/118345999/Grants-Winter-2012

I'm including some relevant excerpts from the article in this discussion:

Quote
One doesn’t have to assume growth in vehicles per household to get there, only continued population growth of a little under 1% per year. At that rate the automakers would return to the good old days of 16 million sales as soon as 2015

Quote
At 11 years, the average car and truck on American highways in 2011 was the oldest on record

Quote
To purchase and finance an average-priced new car required 23.2 weeks of median family income as of the first quarter…That was within a whisker of the all-time most affordable period

Quote
the company, as of year-end 2011, owned $47.2 billion of deferred tax assets before valuation allowances…
GM is unlikely to be paying taxes to the U.S. government for another six years at least

Quote
Daniel F. Akerson, chairman and CEO, pledged to “make GM great again,”…
The impact of new vehicles will be especially profound in the United States, where about 70% of our name plates will be new or freshened over the course of 2012 and 2013.”

Quote
while Ford will be revamping low-margin vehicles, GM will be fo-cusing on high-margin ones.

Quote
Full-size trucks are where the money is…GM will sell more of these trucks and at a better price point

Quote
If management can find its way to a 10% operating margin, roughly 220 basis points more than it is posting today, there in lies $2 billion to $3 billion of improvement in operating profit, equal to $1.11 per share to $1.67 per fully diluted share—none of which will be taxed for a long, long time.”

Quote
pension obligations of $134 billion, the company faces an unfunded liability of $25 billion

Quote
it’s a stretch to call GM a back-door play on rising interest rates, there is some element of truth in that notion, at least in the matter of pension obligations

Quote
This publication, as bearish as it is on China, regards GM’s exposure to the People’s Republic as perhaps the greatest risk the market has not adequately discounted

Quote
Hurdle No. 3 is the overhang of U.S. Treasury-owned shares, 500 million, or just over 30% of the total. Many ask:Why get into GM before the government gets out? To get out whole, Secretary Geithner would need a price of $53 a share.

Quote
What you’re left with is an enterprise value of $21.66 billion. We assume that ‘core,’ or non financial GM, can produce $12 billion in EBITDA. Dividing $21.66 billion by $12 billion, we find that an investor can buy GM at 1.81 times EBITDA, compared to the 3.5 times EV-to-EBITDA multiple at which the likes of Magna International, Delphi and Tenneco change hands.”

Note that the article was published August 10, 2012.

That Mohnish, Einhorn, Tepper and BRK own the stock is a good sign for coattail investors like me:
http://www.dataroma.com/m/stock.php?sym=gm

Warrants have doubled since summer:
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=GM.WS.A&insttype=Stock
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=GM.WS.B&insttype=Stock

I'm still researching GM, so I haven't bought any shares.
Title: Re: GM - General Motors
Post by: hyten1 on January 08, 2013, 09:19:07 AM
i own decent amount of the B shares seem like a better deal than common
Title: Re: GM - General Motors
Post by: PlanMaestro on January 11, 2013, 12:27:41 AM
GM’s Girsky must solve Opel conundrum
http://www.ft.com/intl/cms/s/0/4870dcf6-5b1b-11e2-8d06-00144feab49a.html#axzz2HeGkstUR

Title: Re: GM - General Motors
Post by: Palantir on January 11, 2013, 06:08:11 AM
dude...this is cheap. 24B of net cash, EV of 23B...?
Title: Re: GM - General Motors
Post by: hyten1 on January 11, 2013, 06:11:48 AM
don't forget pension liability
Title: Re: GM - General Motors
Post by: thomcapital on January 11, 2013, 07:14:29 AM
Interview with Dan Akerson in the WSJ from earlier this week:

http://online.wsj.com/article/SB10001424127887323482504578229852571958928.html?mod=WSJ_qtoverview_wsjlatest


WSJ: What are a few things you want to accomplish during your tenure?

Mr. Akerson: I would like to see Cadillac become a global brand. I would like to see Opel cut its losses this year by anywhere from one-third to one-half. I would like to see Chevrolet become a true global brand. It is number four in the world today. I think it has to move up. I am not going to tell you where I think it ought to be, but I am not satisfied with fourth place. I would like to get to investment-grade rating this year. I would like to purchase the remaining shares, or have the government exit in one form or another. It is pretty ambitious for '13 going into '14.
Title: Re: GM - General Motors
Post by: PlanMaestro on January 11, 2013, 03:36:55 PM
2014 Corvette.

http://www.autonews.com/apps/pbcs.dll/article?AID=/20130111/OEM04/301119797/gm-aims-new-corvette-beyond-successful-plumbers
Title: Re: GM - General Motors
Post by: MYDemaray on January 14, 2013, 11:54:45 AM
I'm not a huge car guy, but I think the new Corvette looks great, and have heard similar things from friends.  Seems like the halo effect may work.

Thought this piece in the WSJ about GM's learning from Disney was interesting:
http://online.wsj.com/article/SB10001424127887324081704578235612630814172.html?mod=ITP_marketplace_1
Title: Re: GM - General Motors
Post by: hyten1 on January 14, 2013, 12:49:20 PM
c7 corvette looks nice

this is how i describe it

batmobile  is for batman
c7 corvette is for bruce wayne
Title: Re: GM - General Motors
Post by: MYDemaray on January 14, 2013, 01:08:07 PM
batmobile  is for batman
c7 corvette is for bruce wayne

haha. Nice. Kind of like "drive a Bentley, be driven in a Rolls".  The $50k'ish price tag everyone keeps quoting seems very accessible for the machine...
Title: Re: GM - General Motors
Post by: hyten1 on January 14, 2013, 09:58:02 PM
the new cadillac elr (electric vehicle)

http://www.autoblog.com/2013/01/15/2014-cadillac-elr-is-making-green-sexy-in-detroit/
Title: Re: GM - General Motors
Post by: PlanMaestro on January 15, 2013, 12:20:29 PM
All-New Corvette 'Unapologetically American'
http://www.bloomberg.com/video/car-makers-unveil-their-latest-models-TBm5wQ06R8GBMVQsLf3mhw.html
Title: Re: GM - General Motors
Post by: PlanMaestro on January 16, 2013, 08:36:14 AM


General Motors (GM) told analysts at a Deutsche Bank industry conference in Detroit yesterday that it expects a modest increase in pretax profits in 2013 and believes global auto sales will also grow modestly this year, the Associated Press reports. The automaker sees pretax profit margins in North America rising to 10% from 8% in three to four years.
Title: Re: GM - General Motors
Post by: PlanMaestro on January 18, 2013, 10:28:21 AM

The U.S. Treasury Department has hired JPMorgan Securities and Citigroup Global Markets to sell its remaining stake in General Motors and bring an end to almost four years of partial government ownership of the car maker.

The government, which got its stake in a $49.5-billion bailout of the company in 2009, still holds 300 million shares of GM common stock, giving it 19% of the auto giant. Treasury officials revealed hiring JPMorgan and Citigroup on Wednesday in documents posted on the department's website.

The banks will get one cent for every share they sell for a fee of up to $3 million.

The documents gave no timetable for sale of the remaining shares, but the government has said it intends to be out of GM by early next year. Contracts with the two banks run through Jan. 14, 2014, but can be extended in 90-day increments or through mutual agreement. Extensions can't go longer than Jan. 14, 2017.


Title: Re: GM - General Motors
Post by: PlanMaestro on January 23, 2013, 06:31:35 PM
New book coming.

http://www.amazon.com/American-Turnaround-Reinventing-Way-Business/dp/1455513016/ref=tmm_hrd_title_0

Excerpt: http://management.fortune.cnn.com/2013/01/23/ed-whitacre-american-turnaround/
Title: Re: GM - General Motors
Post by: PlanMaestro on January 25, 2013, 09:28:26 PM
In Brazil, clues how GM will look under Akerson's global brand push
http://www.autonews.com/article/20130126/GLOBAL/301269998#ixzz2J3YlPC5M
Title: Re: GM - General Motors
Post by: txlaw on January 31, 2013, 09:24:50 AM
AutoNation CEO on record results:
http://video.cnbc.com/gallery/?play=1&video=3000143937
Title: Re: GM - General Motors
Post by: PlanMaestro on February 01, 2013, 07:44:50 AM
These are better days baby … tonight this fool's halfway to Heaven and just a mile outta Hell.

GM's January U.S. sales rose 16%.
http://www.marketwatch.com/story/gms-january-us-sales-rose-16-2013-02-01

Broadly, U.S. new-auto sales for January are expected to increase 15% from a year earlier and drop 23% from the prior month, according to Edmunds.

GM reported it sold 194,699 vehicles in January, up from 167,962 a year earlier and 21% below December's total of 245,733.

Chevrolet sales were up 11%, as GMC sales increased 23%. Total Buick sales climbed 32%, and total Cadillac sales jumped 47%.

Month-end dealer inventory in the U.S. stood at 737,885 units, up 2.9% from the prior month. January had 25 selling days this year and 24 selling days a year ago.

[…]

Earlier Friday, Chrysler Group LLC reported its U.S. auto sales rose 16% during the month, driven by jumps at its namesake and Dodge brands, while Ford Motor Co.'s (F) U.S. new-vehicle sales rose 22%, as gains by its namesake brand continued to offset declining Lincoln sales.


Title: Re: GM - General Motors
Post by: PlanMaestro on February 06, 2013, 11:14:15 AM
GM Said to Seek Deals in China to Reach 5 Million Goal
http://www.bloomberg.com/news/2013-02-05/gm-said-to-seek-deals-in-china-to-reach-5-million-goal.html

The Chinese auto industry is overdue for consolidation and General Motors Co., with local partner SAIC Motor Corp., is interested in acquiring ailing automakers, according to four people familiar with the companies’ thinking.

GM, already the top foreign carmaker in China, aims to increase sales by about 75 percent by 2015 to 5 million, and a deal with another automaker is one possible way its ventures can expand, said the people, who didn’t want to be identified because the plans are private.


China has the world’s most overcapacity. Factories in China are able to produce about 10 million more vehicles than they currently make, according to LMC Automotive. That’s more than the number of autos made in any country other than China or the U.S.

GM and SAIC have plans to open two assembly plants in China in 2014. Even then, their joint ventures may be capable of making only about 4 million cars, sport-utility vehicles and microvans a year. One way to stay on track with the 5 million target set when growth was more exuberant would be by taking over assembly plants that aren’t operating at full production.
Title: Re: GM - General Motors
Post by: racemize on February 07, 2013, 11:16:35 AM
Ed Whitacre on the DailyShow:

http://www.thedailyshow.com/full-episodes/wed-february-6-2013-ed-whitacre

Pretty odd responses from them, particularly at the end.  I was hoping for more substance...
Title: Re: GM - General Motors
Post by: PlanMaestro on February 08, 2013, 10:30:28 AM
Do I understand it correctly that there is no adjustments for cash dividends?

There is no definition for "ordinary cash dividend" in the agreements, and that means something completely different for the other TARP warrants.

As
registered 136,363,635
expiration July 10, 2016
exercise price of $10.00

Bs
registered 136,363,635
expiration July 10, 2019
exercise price of $18.33

Adjustment of numbers after IPO (including exercise date and strike): http://www.sec.gov/Archives/edgar/data/1467858/000119312511103292/d8a12b.htm

Original registration As: http://www.sec.gov/Archives/edgar/data/1467858/000119312510078119/dex1031.htm

Original registration Bs:
http://www.sec.gov/Archives/edgar/data/1467858/000119312510078119/dex1030.htm
Title: Re: GM - General Motors
Post by: thomcapital on February 08, 2013, 11:20:52 AM
Do I understand it correctly that there is no adjustments for cash dividends?


I think you are correct. I just emailed IR and will report back.

If we make a dividend or other distribution to all holders of our common stock of shares of (i) our capital stock (other than our common stock), (ii) evidences of our indebtedness, (iii) rights or warrants to purchase our securities or assets, or (iv) property or cash (excluding ordinary cash dividends and excluding any dividend, distribution or issuance covered by the two bullets above), then the exercise price will be adjusted based on the following formula:
 

EP1 = EP0 x ((SP0 – FMV) / SP0)

where:

EP0 = the exercise price in effect at the close of business on the record date;

EP1 = the exercise price in effect immediately after the record date;

SP0 = the Current Market Price (as defined above) as of the record date; and

FMV = the fair market value (as determined in good faith by our Board of Directors), on the record date for such dividend or distribution, expressed as an amount per share of outstanding common stock.

Title: Re: GM - General Motors
Post by: Packer16 on February 08, 2013, 11:27:07 AM
My reading of the warrant agreement was there is no dilution adjustment like for the other TARP warrants.

Packer
Title: Re: GM - General Motors
Post by: PlanMaestro on February 08, 2013, 11:56:14 AM
Thanks guys.
Title: Re: GM - General Motors
Post by: thomcapital on February 11, 2013, 06:37:07 AM
My response from GM IR:

These would be ordinary dividends declared by the Board of Directors. For example, quarterly cash dividends declared by the Board of Directors, paid out of earnings on a particular date to all holders of record on a particular date. Yes, ordinary cash dividends declared would not reduce the exercise price.

Title: Re: GM - General Motors
Post by: muscleman on February 21, 2013, 08:11:07 AM
Thanks guys.

Plan, it looks like you have tracked GM for a while.
What's your take on GM's subprime lending?

http://freebeacon.com/grand-theft-auto-loans/
Title: Re: GM - General Motors
Post by: hyten1 on February 21, 2013, 08:28:16 AM
"General Motors still owed $21.6 billion on its $49.5 billion bailout as of Jan. 30."

that is false
Title: Re: GM - General Motors
Post by: PlanMaestro on February 21, 2013, 09:11:27 AM
Plan, it looks like you have tracked GM for a while.
What's your take on GM's subprime lending?

http://freebeacon.com/grand-theft-auto-loans/

It's something to follow for sure. However, one of the things we learned in the last crisis, is that subprime auto loans behave much better than subprime mortgages. They have a securitization market that was already tested in the 90s and its loses were reasonable even during the last crisis … it's not easy to have a bubble in used cars, in case of repossession, and borrowers preferred to keep their work tool even more than their homes.
Title: Re: GM - General Motors
Post by: hyten1 on February 21, 2013, 09:40:16 AM
also note GM financial concentrate on subprime. before gm acquired americredit and ally financial (international divisions) gm's percentage of sales that was subprime was below industry average. they have just been ramping up after americredit/ally.

i can't recall the actual percentages.

i think i read somewhere total industry average aas 24% for subprime loans
Title: Re: GM - General Motors
Post by: txlaw on February 21, 2013, 12:13:12 PM
Plan, it looks like you have tracked GM for a while.
What's your take on GM's subprime lending?

http://freebeacon.com/grand-theft-auto-loans/

It's something to follow for sure. However, one of the things we learned in the last crisis, is that subprime auto loans behave much better than subprime mortgages. They have a securitization market that was already tested in the 90s and its loses were reasonable even during the last crisis … it's not easy to have a bubble in used cars, in case of repossession, and borrowers preferred to keep their work tool even more than their homes.

If you guys are further interested in dissecting GM Financial, I highly recommend looking at the history of AmeriCredit (former name of GM Financial before it was acquired by GM), its processes, and what happened to it during the financial crisis. 

Notably, both LUK and Bruce B were involved in that investment.
Title: Re: GM - General Motors
Post by: muscleman on February 21, 2013, 07:30:11 PM
Plan, it looks like you have tracked GM for a while.
What's your take on GM's subprime lending?

http://freebeacon.com/grand-theft-auto-loans/

It's something to follow for sure. However, one of the things we learned in the last crisis, is that subprime auto loans behave much better than subprime mortgages. They have a securitization market that was already tested in the 90s and its loses were reasonable even during the last crisis … it's not easy to have a bubble in used cars, in case of repossession, and borrowers preferred to keep their work tool even more than their homes.

True. One thing to keep in mind is how many cars in the delinquent loans are never found. For houses, you can never take it away, but for delinquent auto loans, they can take the car away, which makes the bank's loss recovery percentage to be 0% on these cases.
I read David Einhorn's Fooling some of the people all the time book, and in the first few chapters he mentioned investing in a subprime auto loan company and lost money due to the false assumption that ignored cars that never got found.
Title: Re: GM - General Motors
Post by: muscleman on February 21, 2013, 07:31:26 PM
Plan, it looks like you have tracked GM for a while.
What's your take on GM's subprime lending?

http://freebeacon.com/grand-theft-auto-loans/

It's something to follow for sure. However, one of the things we learned in the last crisis, is that subprime auto loans behave much better than subprime mortgages. They have a securitization market that was already tested in the 90s and its loses were reasonable even during the last crisis … it's not easy to have a bubble in used cars, in case of repossession, and borrowers preferred to keep their work tool even more than their homes.

If you guys are further interested in dissecting GM Financial, I highly recommend looking at the history of AmeriCredit (former name of GM Financial before it was acquired by GM), its processes, and what happened to it during the financial crisis. 

Notably, both LUK and Bruce B were involved in that investment.

Thanks a lot! I will look into that.
Besides GM financial, how much do you think is the upside for GM? 2x? 3x?
Title: Re: GM - General Motors
Post by: txlaw on February 22, 2013, 07:48:12 AM
Plan, it looks like you have tracked GM for a while.
What's your take on GM's subprime lending?

http://freebeacon.com/grand-theft-auto-loans/

It's something to follow for sure. However, one of the things we learned in the last crisis, is that subprime auto loans behave much better than subprime mortgages. They have a securitization market that was already tested in the 90s and its loses were reasonable even during the last crisis … it's not easy to have a bubble in used cars, in case of repossession, and borrowers preferred to keep their work tool even more than their homes.

If you guys are further interested in dissecting GM Financial, I highly recommend looking at the history of AmeriCredit (former name of GM Financial before it was acquired by GM), its processes, and what happened to it during the financial crisis. 

Notably, both LUK and Bruce B were involved in that investment.

Thanks a lot! I will look into that.
Besides GM financial, how much do you think is the upside for GM? 2x? 3x?

Depends on your time frame. 

I have my own idea of what IV is, but I don't really like to put that out there to the public.  I have a warrant position, so that skews things a bit for me as well.
Title: Re: GM - General Motors
Post by: jay21 on February 26, 2013, 05:41:43 AM
Apparently GM Financial files.  Here's 2012 results:  http://www.sec.gov/Archives/edgar/data/804269/000080426913000010/acf12311210-k.htm

Delinquencies up, which is consistent with what I am seeing in the subprime auto space.
Title: Re: GM - General Motors
Post by: muscleman on February 26, 2013, 07:31:23 AM
Apparently GM Financial files.  Here's 2012 results:  http://www.sec.gov/Archives/edgar/data/804269/000080426913000010/acf12311210-k.htm

Delinquencies up, which is consistent with what I am seeing in the subprime auto space.

What is the weighted average rate for the sub-prime loans?
I see find this in the 10-K. Is that the right number? Who would buy a car with 15% APR. ::)
Years Ending December 31,
 
2012
 
2013
 
2014
 
2015
 
2016
 
Thereafter
 
Fair Value
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer finance receivables
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
3,889,053

 
$
2,571,226

 
$
1,531,495

 
$
946,448

 
$
547,500

 
$
264,992

 
$
9,385,851

Weighted average annual percentage rate
 
15.19
%
Title: Re: GM - General Motors
Post by: PlanMaestro on February 26, 2013, 04:34:31 PM
Thanks Jay, very interesting 10-K.

Apparently GM Financial files.  Here's 2012 results:  http://www.sec.gov/Archives/edgar/data/804269/000080426913000010/acf12311210-k.htm

Delinquencies up, which is consistent with what I am seeing in the subprime auto space.
Title: Re: GM - General Motors
Post by: MYDemaray on February 28, 2013, 09:51:21 AM
GM reaches agreement to shut down German factory by 2016:
http://online.wsj.com/article/SB10001424127887324662404578332160811576992.html?ru=yahoo&mod=yahoo_hs
Title: Re: GM - General Motors
Post by: jay21 on March 01, 2013, 05:11:21 PM
Thanks Jay, very interesting 10-K.

Apparently GM Financial files.  Here's 2012 results:  http://www.sec.gov/Archives/edgar/data/804269/000080426913000010/acf12311210-k.htm

Delinquencies up, which is consistent with what I am seeing in the subprime auto space.

Plan, I know you follow banking and autos.  Any thoughts on the subprime auto market?  It seems credit is loosening and credit metrics are worsening.    Do you have a sense where these numbers fall in the subprime auto history?
Title: Re: GM - General Motors
Post by: hyten1 on March 01, 2013, 10:09:51 PM
http://www.subprimenews.com/spn/news/story.html?id=2813

"As expected auto loan delinquencies rose slightly in the fourth quarter, though they remain near the all-time record low set in the second quarter of 2012," said Peter Turek,
Title: Re: GM - General Motors
Post by: jay21 on March 02, 2013, 07:26:39 AM
http://www.subprimenews.com/spn/news/story.html?id=2813

"As expected auto loan delinquencies rose slightly in the fourth quarter, though they remain near the all-time record low set in the second quarter of 2012," said Peter Turek,

Thanks.  However, this article seemed to talk about the entire auto market, not specifically subprime.
Title: Re: GM - General Motors
Post by: hyten1 on March 02, 2013, 07:43:28 AM
jay yes this article is about deliquency for entire auto market (which is still helpful)

you want subprime specific search that website they have other article about it
Title: Re: GM - General Motors
Post by: jay21 on March 02, 2013, 07:47:33 AM
jay yes this article is about deliquency for entire auto market (which is still helpful)

you want subprime specific search that website they have other article about it

Yes, I'm looking at it now.  There's some very good articles there.  Some that highlight my worries, like this one:  http://www.subprimenews.com/spn/news/story.html?id=2807


"We're seeing more lenders enter into that subprime space again,"


"As we have discussed for several quarters, an important driver of recovery in auto sales is the expansion of consumer credit, particularly for lower-tiered customers," Holzshu said. "Lenders are committed to increasing their portfolios of automotive loans and loosening their lending criteria to accomplish this objective.

"We focus on continuing to get the subprime customers back into our stores. I can tell you the subprime customer is an opportunity for us today," he concluded.


Here's another: http://www.subprimenews.com/spn/news/story.html?id=2788

"The environment that we're in today is very competitive," Doug Busk, senior vice president, treasurer and head of investor relations at Credit Acceptance.

"There are hundreds of companies that serve the subprime auto space across the country," Busk told analysts. "We have historically found that the primary factor that impacts how competitive the environment is, is the availability of capital to the industry. At the current time, capital is readily available and due to the low interest rate environment, capital is very cheap. That has led to an increase in competition."

Title: Re: GM - General Motors
Post by: hyten1 on March 02, 2013, 07:52:17 AM
jay this is definitely worth watching

base on what i have read, the current subprime loans as a percentage of entire loans is still within the historical norm.

hy
Title: Re: GM - General Motors
Post by: PlanMaestro on March 06, 2013, 07:42:31 PM
GM struggles to overcome Chevrolet and Opel rivalry.
http://news.yahoo.com/gm-struggles-overcome-chevrolet-opel-rivalry-131915125--finance.html
Title: Re: GM - General Motors
Post by: MYDemaray on March 06, 2013, 08:39:53 PM
Any thoughts on European ops in general?  Do you agree that winding them down would be ludicrous -- because I understand the appeal of that given the past, present and likely near future losses?
Title: Re: GM - General Motors
Post by: PlanMaestro on March 06, 2013, 09:40:41 PM
Any thoughts on European ops in general?  Do you agree that winding them down would be ludicrous -- because I understand the appeal of that given the past, present and likely near future losses?

Personal opinion. Opel doesn't provide much in terms of scale, brand, or technology. And it's facing some of the best global competitors in their home turf … and the Koreans are coming. Considering that GM is also facing the risk of completely losing its, once dominant, leading positions in the attractive US and Chinese markets, I would prefer a little more focus.
Title: Re: GM - General Motors
Post by: jay21 on March 13, 2013, 10:08:36 AM
one thing i have been thinking about is the universally accepted belief that GM has no competitive advantage.

does GM have competitive advantage?

consider these:

1. GM has been badly operated (not counting recently) for decades, decades!
2. GM has been saddle with HUGE pension obligations due to past management/unions (kind of related to above)

Now people can argue GM went into bankruptcy recently, but it took a 2008 like event to put them into bankrupty

also GM would not have had to file for bankrupty if they did want F did which was to raise tons of money before 2008 hit (not that could be attributed partially to luck for F and mostly due to bad management on GM part)


And GM is still around and kicking (I understand it went through bankruptcy)

now does GM have a competitive advantage?

I think GM is not your typical manufacturing company selling some widgets

the scale and complexity of cars provides some competitive advantage

The question on competitive advantage, the operating leverage, and the pension are the biggest problems to me at first glance.  Without too much digging, I would think that car companies can have an advantage due to scale and/or management.  I don't think there is too much brand equity in cars.  A management team that focuses on cost control (taking advantage of the scale) would probably do better than others and a new entrant would be hard pressed to develop a cost advantage.

I think the operating leverage is also a little scary.  It appears management is trying to reduce some liabilities through debt reduction.  At least things seem to be improving, in which case the leverage can be beneficial (op margins expanding to 10%). 
Title: Re: GM - General Motors
Post by: racemize on March 17, 2013, 09:30:02 PM
Hi All, looking for the SEC filings on the tarp warrants (or just the strikes/dividend adjustments/expiry dates), anyone have the info/link?  (or how I can search for the tarp info on the SEC filing?)

Thanks!
Title: Re: GM - General Motors
Post by: compoundinglife on March 17, 2013, 09:57:20 PM
Hi All, looking for the SEC filings on the tarp warrants (or just the strikes/dividend adjustments/expiry dates), anyone have the info/link?  (or how I can search for the tarp info on the SEC filing?)

Thanks!

GM has a FAQ on their IR website that mentions the relevant data about the warrants, strike, expiration etc... They are not TARP warrants, they are a result of the bankruptcy, some were give to bondholders etc... They do not have the div reduction feature. I can't remember if the prospectus is linked of the IR website but the FAQ answers most of your questions.
Title: Re: GM - General Motors
Post by: racemize on March 17, 2013, 10:01:51 PM
Hi All, looking for the SEC filings on the tarp warrants (or just the strikes/dividend adjustments/expiry dates), anyone have the info/link?  (or how I can search for the tarp info on the SEC filing?)

Thanks!

GM has a FAQ on their IR website that mentions the relevant data about the warrants, strike, expiration etc... They are not TARP warrants, they are a result of the bankruptcy, some were give to bondholders etc... They do not have the div reduction feature. I can't remember if the prospectus is linked of the IR website but the FAQ answers most of your questions.

Ah, I see--that website was unavailable when I checked (I guess they have server issues), but I couldn't find the dividend adjustment from the cached version.  Not having one makes sense, then.
Title: Re: GM - General Motors
Post by: hyten1 on March 19, 2013, 06:31:54 PM
i was wondering if anyone have any insight into why the GM b warrant are trading so low?

- gm b warrant is getting cheaper relative to gm common
- also if you look at jan 2015 call strike $18, it cost $10.95? the gm b warrant (strike is $18.33) is only $11.93 at the expire date is jul 2019

what gives?

hy
Title: Re: GM - General Motors
Post by: MYDemaray on March 21, 2013, 12:52:26 PM
http://www.reuters.com/article/2013/03/21/germany-opel-bochum-idUSL6N0CDG0B20130321?feedType=RSS&feedName=cyclicalConsumerGoodsSector&rpc=43
Title: Re: GM - General Motors
Post by: BargainValueHunter on March 21, 2013, 04:33:26 PM
SumZero analyzes GM:

http://sumzero.com/headlines/automobile_and_transportation/GM/161-gm-is-a-radically-improved-business-stock-could-double

Quote
$50 intrinsic value estimate is based on a simple average of P/E and EV/EBITDAP based valuation approaches. I arrive at a P/E based valuation of $46 by applying an 11x multiple to fully diluted 2014E EPS of $4.19. I use 2014E because by this year projected US auto demand is more normalized (16mm), and K2XX will be fully rolled out. My EPS estimate assumes little improvement in GME ($1.3bn EBIT loss). There is upside to my EPS estimate if the US market returns to my fully normalized assumption of ≥17mm units (each additional1mm adds $0.60 to EPS). Each 100mm of share repurchases adds $0.27 of EPS. If GM Financial doubles EBIT by expanding into prime lending ($1bn increase) this adds $0.40 to EPS. 11x is a reasonable multiple of sustainable mid-cycle earnings for a business with good downside protection. GM currently trades at a discount to most comps.

I arrive at my EV/EBITDAP based valuation of $55 by applying a 4.0x multiple to my 2014E core auto EBITDAP of $17.1bn. To this I add projected net auto cash, GM Financial at book value, foreign JVs at 10x equity income, and the present value of NOLs using a 14% discount rate. I deduct pension/OPEB liabilities net of tax. 4.0x is a reasonable EBITDAP multiple for a solidly profitable auto business, and is a discount to most comps.

Title: Re: GM - General Motors
Post by: hyten1 on March 26, 2013, 06:00:27 PM
new CTS is out

nice car

http://www.autoblog.com/2013/03/26/2014-cadillac-cts-pictures-video-new-york-2013/
Title: Re: GM - General Motors
Post by: hyten1 on April 01, 2013, 10:53:57 AM
2014 Chevy Silverado priced from *$24,585, V8 gets better economy than Ford EcoBoost V6

http://www.autoblog.com/2013/04/01/2014-chevy-silverado-priced-from-24-585-v8-gets-better-econom/
Title: Re: GM - General Motors
Post by: jay21 on April 02, 2013, 06:11:41 AM
I am getting more interested in this idea.  It has a few characteristics that historically have made for a good investment:

1. Post-Reorg equity with improved balance sheet and cost structure
2. "Forced Selling" Overhang
3. Investor stigma

Add in economic tailwinds to boot.

My initial concerns are:

1. Limited competitive advantage - I think scale is definitely here, but it seems brand equity is limited.  Although, there must be some advantage in the more important pick up market as Ford and GM share a large percent of the market.  Maybe it's a buy American thing.

2. Pension obligations/Unions - Probably more of a lack of knowledge on my part.  How do most people view it?

I need to dig some more into the capital allocation plan as well.  With a lot of  liquid assets and a seemingly depressed price, why aren't they buying shares?  Are they going to try to buy another block from the Treasury? 

The estimated $40 to $60 ranges I see don't seem unreasonable.

Title: Re: GM - General Motors
Post by: jay21 on April 02, 2013, 06:22:20 AM
jay gm just recently bought 300mil shares from the treasury

*200m

I knew that, I meant open market purchases.  I am guessing they are saving cash in case they want to buy more from the treasury?  Have they communicated any plan on their >$20b in cash?
Title: Re: GM - General Motors
Post by: thomcapital on April 02, 2013, 07:31:56 AM
jay gm just recently bought 300mil shares from the treasury

*200m

I knew that, I meant open market purchases.  I am guessing they are saving cash in case they want to buy more from the treasury?  Have they communicated any plan on their >$20b in cash?

I have heard GM is not buying back any shares atm b/c they don't want to potentially negate their NOL's (a rule I've heard of, but can't speak to, others are on this board could, involving 5%+ shareholders). The rules expire for GM in November. So far in 2013 the Treasury has sold ~$500M of GM stock, or about 6% of their stake: http://www.reuters.com/article/2013/03/12/gm-treasury-idUSL3N0C33OB20130312
Title: Re: GM - General Motors
Post by: ERICOPOLY on April 02, 2013, 08:38:51 AM
I have heard GM is not buying back any shares atm b/c they don't want to potentially negate their NOL's (a rule I've heard of, but can't speak to, others are on this board could, involving 5%+ shareholders). The rules expire for GM in November. So far in 2013 the Treasury has sold ~$500M of GM stock, or about 6% of their stake: http://www.reuters.com/article/2013/03/12/gm-treasury-idUSL3N0C33OB20130312

Strange -- AIG never said anything like that.
Title: Re: GM - General Motors
Post by: MYDemaray on April 02, 2013, 12:31:31 PM
Most AIG repurchases were direct from Treasury no (vs. open market)?  I imagine that the same Section 382 waiver applies to GM as it did to AIG (and...where are the complaints from Elizabeth Warren when it comes to GM?).
Title: Re: GM - General Motors
Post by: MYDemaray on April 05, 2013, 11:05:01 AM
More generous press for the new C7: http://online.wsj.com/article/SB10001424127887323611604578398691335681324.html?mod=WSJ_hp_EditorsPicks
Title: Re: GM - General Motors
Post by: Cunninghamew on April 24, 2013, 05:39:01 AM
Ford earnings are out  http://corporate.ford.com/our-company/investors/investor-news-detail/pr-ford-posts-first-quarter-pretax-37920 (http://corporate.ford.com/our-company/investors/investor-news-detail/pr-ford-posts-first-quarter-pretax-37920)

Highlights
* Most profitable quarter in North America, but Europe still sucks
* In North America quarter-o-quarter revenues were up 20%. Operating margins were down slightly, but they are ramping up investment here, so everything looks solid
* Regarding Europe... company expects a $2 billion loss for the year
* Solid results from the financing division
* For full year 2013, the company's guidane remains unchanged, so pre-tax profit equal to 2012
* Looks like Ford took some market share in the US and China 15.2 to 15.9%
* Random piece of info that I did not know... the Ford Focus is the world's best selling passenger car
Title: Re: GM - General Motors
Post by: PlanMaestro on May 07, 2013, 12:51:19 PM
GM wins approval to build $1.3 billion Cadillac plant in China
http://www.autonews.com/article/20130507/GLOBAL03/130509908/gm-wins-approval-to-build-1-3-billion-cadillac-plant-in-china#axzz2SddDdtje
Title: Re: GM - General Motors
Post by: merkhet on May 13, 2013, 05:38:44 PM
be careful

http://www.sec.gov/Archives/edgar/data/1549575/000154692713000077/dalalstreet132013q1v3.txt

it looks like he has swap GM common for GM warrants

which is something that i done a little while ago

GM'B warrant is a long long term option, it a better way to leverage your GM shares, most of my GM investment are in warrants

EDIT: GM is pabari's second largest holding by value

Pabrai raising cash as well?  He sold GM last quarter.

http://www.dataroma.com/m/holdings.php?m=PI

I can feel the warm fuzzy feeling of validation washing over me.  I love it when someone I admire does the same thing that I've done.

Notably, I think it's interesting that (assuming an AUM of $600M) Pabrai seems to have invested a notional value of 30% of his fund into GM based on the warrants.  (5,928,876 warrants x $31 per share of GM.)
Title: Re: GM - General Motors
Post by: PlanMaestro on May 27, 2013, 02:14:42 PM
Not satisfied with OnStar's steady profits, GM wants to create a global 4G powerhouse
http://www.autonews.com/article/20130527/OEM/305279958#ixzz2UWuWDQf8
Title: Re: GM - General Motors
Post by: hyten1 on June 03, 2013, 02:27:08 PM
General Motors will replace HJ Heinz in the S&P 500 and 100 indexes.
Title: Re: GM - General Motors
Post by: PlanMaestro on June 17, 2013, 03:50:10 PM
General Motors won’t release production data
http://www.autonews.com/article/20130617/BLOG06/130619885/why-gm-can-only-get-hurt-keeping-data-secret#axzz2WVdcJorg
Title: Re: GM - General Motors
Post by: hyten1 on June 19, 2013, 01:29:31 PM
J.D. Power has released the results of its latest Initial Quality Study (IQS),

"Porsche Leads Brand Rankings, Two GM Brands among Top Five
Porsche ranks highest among nameplates included in the 2013 IQS, with an average of 80 problems per 100 vehicles (PP100). GMC ranks second with 90 PP100, and Lexus ranks third with 94 PP100. Infiniti (95 PP100) and Chevrolet (97 PP100) round out the top five. Overall initial quality for the industry averages 113 PP100."


http://www.jdpower.com/content/study-auto/vURhToQ/2013-u-s-initial-quality-study-results.htm?page=2
Title: Re: GM - General Motors
Post by: PlanMaestro on June 27, 2013, 01:46:12 PM
Peugeot family ready to step aside for GM, report says
http://www.autonews.com/article/20130627/COPY01/306279967#ixzz2XS3cu1nG

"GM faces the same overcapacity situation with Opel, and that's why PSA is trying to convince them to merge the two,"
Title: Re: GM - General Motors
Post by: PlanMaestro on July 04, 2013, 08:56:54 AM
Ford's 2013 Fusion Dominates the Chevy Malibu
http://www.fool.com/investing/general/2013/06/02/fords-2013-fusion-dominates-the-chevy-malibu.aspx

The Malibu is the only weak point of all the Detroit automakers lineup.
Title: Re: GM - General Motors
Post by: PlanMaestro on July 05, 2013, 04:44:36 PM
(http://farm4.staticflickr.com/3736/9217281369_3d81336abb_o.png)
Title: Re: GM - General Motors
Post by: CONeal on July 06, 2013, 05:11:08 PM
Went a GMC dealership today to check out the 2014.  Like the truck and want to put it on the shopping list but after a discussion with the sales guy buying a new vehicle maybe put last on the to do list.

The new pickups are electronically programmed.  I wouldn't even be able to change out a battery on it myself.  A new battery would also have to be programmed into the computer alot like audi and Mercedes.  It took a little bit for him to finally admit this but it has me wondering what else I'm not able to do regarding maintenance?  Are the most simple task such as a new batter and spark plugs going to cost an arm and a leg to be replaced bc no one else is able to do it bc they need to be programmed?

  I'll admit that most people will probably not ask questions like this when shopping (and car dealers are not going to come out and really explain this)  I normally expect a vehicle to last 12 years and look past the warranty when making a vehicle decision.

As much as I hear about people bitching at work about the cost to repair their Mercedes the new line of GM pickups has me scratching my head.
Title: Re: GM - General Motors
Post by: PlanMaestro on July 22, 2013, 10:44:08 AM
GM 'hits the sweet spot' in its new-vehicle rollouts
http://www.autonews.com/article/20130722/OEM04/130719828#ixzz2ZnTXmokk

Review of 2014 Chevrolet Spark EV (video)
http://www.autoblog.com/2013/07/22/2014-chevrolet-spark-ev-review-first-drive-video/

Title: Re: GM - General Motors
Post by: hyten1 on July 25, 2013, 08:32:12 AM
Gm impala one of the top sedan rank by consumer report

http://finance.yahoo.com/news/impala-tops-sedans-consumer-reports-102156094.html

I don't see all the hoopla that tesla received with the Gm impala

Only 2 car ever received higher score and impala is a 27k car

Lets hope it his translate to more sales and profit

"It really doesn't fall down in any area, and it does a lot of things really well," Fisher said of the 2014 version. "The car rides better than a Lexus ES. It's quieter than many luxury cars. It accelerates and brakes better than, say a Volkswagen GTI. It's extremely roomy."
Title: Re: GM - General Motors
Post by: fareastwarriors on July 25, 2013, 08:46:02 AM
http://www.bloomberg.com/news/2013-07-25/gm-beats-profit-estimates-ahead-of-new-model-wave.html (http://www.bloomberg.com/news/2013-07-25/gm-beats-profit-estimates-ahead-of-new-model-wave.html)

GM Beats Profit Estimates Ahead of New Model Wave



Profit excluding one-time items was 84 cents a share, GM said, exceeding the 77-cent average of 13 estimates compiled by Bloomberg. That compares with 90 cents a share a year earlier. GM rose 0.6 percent to $37.37 at 9:46 a.m. New York time. The shares earlier touched $37.71, the highest intraday price since January 2011.

...
GM’s North American operations reported adjusted earnings before interest and taxes that rose 4.5 percent to $1.98 billion, the automaker said today in a statement. That exceeded the $1.73 billion average of three analysts’ estimates. Companywide net income fell 23 percent to $1.41 billion in the second quarter. The company earned $2.59 billion during the first six months.

...
Title: Re: GM - General Motors
Post by: merkhet on July 25, 2013, 09:00:09 AM
The biggest piece of that news is that it looks like they're getting Europe under control.
Title: Re: GM - General Motors
Post by: txlaw on September 04, 2013, 08:43:38 AM
http://www.freep.com/article/20130903/BUSINESS01/309030164/auto-sales-august-ford-gm

Apparently, GM spokesmen have said that the 16 million sales pace is here to stay.

Gotta love those warrants!
Title: Re: GM - General Motors
Post by: txlaw on September 04, 2013, 08:47:11 AM
http://www.autonews.com/apps/pbcs.dll/article?AID=/20130801/RETAIL01/308019998/#
Title: Re: GM - General Motors
Post by: hyten1 on September 04, 2013, 09:53:00 AM
txlaw, i know the warrants are kicking ass


i have been trying to figure out at what price i'll start to unload some (have not sold a share yet). i can see GM trading over $45, that would mean another $10 or so to the B warrants.
Title: Re: GM - General Motors
Post by: txlaw on September 04, 2013, 10:16:10 AM
txlaw, i know the warrants are kicking ass


i have been trying to figure out at what price i'll start to unload some (have not sold a share yet). i can see GM trading over $45, that would mean another $10 or so to the B warrants.

I plan on holding my current stake in the warrants for the long run.  I may even add at some point, but not right now, as I want to deploy capital into other opportunities.
Title: Re: GM - General Motors
Post by: fareastwarriors on September 18, 2013, 04:03:25 PM
http://www.bloomberg.com/news/2013-09-18/u-s-treasury-reduces-holding-in-general-motors-to-7-3-.html (http://www.bloomberg.com/news/2013-09-18/u-s-treasury-reduces-holding-in-general-motors-to-7-3-.html)

GM Share Sale Leaves U.S. Room to Exit Automaker in 2013
Title: Re: GM - General Motors
Post by: fareastwarriors on September 23, 2013, 11:10:30 AM
http://www.bloomberg.com/news/2013-09-23/gm-agrees-to-buy-3-2-billion-of-trust-s-preferred-shares.html (http://www.bloomberg.com/news/2013-09-23/gm-agrees-to-buy-3-2-billion-of-trust-s-preferred-shares.html)

GM Agrees to Buy $3.2 Billion of Trust’s Preferred Shares
Title: Re: GM - General Motors
Post by: fareastwarriors on October 29, 2013, 01:50:06 PM
http://www.cnbc.com/id/101153187 (http://www.cnbc.com/id/101153187)

US swallowed $9.7 billion loss on General Motors bailout
Title: Re: GM - General Motors
Post by: txlaw on November 07, 2013, 09:58:33 AM
Cadillac CTS just won Motor Trend Car of the Year:
http://www.freep.com/article/20131107/BUSINESS01/311070088/GM-Cadillac-CTS-Motor-Trend-Car-of-the-Year-2014

I'm glad that we bailed these guys out.  The resurgence of GM and other American car manufacturers, including new ones like Tesla, has generated how much wealth for Americans -- despite these nominal $10 billion loss figures? 

And now we seem to be in a new golden age of cars.  Loving it -- although we definitely need to work a bit more on public transport in the US.
Title: Re: GM - General Motors
Post by: hyten1 on November 21, 2013, 06:39:49 AM
Automobile Mag Car of the year - corvette
http://www.automobilemag.com/features/awards/1401_automobile_of_the_year_2014_chevrolet_corvette_stingray/

Treasury Plans to Exit General Motors Investment by Year End
http://us.rd.yahoo.com/finance/external/bloomberg/SIG=13f96grga/*http://www.bloomberg.com/news/2013-11-21/treasury-plans-to-exit-general-motors-investment-by-year-end-1-.html?cmpid=yhoo

Cadillac CTS and Corvette are one of the 10 best from car and driver
http://www.caranddriver.com/features/2014-10best-cars-feature
Title: Re: GM - General Motors
Post by: fareastwarriors on November 26, 2013, 08:48:19 AM
GM’s $27 Billion in Cash Seen Luring Activists


http://www.bloomberg.com/news/2013-11-26/gm-s-27-billion-in-cash-seen-luring-activists-real-m-a.html (http://www.bloomberg.com/news/2013-11-26/gm-s-27-billion-in-cash-seen-luring-activists-real-m-a.html)
Title: Re: GM - General Motors
Post by: hyten1 on November 26, 2013, 11:32:31 AM
folks was wondering if anyone has given any thought to when/if GM issues dividend do you plan to exercise the warrants? i can't recall if the strike prices adjust base on dividend. i need to look into this again.


this is from their websites faq"

" Strike prices may change due to certain events, such as a stock dividend or stock split.  There are no restrictions on shares of common stock post exercise."

hy
Title: Re: GM - General Motors
Post by: merkhet on November 26, 2013, 12:44:21 PM

GM’s $27 Billion in Cash Seen Luring Activists

http://www.bloomberg.com/news/2013-11-26/gm-s-27-billion-in-cash-seen-luring-activists-real-m-a.html (http://www.bloomberg.com/news/2013-11-26/gm-s-27-billion-in-cash-seen-luring-activists-real-m-a.html)


Some nice excerpts:

"GM already trades at a valuation that’s cheaper than 97 percent of its peers, including Ford Motor Co. (F), according to data compiled by Bloomberg. Analysts project the company will generate $5.4 billion in free cash flow in 2014, double last year’s figure."

"GM’s $42.3 billion enterprise value as of yesterday was equal to 3.1 times analysts’ average estimate for this year’s earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. That multiple trails all but one automaker larger than $5 billion, a group which fetches a median of 9 times Ebitda, the data show."

Let's unpack of this for fun...

The article implies that analysts expect around $13.65 billion of EBITDA for 2013. On a projected maintenance capital expenditure of $8 billion a year and about $500 million of interest expense, we should expect a little more than $5 billion of free cash flow. (Nice to have a tax shield.) Compare this to the market capitalization of GM @ $52 billion, and you're getting roughly 10.4x FCF -- compared to the S&P 500 ratio of about 18.85x. (Comparable companies are trading at around 13.4x) -- so likely cheap.

Interestingly, the $13.65 billion of EBITDA implies an 8.8% EBITDA margin on estimates of $155 billion in revenue (which I personally think GM will beat). The consensus estimate for revenue in 2014 is about $165 billion, which then would imply a $14.52 billion EBITDA for 2014.  Apply the same calculation of capital expenditures and interest rates above, and you get a little over $6 billion in fee cash flow -- again likely cheap compared to the current market capitalization.


folks was wondering if anyone has given any thought to when/if GM issues dividend do you plan to exercise the warrants? i can't recall if the strike prices adjust base on dividend. i need to look into this again.


this is from their websites faq"

" Strike prices may change due to certain events, such as a stock dividend or stock split.  There are no restrictions on shares of common stock post exercise."

hy


If I remember correctly, there's no adjustment for "ordinary cash dividends"...
Title: Re: GM - General Motors
Post by: dcollon on December 04, 2013, 07:41:24 AM
Kyle Bass likes GM

http://www.bloomberg.com/news/2013-12-04/hayman-s-bass-says-gm-is-most-compelling-risk-reward-situation.html
Title: Re: GM - General Motors
Post by: thomcapital on December 04, 2013, 07:47:25 AM
Here's his presentation (see attached)...
Title: Re: GM - General Motors
Post by: MYDemaray on December 04, 2013, 07:58:55 AM
Is it just me or is Hayman adding back pension expense, but not including unfunded pension liabilities in the EV?  Conceptually incorrect, and skews multiple.
Title: Re: GM - General Motors
Post by: hyten1 on December 04, 2013, 08:13:12 AM
MYDemaray

not sure why he did that, also GM won't be paying tax for a while, maybe he netted that out?

hy

EDIT: take a look at page 10 of the presentation
Title: Re: GM - General Motors
Post by: racemize on December 04, 2013, 08:29:37 AM
Took a bit to work through that page 10, seems like a heavily modified EV, but I guess it makes sense.
Title: Re: GM - General Motors
Post by: MYDemaray on December 04, 2013, 08:38:05 AM
Thanks for pointing that out guys... Seems to make sense
Title: Re: GM - General Motors
Post by: fareastwarriors on December 04, 2013, 12:58:41 PM
http://www.bloomberg.com/news/2013-12-04/gm-said-to-plan-sale-of-9-9-ally-financial-stake-held-in-trust.html (http://www.bloomberg.com/news/2013-12-04/gm-said-to-plan-sale-of-9-9-ally-financial-stake-held-in-trust.html)

General Motors Said to Plan Sale of Ally Financial Stake


Quote
The No. 1 U.S. auto maker by sales plans to sell its stake through a private placement valued at about $900 million, one of the people said. A sale could be announced within a week. Identity of the buyer or buyers couldn't immediately be learned.
Title: Re: GM - General Motors
Post by: plato1976 on December 04, 2013, 03:47:47 PM
Even after this pension adjustment (whether it's reasonable or not can be argued), seems Fiat is as cheap as GM, if not cheaper, according to the data presented in this report; Arguably Fiat will have more upside due to leverage

near term GM 's government catalyst is more predictable, while Fiat 's merge catalyst is less predictable


Thanks for pointing that out guys... Seems to make sense
Title: Re: GM - General Motors
Post by: racemize on December 04, 2013, 04:11:34 PM
Even after this pension adjustment (whether it's reasonable or not can be argued), seems Fiat is as cheap as GM, if not cheaper, according to the data presented in this report; Arguably Fiat will have more upside due to leverage

near term GM 's government catalyst is more predictable, while Fiat 's merge catalyst is less predictable


Thanks for pointing that out guys... Seems to make sense

don't forget the nearly cost free leverage you can get via GM-B warrants.
Title: Re: GM - General Motors
Post by: txlaw on December 04, 2013, 05:35:54 PM
Even after this pension adjustment (whether it's reasonable or not can be argued), seems Fiat is as cheap as GM, if not cheaper, according to the data presented in this report; Arguably Fiat will have more upside due to leverage

near term GM 's government catalyst is more predictable, while Fiat 's merge catalyst is less predictable


Thanks for pointing that out guys... Seems to make sense

don't forget the nearly cost free leverage you can get via GM-B warrants.

I still don't understand why the warrants are so cheap.
Title: Re: GM - General Motors
Post by: racemize on December 04, 2013, 05:36:40 PM
I still don't understand why the warrants are so cheap.

Perhaps the lack of dividend adjustment?  Seems ridiculously cheap with that anyway though...
Title: Re: GM - General Motors
Post by: fareastwarriors on December 04, 2013, 06:45:46 PM
A,B, and C holders
Title: Re: GM - General Motors
Post by: plato1976 on December 04, 2013, 08:02:52 PM
Will GM-B warrant be screwed if GM issues a fat one time div ?



I still don't understand why the warrants are so cheap.

Perhaps the lack of dividend adjustment?  Seems ridiculously cheap with that anyway though...
Title: Re: GM - General Motors
Post by: hyten1 on December 04, 2013, 08:53:25 PM
i really hope GM don't issue cash dividend of any kind anytime soon, i rather they keep the cash or do buy backs

hy

Will GM-B warrant be screwed if GM issues a fat one time div ?



I still don't understand why the warrants are so cheap.

Perhaps the lack of dividend adjustment?  Seems ridiculously cheap with that anyway though...
Title: Re: GM - General Motors
Post by: PJM on December 04, 2013, 11:02:18 PM
I still don't understand why the warrants are so cheap.

Perhaps the lack of dividend adjustment?  Seems ridiculously cheap with that anyway though...

If GM does issue dividend, then wouldn't a warrant holder be able to exercise full share settlement and get the dividend?
Title: Re: GM - General Motors
Post by: tng on December 05, 2013, 06:52:23 AM
I still don't understand why the warrants are so cheap.

This is one of the more obvious mispricings in the the market because it frequently violates the no-arbitrage theory. In the past few months, there have been many times where the warrant was priced cheaper than a call option with an inferior strike price and duration.
Title: Re: GM - General Motors
Post by: jch548 on December 05, 2013, 06:53:38 AM
Bass was just on CNBC. He was saying with rising rates the pension liability could drop to $17B. A 100 basis point rise in rates reduces the liability $8 or $9B. Thus with the rise in rates the liability should be dropping substantially next time they report.

Do they adjust these pension liability assumptions quarterly or annually?
Title: Re: GM - General Motors
Post by: hyten1 on December 05, 2013, 06:58:28 AM
pjm

yes, but then that nice leverage you are getting will go away :)

hy

I still don't understand why the warrants are so cheap.

Perhaps the lack of dividend adjustment?  Seems ridiculously cheap with that anyway though...

If GM does issue dividend, then wouldn't a warrant holder be able to exercise full share settlement and get the dividend?
Title: Re: GM - General Motors
Post by: merkhet on December 05, 2013, 06:59:21 AM

Will GM-B warrant be screwed if GM issues a fat one time div ?



I still don't understand why the warrants are so cheap.


Perhaps the lack of dividend adjustment?  Seems ridiculously cheap with that anyway though...



I believe the prospectus says something along the lines of "ordinary cash dividends" not adjusting the strike price -- a very large dividend of cash might not be "ordinary." (It's also possible that ordinary is a modifier that qualifies versus stock dividends or something like that.)


Bass was just on CNBC. He was saying with rising rates the pension liability could drop to $17B. A 100 basis point rise in rates reduces the liability $8 or $9B. Thus with the rise in rates the liability should be dropping substantially next time they report.

Do they adjust these pension liability assumptions quarterly or annually?


I believe those assumptions are adjusted annually.
Title: Re: GM - General Motors
Post by: racemize on December 05, 2013, 07:56:15 AM
Well, even if they issue a large, recurring ordinary dividend, the stock should go up to reflect the current market yield, so then the warrants sacrifice the current yield for more leverage (say 3-5% additional cost per annum).  Probably works out, unless the stock goes absolutely nowhere, but then you wouldn't have wanted the common anyway!
Title: Re: GM - General Motors
Post by: fareastwarriors on December 05, 2013, 09:23:14 AM
What are the strike prices/expiration dates for the various warrants?
Title: Re: GM - General Motors
Post by: 50centdollars on December 05, 2013, 09:29:23 AM
What are the strike prices/expiration dates for the various warrants?

Class B 7/10/2019, strike $18.33
Class A 7/10/2013, Strike $10
Class C 7/10/2016, Strike $42.31
Title: Re: GM - General Motors
Post by: racemize on December 05, 2013, 09:34:43 AM
What are the strike prices/expiration dates for the various warrants?

See this spreadsheet for more details:

https://docs.google.com/spreadsheet/ccc?key=0AhTPR9eP5nWedEF1SGVLdllJTnBMSDMzM3lYZ2d0SlE&usp=sharing
Title: Re: GM - General Motors
Post by: racemize on December 05, 2013, 09:35:30 AM
What are the strike prices/expiration dates for the various warrants?

Class B 7/10/2019, strike $18.33
Class A 7/10/2013, Strike $10
Class C 7/10/2016, Strike $42.31

I believe the C warrants exprie on December 31, 2015.

See:
http://www.sec.gov/Archives/edgar/data/1467858/000119312513323528/d577902d424b7.htm
Title: Re: GM - General Motors
Post by: 50centdollars on December 05, 2013, 09:46:33 AM
What are the strike prices/expiration dates for the various warrants?

Class B 7/10/2019, strike $18.33
Class A 7/10/2013, Strike $10
Class C 7/10/2016, Strike $42.31

I believe the C warrants exprie on December 31, 2015.

See:
http://www.sec.gov/Archives/edgar/data/1467858/000119312513323528/d577902d424b7.htm


Sorry my mistake and class A expire 7/10/2016
Title: Re: GM - General Motors
Post by: hyten1 on December 05, 2013, 09:54:07 AM
racemize,

quick question regarding your doc, there is a column label "switch over point with div", what is that column mean?

hy

What are the strike prices/expiration dates for the various warrants?

See this spreadsheet for more details:

https://docs.google.com/spreadsheet/ccc?key=0AhTPR9eP5nWedEF1SGVLdllJTnBMSDMzM3lYZ2d0SlE&usp=sharing
Title: Re: GM - General Motors
Post by: brker_guy on December 05, 2013, 10:02:04 AM
GM to discontinue Chevrolet brand in Europe

http://money.cnn.com/2013/12/05/news/companies/gm-chevrolet-europe/index.html?hpt=hp_t2
Title: Re: GM - General Motors
Post by: racemize on December 05, 2013, 10:09:32 AM
racemize,

quick question regarding your doc, there is a column label "switch over point with div", what is that column mean?

hy

What are the strike prices/expiration dates for the various warrants?

See this spreadsheet for more details:

https://docs.google.com/spreadsheet/ccc?key=0AhTPR9eP5nWedEF1SGVLdllJTnBMSDMzM3lYZ2d0SlE&usp=sharing

That adds in the missed dividends at the current dividend amount. 

There are two different relevant scenarios, so, consider BAC-A:
threshold is 0.01, and there are adjustments for anything over that, so the "missed" dividends will be 0.01 per quarter until expiry, regardless of whether the dividend is raised.  First, I calculate the switch over point, and then I add in the missed dividends, since you would have gotten those if you held the common.  Thus, you get an idea of how much the common needs to grow to break even + the dividends you would have missed, giving you a higher rate of borrowing.

Now, consider something like BAC Leaps, where there is no dividend adjustment:
in this case, the calculation just looks at the current dividend and adds that back similar to above.  What this will miss, however, is the extra cost of increased dividends (e.g., BAC will almost certainly have a higher dividend in a few quarters).  Same is true for those with thresholds that have not been reached yet.
Title: Re: GM - General Motors
Post by: Yours Truly on December 06, 2013, 06:13:00 AM
What am I missing on the B-warrants? Is the market basically saying GM will not be making any earnings from now until July 2019 since they trade at near break-even prices
Title: Re: GM - General Motors
Post by: 50centdollars on December 06, 2013, 06:18:28 AM
What am I missing on the B-warrants? Is the market basically saying GM will not be making any earnings from now until July 2019 since they trade at near break-even prices

I dont understand it either. Is the market mispricing them? I find it hard to believe. There is so much talk about GM lately with Buffett, Bass etc. taking positions. They are very cheap.
Title: Re: GM - General Motors
Post by: hyten1 on December 06, 2013, 06:21:07 AM
yours truly,

i have been scratching my head on the B warrants for awhile now. why complain when you can take advantage (hopefully i am not missing anything).  essential B warrants is a very long dated option/leap, now when/if leap trade without much of any premium typically why is that the case?

what do everyone think is the reason?


hy
Title: Re: GM - General Motors
Post by: Packer16 on December 06, 2013, 06:28:35 AM
In essence the B warrants have a borrowing rate of about 0.7% for the strike price.  A way calc the rate is take the premium and divide in by the strike price and annualize the number. The reason the premium is low is because it is deeply in the money.

Packer
Title: Re: GM - General Motors
Post by: hyten1 on December 06, 2013, 06:30:48 AM
packer i hear ya, but the B warrants have been without much premium for a long while

even back when GM stock was trading at $20/$19 if i recall correctly.


EDIT: i guess packer deeply in the money can be "THE" reason (even back when the stock was at around $20). I guess i always found it absurd where the B is trading, if you plan to invest int GM, why buy common when you get a cheap leverage with B without paying much premium, only risk is obviously GM collapses, but the expiration date of 2019 gives you so much time.

In essence the B warrants have a borrowing rate of about 0.7% for the strike price.  A way calc the rate is take the premium and divide in by the strike price and annualize the number. The reason the premium is low is because it is deeply in the money.

Packer
Title: Re: GM - General Motors
Post by: Packer16 on December 06, 2013, 06:53:39 AM
You are correct that is why I bought the B warrants versus the common.  Monish Pabrai has done this as well.

Packer
Title: Re: GM - General Motors
Post by: 50centdollars on December 06, 2013, 06:55:13 AM
You are correct that is why I bought the B warrants versus the common.  Monish Pabrai has done this as well.

Packer

Didn't Monish sell his GM position?
Title: Re: GM - General Motors
Post by: hyten1 on December 06, 2013, 06:56:01 AM
he did sell his common, but switch to B warrants

hy

You are correct that is why I bought the B warrants versus the common.  Monish Pabrai has done this as well.

Packer

Didn't Monish sell his GM position?
Title: Re: GM - General Motors
Post by: 50centdollars on December 06, 2013, 06:58:14 AM
he did sell his common, but switch to B warrants

hy

You are correct that is why I bought the B warrants versus the common.  Monish Pabrai has done this as well.

Packer

Didn't Monish sell his GM position?


Thanks
Title: Re: GM - General Motors
Post by: fareastwarriors on December 09, 2013, 01:05:58 PM
http://online.wsj.com/news/articles/SB10001424052702304744304579248001805812732?mod=WSJ_business_whatsNews (http://online.wsj.com/news/articles/SB10001424052702304744304579248001805812732?mod=WSJ_business_whatsNews)


GM Sees Sales Bump From U.S. Exit

Some Buyers Shunned Auto Maker Because of Government Ownership Stake
Title: Re: GM - General Motors
Post by: fareastwarriors on December 09, 2013, 02:43:14 PM
http://dealbook.nytimes.com/2013/12/09/u-s-sells-remaining-stake-in-gm/ (http://dealbook.nytimes.com/2013/12/09/u-s-sells-remaining-stake-in-gm/)


U.S. Sells Remaining Stake in General Motors
Title: Re: GM - General Motors
Post by: txlaw on December 10, 2013, 07:44:54 AM
http://www.bloomberg.com/news/2013-12-10/gm-said-to-choose-barra-as-first-female-ceo-of-automaker.html
Title: Re: GM - General Motors
Post by: merkhet on December 10, 2013, 07:47:55 AM

http://www.bloomberg.com/news/2013-12-10/gm-said-to-choose-barra-as-first-female-ceo-of-automaker.html


I like that she's been with the company since 1980 -- that's a rarity to see these days...
Title: Re: GM - General Motors
Post by: merkhet on December 10, 2013, 08:02:29 AM
http://blogs.wsj.com/cfo/2013/12/06/finance-in-the-drivers-seat/

Not sure if anyone posted this before, but it's some great insight into the mind of Dan Ammann.
Title: Re: GM - General Motors
Post by: txlaw on December 10, 2013, 08:21:56 AM

http://www.bloomberg.com/news/2013-12-10/gm-said-to-choose-barra-as-first-female-ceo-of-automaker.html


I like that she's been with the company since 1980 -- that's a rarity to see these days...

Yeah, it's a good thing.  Maybe it will be a trend to have women elevated to the C-Suite who are lifers. 

Gini Rommety was a lifer, I believe. 
Title: Re: GM - General Motors
Post by: txlaw on December 10, 2013, 09:41:09 AM
Cadillac will apparently be featured on Bloomberg's C-Suite tonight, btw.

I'm a big fan of the Bloomberg TV app.  It's way better than the CNBC equivalent.
Title: Re: GM - General Motors
Post by: fareastwarriors on December 11, 2013, 12:26:00 PM
http://www.nytimes.com/reuters/2013/12/11/business/11reuters-autos-gm-analysis.html?src=busln (http://www.nytimes.com/reuters/2013/12/11/business/11reuters-autos-gm-analysis.html?src=busln)

With Heavy Lifting Done, GM's Focus Turns to Cars, Fixing Europe
Title: Re: GM - General Motors
Post by: fareastwarriors on December 12, 2013, 10:56:42 AM
http://www.bloomberg.com/news/2013-12-12/gm-announces-its-selling-off-entire-7-stake-in-peugeot-citroen.html (http://www.bloomberg.com/news/2013-12-12/gm-announces-its-selling-off-entire-7-stake-in-peugeot-citroen.html)

GM Selling Entire Peugeot Stake as Alliance Finds Less Savings
Title: Re: GM - General Motors
Post by: racemize on December 12, 2013, 11:00:15 AM
http://www.bloomberg.com/news/2013-12-12/gm-announces-its-selling-off-entire-7-stake-in-peugeot-citroen.html (http://www.bloomberg.com/news/2013-12-12/gm-announces-its-selling-off-entire-7-stake-in-peugeot-citroen.html)

GM Selling Entire Peugeot Stake as Alliance Finds Less Savings

So what's the gain/loss on their 1 year investment here?  Seems like a poorly executed idea...
Title: Re: GM - General Motors
Post by: fareastwarriors on December 12, 2013, 11:01:32 AM
G.M. Sells Rest of Stake in Ally Financial

http://dealbook.nytimes.com/2013/12/12/g-m-sells-rest-of-stake-in-ally-financial/?_r=0 (http://dealbook.nytimes.com/2013/12/12/g-m-sells-rest-of-stake-in-ally-financial/?_r=0)

Quote
General Motors announced on Thursday that it had sold the last of its holdings in Ally Financial, its onetime financing arm, through a private placement of shares for $900 million.
 
G.M., which declined to identify the buyer, said it expected to record a gain of $500 million in the fourth quarter on the sale of the 8.5 percent stake.
Title: Re: GM - General Motors
Post by: fareastwarriors on December 12, 2013, 11:16:32 PM
BusinessWeek cover:
The Inside Story of GM's Comeback and Mary Barra's Rise

http://www.businessweek.com/articles/2013-12-12/exclusive-the-inside-story-of-gms-comeback-and-mary-barras-rise (http://www.businessweek.com/articles/2013-12-12/exclusive-the-inside-story-of-gms-comeback-and-mary-barras-rise)
Title: Re: GM - General Motors
Post by: hyten1 on December 13, 2013, 07:20:57 AM
Chevrolet sweeps Autoweek's best of 2013 road tests

http://www.autonews.com/article/20131213/OEM03/131219926/chevrolet-sweeps-autoweeks-best-of-2013-road-tests#axzz2nMuPQtH7

lets hope all these awards changes some minds/perception about GM as well as increase sales :)
Title: Re: GM - General Motors
Post by: hyten1 on December 13, 2013, 07:35:43 AM
nice article

this is exactly why the old gm went bankrupt, take a look at this fortune cover from the 80's

(http://www.curbsideclassic.com/wp-content/uploads/2012/11/Fortune-cover-GM-A-bodies.jpg)

there are 4 cars, 4 different brands, looks pretty much identical, that was back in the 80's


here are 3 cars in 2013 with similar fundamental architecture underneath, but have totally different style/function/target audience etc.

(http://machinespider.com/wp-content/uploads/2013/03/2014-Buick-LaCrosse-2.jpg)
(http://www.tflcar.com/wp-content/uploads/2012/11/2014-Chevrolet-Impala-67.jpg)
(http://www.autoguide.com/auto-news/wp-content/uploads/2011/05/x10cc_ca007_pt.jpg)

hy

BusinessWeek cover:
The Inside Story of GM's Comeback and Mary Barra's Rise

http://www.businessweek.com/articles/2013-12-12/exclusive-the-inside-story-of-gms-comeback-and-mary-barras-rise (http://www.businessweek.com/articles/2013-12-12/exclusive-the-inside-story-of-gms-comeback-and-mary-barras-rise)
Title: Re: GM - General Motors
Post by: fareastwarriors on December 17, 2013, 03:00:38 PM
http://blogs.wsj.com/corporate-intelligence/2013/12/17/alongside-booming-car-sales-booming-loan-debt/?mod=WSJBlog&mod=WSJ_corp_intel (http://blogs.wsj.com/corporate-intelligence/2013/12/17/alongside-booming-car-sales-booming-loan-debt/?mod=WSJBlog&mod=WSJ_corp_intel)

Alongside Booming Car Sales: Booming Loan Debt
Title: Re: GM - General Motors
Post by: fareastwarriors on December 18, 2013, 08:59:54 AM
http://online.wsj.com/news/articles/SB10001424052702304173704579264591784583248?mod=WSJ_Heard_LEFTTopNews (http://online.wsj.com/news/articles/SB10001424052702304173704579264591784583248?mod=WSJ_Heard_LEFTTopNews)

GM's Catalytic Converter Looks Better Than Ford's


Quote
Investors have started to think General Motors GM -2.89% is a different kind of car company.
 
Ever since GM went public again three years ago, its shares and those of Ford Motor F -7.01% have tended to zig and zag together. This can be measured using the correlation coefficient for the two stocks' daily performance, where one represents perfect correlation and zero no relationship whatsoever. As of two months ago, the trailing two-month coefficient was 0.84.


But that linkage has since broken down, with GM's stock rising 17% and Ford's falling 4.4%. This reflects a string of positive developments at GM, including stabilization in European car sales, the U.S. government selling off the last of its shares, and the announcement that product development head Mary Barra will become chief executive next year. There is even talk of a renewed dividend.
 
The stage seems set for GM to take more of the steps to improve operations that Ford, under CEO Alan Mulally, has taken already.
 
It is less clear where Ford, following successful efforts to date, goes next. Indeed, questions about how much longer the well-regarded Mr. Mulally—rumored to be in the running to be Microsoft's MSFT -1.42% next CEO—will be at Ford have raised concerns over how well the company will handle the transition. Ford's management bench is said to be deep. But so was Apple's when Steve Jobs stepped down.
 
Investors may have gone a bit too far imagining how much GM will improve under Ms. Barra. After all, Ford has proved its ability to change for the better while GM has much to do. Still, both stocks now trade at roughly equal forward price/earnings multiples of nine times. With more catalysts for improvement, GM's stock could continue to pull away as we head into 2014.

Title: Re: GM - General Motors
Post by: jay21 on December 23, 2013, 05:54:09 AM
Opel is on track to reach profitability by 2016, Neumann said, but the company expects a difficult year ahead, weighed down by restructuring costs for ending vehicle production at its factory in Bochum in Germany.

"If the world doesn't come to an end, we should keep growing, and then we don't need additional cost savings," Neumann said in an interview with the paper.

http://finance.yahoo.com/news/gm-unit-opel-sees-enough-090943382.html

Seems like people believe we are at a bottom in Europe, always nice to hear a reiteration of breakeven/profitability starting 2015/2016.
Title: Re: GM - General Motors
Post by: fareastwarriors on December 23, 2013, 08:56:16 AM
GM to Consider Shareholder Dividend

http://online.wsj.com/news/articles/SB10001424052702304858104579262212075413166?mod=WSJ_auto_IndustryCollection (http://online.wsj.com/news/articles/SB10001424052702304858104579262212075413166?mod=WSJ_auto_IndustryCollection)




General Motors Co. GM +0.88% Chief Executive Dan Akerson said on Monday the auto maker could consider paying a dividend next year even as it looks to raise executive salaries and invest $1.3 billion in modernizing five U.S. factories.
 
Investors have been anticipating a move by GM to return some of its $27 billion in cash since the U.S. Treasury sold the remaining shares acquired as part of the auto maker's 2009 federal bailout. GM stock jumped on Mr. Akerson's comments, trading up $1.40, or 3.5%, at $41.43 in 4 p.m. New York Stock Exchange trading on Monday.
 
Mr. Akerson also highlighted $1.3 billion in new investments destined for several Midwest production facilities, and defended the government rescue that made them possible in a speech in Washington, D.C.

GM will upgrade a truck assembly plant in Flint, Mich., retool a plant in Romulus, Mich., to produce a new ten-speed automatic gearbox and a six-cylinder engine; and upgrade other operations in Detroit, Toledo, Ohio, and Bedford, Ind.




The five factories now employ about 7,500 people. The Detroit company said the moves will protect or create 1,000 jobs, but didn't specify how many new jobs will result.
 
GM's investment follows Ford Motor Co. F -0.77% 's statement last week that it plans to add 5,000 jobs in the U.S. next year. About 3,300 of those jobs will be for engineers, Ford said. Ford said it will hire 6,000 new workers in Asia next year, and open three new factories to meet increased demand overseas, two in Asia and one in South America.
 
Mr. Akerson said last week he would step down on Jan. 15 and turn command of GM over to Mary Barra, currently head of world-wide product development. GM's new chairman will be Theodore "Tim" Solso, former chairman and CEO of heavy duty engine maker Cummins Inc. CMI +1.23%
 
Any decision on restoring a common stock dividend will likely occur on Ms. Barra and Mr. Solso's watch, but Mr. Akerson signaled that shareholders who have been pressing the company to give back some cash would likely get their wish.
 
"We are producing a fair amount of cash and we have improved our balance sheet by buying back some asset-backed securities so I do think it gives us some bandwidth to consider it," Mr. Akerson said, referring to a dividend payment.

Mr. Akerson said GM must move to raise the wages of its executive team to make them more competitive. Wages had been previously been effectively capped by the U.S. Treasury, which held a stake in the auto maker until last week.
 
"We need to pay competitive salaries," Mr. Akerson said moments before his speech. "I will be chairman of the board through January but I don't think a decision [on pay] will be made by then."
 
Ms. Barra's selection last week as the first woman to run a major global auto maker came amid a flurry of restructuring and management changes announced by GM.
 
Since taking over as CEO in 2010, Mr. Akerson has wrestled with how to respond to criticism of the $49.5 billion federal rescue of the auto maker, which collapsed amid the financial crisis of 2008 and filed for bankruptcy in 2009. Company executives have said sales were hurt by the "Government Motors" label hung on the company by opponents of the bailout.
 
With the U.S. Treasury's sale of its GM shares, Ford now owes more to the U.S., an about $6 billion low-interest loan for factory modernization, than GM does, he said.

The U.S. Treasury last Monday sold its remaining shares of GM stock, locking in a loss of $10.5 billion on the bailout.
 
Mr. Akerson has made a series of decisions aimed at resolving some troublesome issues for Ms. Barra. GM will wind down an unsuccessful effort to establish the Chevrolet brand in Eastern and Western Europe by 2016, and focus instead on rebuilding its German brand, Opel. Chevrolet will continue to be sold in Russia.
 
Last week, GM said it had divested a 7% stake held in French auto maker PSA Peugeot Citroën and scaled back an automobile-development alliance with the struggling firm.

GM also confirmed it will end production in Australia in 2017, although it will continue to sell cars and will keep the Holden brand name alive in the nation. The end of production will cost about 2,900 Australian workers their jobs.

"There were so many factors in that decision," Mr. Akerson said in Washington. "Basically you have a low tariff economy so outside importers to the country had an advantage. You had a strong Aussie dollar, [and] a supply chain that is weaker because of fewer auto makers in the country."
 
Mr. Akerson also took a shot at critics of the Chevrolet Volt, the plug-in hybrid he has championed, despite sales that fell short of the company's early expectations.
 
"We will sell more Volts this year than Jaguar will sell cars in this country," Mr. Akerson said. "There are a lot cars that aren't selling as well as the Volt. This car is a step forward."
Title: Re: GM - General Motors
Post by: fareastwarriors on December 24, 2013, 06:27:48 PM
http://www.businessweek.com/articles/2013-12-24/if-cadillac-keeps-growing-like-this-itll-be-the-best-selling-luxury-car-in-america#r=hp-ls (http://www.businessweek.com/articles/2013-12-24/if-cadillac-keeps-growing-like-this-itll-be-the-best-selling-luxury-car-in-america#r=hp-ls)

If Cadillac Keeps Growing Like This, It'll Be America's Bestselling Luxury Car
Title: Re: GM - General Motors
Post by: fareastwarriors on December 26, 2013, 12:12:12 AM
http://www.bloomberg.com/news/2013-12-26/gm-robo-glove-to-meat-hook-smooth-human-machine-teamwork.html (http://www.bloomberg.com/news/2013-12-26/gm-robo-glove-to-meat-hook-smooth-human-machine-teamwork.html)

GM Robo-Glove to Meat Hook Smooth Human-Machine Teamwork
Title: Re: GM - General Motors
Post by: fareastwarriors on December 27, 2013, 12:38:34 AM
http://www.nytimes.com/reuters/2013/12/27/business/27reuters-gm-china-recall.html?src=busln (http://www.nytimes.com/reuters/2013/12/27/business/27reuters-gm-china-recall.html?src=busln)


GM to Recall Around 1.5 Million Vehicles in China-Regulator
Title: Re: GM - General Motors
Post by: bmichaud on December 27, 2013, 05:04:40 AM
GM potentially buying tesla?

http://www.cnbc.com/id/101298535
Title: Re: GM - General Motors
Post by: hyten1 on December 27, 2013, 06:12:08 AM
i hope not

GM potentially buying tesla?

http://www.cnbc.com/id/101298535
Title: Re: GM - General Motors
Post by: DCG on December 27, 2013, 07:42:52 AM
well, it's not like Musk needs the cash, so I doubt he's looking for an exit, but maybe GM would be able to help Tesla scale. I doubt GM would conform to the 'no dealers' model though.
Title: Re: GM - General Motors
Post by: Liberty on December 27, 2013, 08:02:38 AM
GM potentially buying tesla?

http://www.cnbc.com/id/101298535

I don't think there's any chances of that happening until Tesla's mass-market model is out in a few years.
Title: Re: GM - General Motors
Post by: jay21 on December 30, 2013, 10:01:32 AM
I don't think it's been posted before but this writeup from VIC was fantastic: http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/94418

A few highlights/snippets:

Although North American sales volume declined from 3.6 million units to 3.0 million units from 2008 to 2012, North America revenues actually improved from $83bn to $89bn!

Historically, GM had to operate at high volumes across many different plants to cover massive fixed cost obligations.  This excess capacity limited GM’s ability to control production, inventory, incentives and sales prices.  GM would unveil a new product, the product would not be accepted by the retail market at GM’s target volumes, so GM would have to sell the product into the fleet (rental car) market near cost to make up for volume, and those fleet cars would tarnish the image of the car and also lower the average used price.  As the average resale price declined, the new car’s first day depreciation rose, and demand by retail buyers declined, forcing GM to use incentives to increase retail sales and fleet sales once again.  This negative feedback loop could continue through each new product cycle.  For example, GM used to fleet 70% of its Pontiac Grand Prixe in the early 2000s.  Today, New GM can control production, inventory, incentives and sales prices to a degree which was impossible before the restructuring.

GM’s market share in North America declined from 23.8% to 16.9% from 2006 to 2012, or a total of 6.9% points of decline.  In the U.S., which makes up over 85% of New GM’s North American sales, GM’s market share declined from 24.2% to 17.9% from 2006 to 2012, or a total of 8.5% points of decline.  However, there’s a better way to look market share than total sales volumes.  We need to adjust sales volume to include only New GM brands (Chevrolet, GMC, Buick, and Cadillac) and exclude brands that were jettisoned in the bankruptcy (Saturn, Pontiac, Hummer, Saab).  After these adjustments, the sales volume of New GM brands actually improved from 2.5 million units to 2.6 million units from 2008 to 2012, while market share declined from 19.5% to 17.9% or only 1.6% points.  The majority of the loss of market share is related to four jettisoned brands.

Total U.S. Housing starts averaged 1.3 million per year from 2002 to 2012, or 67% higher than the 770,000 starts in 2012.  Total U.S. pickup sales averaged 2.2 million per year from 2002 to 2012, or 20% higher than 1.8 million units in 2012.  U.S. housing starts and pickup sales were 97% correlated from 2002 to 2012.  As total U.S. housing starts improve, total U.S. pickup sales will improve.

New GM has a 35% share of the U.S. pickup truck market, selling 645,000 pickups in 2012.  Returning to the 2002 to 2012 average, New GM could sell 121,000 additional pickup trucks.  Also, New GM is finally releasing its next generation of pickup trucks in May 2013, which had been delayed due to the bankruptcy.  With an improvement in U.S. housing starts to 1.3 million per year, and assuming that New GM at least keeps its market share, pickup trucks sell at a 50% premium MSRP to New GM’s North American average, and pickup trucks sell at 50% EBITDA margins, New GM would generate $2.7bn additional EBITDA.

Longer-term and speculative in nature but totalling $8bn of EBITDA based on my meatball math:  (1) automotive recovery +$4bn, (2) housing recovery +$2.7bn, (3), europe restructured and fixed +$0.8bn, (4) rest of world growth based on demographics $0.4bn, (5) Ally international transaction +$0.5bn, (6) China growth +$0.3bn.
Title: Re: GM - General Motors
Post by: Yours Truly on December 30, 2013, 09:02:06 PM
Fantastic write up, thanks for the find
Title: Re: GM - General Motors
Post by: fareastwarriors on January 03, 2014, 10:58:49 AM
December U.S. Auto Sales Miss Expectations


Quote
GM's sales for the year rose 7 percent to 2.8 million vehicles, and Ford's U.S. annual sales of 2.5 million vehicles rose 11 percent.

For the year, Chrysler's U.S. sales rose 9 percent to 1.8 million vehicles.

Toyota's annual U.S. sales rose 7 percent to 2.2 million vehicles.


http://www.nytimes.com/reuters/2014/01/03/business/03reuters-autos-sales-usa.html?ref=business&_r=0 (http://www.nytimes.com/reuters/2014/01/03/business/03reuters-autos-sales-usa.html?ref=business&_r=0)
Title: Re: GM - General Motors
Post by: plato1976 on January 04, 2014, 04:23:19 AM
The lackluster performance in the pickup sector is esp. concerning
I don't mind if they lose some shares in cheap car sectors
but really hope they can do well in high margin sectors
almost want sell some to take profits - seems it's not doing well in north america

December U.S. Auto Sales Miss Expectations


Quote
GM's sales for the year rose 7 percent to 2.8 million vehicles, and Ford's U.S. annual sales of 2.5 million vehicles rose 11 percent.

For the year, Chrysler's U.S. sales rose 9 percent to 1.8 million vehicles.

Toyota's annual U.S. sales rose 7 percent to 2.2 million vehicles.


http://www.nytimes.com/reuters/2014/01/03/business/03reuters-autos-sales-usa.html?ref=business&_r=0 (http://www.nytimes.com/reuters/2014/01/03/business/03reuters-autos-sales-usa.html?ref=business&_r=0)
Title: Re: GM - General Motors
Post by: dpetrescu on January 05, 2014, 10:51:21 PM
I just became a member and am excited to write my first post. This site seems like a great resource.

I am also interested in the GM warrants. However, while they do seem cheaper, after looking into the price they don't seem as cheap -relative to the LEAPS- as some people are claiming. Lets take a look...

To calculate the comparative cost of options and warrants I recommend not looking at the price because it is misleading. Best metric is looking at the implied volatility.

LEAPS
Currently the $18 strike price with an expiration of 2016 has an implied volatility of 24.82. Price is ~$21.5. I didn't use the 2015 strike because volatility is unusually high.

Warrants
The $18 strike price warrants with an expiration date of 2019 have an implied volatility of 19.34. Price is $22.01. Just 50 cents more for 2 more years, a steal right? We'll not exactly. If you plug in a 24.82 volatility into the B-S equation, the premium is now $22.4. So sure the warrants are underpriced relative to leaps, but only by 2%. Because it is so much in the money, additional time does not contribute much to the premium.

Now with that's said, in my opinion all warrants are always underpriced relative to short duration options because B-S assumes there is no upward bias long term. That has not really been the case over the last century as stock prices have tended to move up over time. Warren Buffett talked about warrants mispricing because of this fact a few years ago in the BH annual report.
Title: Re: GM - General Motors
Post by: bmichaud on January 06, 2014, 06:20:32 AM
Old, but good comments here by Einhorn on GM:

http://www.marketfolly.com/2012/10/david-einhorns-presentation-on-general.html

Title: Re: GM - General Motors
Post by: txlaw on January 06, 2014, 06:44:32 AM
Lots of good stuff being unveiled by GM today at CES, including partnerships with Google and AT&T, a new app platform, etc.

http://ces.cnet.com/8301-35289_1-57616636/gm-unveils-app-platform-partners-with-at-t-for-in-car-lte/
http://www.businessweek.com/articles/2014-01-06/google-teams-with-gm-honda-and-audi-to-bring-android-to-cars

Apparently, GM is also talking with Chinese wireless providers:
http://www.bloomberg.com/news/2014-01-06/gm-onstar-in-talks-with-chinese-providers-for-4g-in-cars.html

GM will also stop doing monthly sales calls:
http://www.autoblog.com/2014/01/05/gm-stops-monthly-sales-calls/

Finally, Detroit auto show is only a few weeks ago.  Lots of interesting things happening in the next few weeks!
Title: Re: GM - General Motors
Post by: fareastwarriors on January 06, 2014, 10:19:10 AM
http://www.bloomberg.com/news/2014-01-06/made-in-america-gets-better-as-price-drives-better-sales.html (http://www.bloomberg.com/news/2014-01-06/made-in-america-gets-better-as-price-drives-better-sales.html)


Made-in-America Gets Better as Price Drives Better Sales
Title: Re: GM - General Motors
Post by: fareastwarriors on January 12, 2014, 10:14:10 PM
GM CFO Ammann Says Company Closer to Issuing a Dividend




http://www.bloomberg.com/news/2014-01-13/gm-cfo-ammann-says-company-closer-to-issuing-a-dividend.html (http://www.bloomberg.com/news/2014-01-13/gm-cfo-ammann-says-company-closer-to-issuing-a-dividend.html)
Title: Re: GM - General Motors
Post by: fareastwarriors on January 13, 2014, 10:36:03 AM
http://www.nytimes.com/2014/01/14/automobiles/autoshow/chevrolet-doubles-up-for-car-and-truck-of-the-year.html?hp (http://www.nytimes.com/2014/01/14/automobiles/autoshow/chevrolet-doubles-up-for-car-and-truck-of-the-year.html?hp)


Chevrolet Doubles Up for Car and Truck of the Year
Title: Re: GM - General Motors
Post by: fareastwarriors on January 14, 2014, 10:23:36 AM
GM Global Vehicle Sales Rise 4% in 2013

http://online.wsj.com/news/articles/SB10001424052702303595404579320260763235006?mod=WSJ_business_whatsNews (http://online.wsj.com/news/articles/SB10001424052702303595404579320260763235006?mod=WSJ_business_whatsNews)



General Motors Co.  sold 9.71 million vehicles globally last year, a 4% increase over 2012 and enough to maintain its second-place behind Toyota Motor Corp., as robust demand in the U.S. and China offset weakness in Europe.
 
Sales in North America, primarily driven by the U.S., rose 7% to 3.23 million units, while the company's international operations notched 3.89 million in sales for the year.
Title: Re: GM - General Motors
Post by: hyten1 on January 14, 2014, 01:56:24 PM
http://finance.yahoo.com/news/gm-declares-30-cents-per-214400322.html

GM declare 0.30 dividend

warrant holders, plan to exercise?
Title: Re: GM - General Motors
Post by: txlaw on January 14, 2014, 02:05:06 PM
http://finance.yahoo.com/news/gm-declares-30-cents-per-214400322.html

GM declare 0.30 dividend

warrant holders, plan to exercise?

Already switched out of the warrants into a combo of common and LEAPS.  Hoping that the stock price moves up rapidly after this announcement, after which I can sell my LEAPS and hold onto my common.

I'm glad we had that discussion about cost of leverage a couple of weeks ago.
Title: Re: GM - General Motors
Post by: original mungerville on January 14, 2014, 02:21:05 PM
I've got the LEAPS. Stock should rise in the morning...

Title: Re: GM - General Motors
Post by: fareastwarriors on January 14, 2014, 02:33:13 PM
3% up after hours.

Wish I bought more warrant.
 ;)
Title: Re: GM - General Motors
Post by: txlaw on January 14, 2014, 02:33:55 PM
I've got the LEAPS. Stock should rise in the morning...

Crossing my fingers.

GM and Fiat firing on all cylinders.  Loving the Detroit Auto Show coverage too.
Title: Re: GM - General Motors
Post by: fareastwarriors on January 14, 2014, 02:46:39 PM
I've got the LEAPS. Stock should rise in the morning...

Crossing my fingers.

GM and Fiat firing on all cylinders.  Loving the Detroit Auto Show coverage too.


Are any of you guys concern about the overall auto market?

It seems like me all the major autos are doing well right now.




http://dealbook.nytimes.com/2014/01/14/auto-loans-bring-growth-and-scrutiny-for-banks/ (http://dealbook.nytimes.com/2014/01/14/auto-loans-bring-growth-and-scrutiny-for-banks/)
Auto Loans Bring Growth, and Scrutiny, for Banks
Title: Re: GM - General Motors
Post by: ERICOPOLY on January 14, 2014, 02:47:01 PM
http://finance.yahoo.com/news/gm-declares-30-cents-per-214400322.html

GM declare 0.30 dividend

warrant holders, plan to exercise?

Already switched out of the warrants into a combo of common and LEAPS.  Hoping that the stock price moves up rapidly after this announcement, after which I can sell my LEAPS and hold onto my common.

I'm glad we had that discussion about cost of leverage a couple of weeks ago.

I wonder if the warrants will trade with any premium tomorrow.
Title: Re: GM - General Motors
Post by: racemize on January 14, 2014, 03:28:38 PM
With the current prices (for the B warrants), while the cost of leverage is roughly 7.2%, that implies only common growth of 4.5% per annum.  I assume most holders of GM-B warrants on the board think the common will grow more than 4.5% a year, so I don't really think it is worth switching out of the warrants.  Unless perhaps it was into LEAPs, but the time frame is much shorter there.

Now, if the warrant traded with no premium tomorrow, with no growth in common (doubt it), the numbers would be 6.55% and 3.78%, respectively.
Title: Re: GM - General Motors
Post by: ERICOPOLY on January 14, 2014, 03:31:52 PM
I figure if somebody buys GM common and shorts the warrant, they'll get a nice little low-risk yield.  Then perhaps you buy at-the-money calls with that yield.

I wonder what the warrant borrowing costs are looking like.
Title: Re: GM - General Motors
Post by: racemize on January 14, 2014, 03:37:44 PM
I figure if somebody buys GM common and shorts the warrant, they'll get a nice little low-risk yield.  Then perhaps you buy at-the-money calls with that yield.

I wonder what the warrant borrowing costs are looking like.

I guess you would have to short in a manner to keep the leverage equal, right?  Otherwise you would lose if the common appreciated more than the 4.5% hurdle rate.
Title: Re: GM - General Motors
Post by: ERICOPOLY on January 14, 2014, 03:50:59 PM
I figure if somebody buys GM common and shorts the warrant, they'll get a nice little low-risk yield.  Then perhaps you buy at-the-money calls with that yield.

I wonder what the warrant borrowing costs are looking like.

I guess you would have to short in a manner to keep the leverage equal, right?  Otherwise you would lose if the common appreciated more than the 4.5% hurdle rate.

See, here is what I'm thinking.

1)  Buy the common for the dividend
2)  Short the warrant to eliminate common stock pricing risk of dropping down to warrant strike
3)  Purchase put on GM with $18 strike for 20 cent (asking price)

You basically have a risk-free dividend, less the 20 cents for the put.  And less the borrowing cost on the warrant.

So I'm kind of curious how much the borrowing cost is going to cost for the warrants, and what the premiums will be for the warrant.

EDIT:  well, I suppose there is risk of rising volatility premium in the puts (come time to roll them) if stock drops down near strike.  However, that's not a big risk..
Title: Re: GM - General Motors
Post by: yitech on January 14, 2014, 06:09:04 PM
I think the premium of [B warrant] versus [stock - strike] has been shrinking ever since the hint of re-initiation of dividend payment. It was above 60c and now it's below that. I'd expect it to shrink further tomorrow or gradually when people realize the extra leverage will now cost them 30c/qtr or ~3%/yr.

I switched to common two days ago thanks to the discussion on this topic. I was going to wait till right before the actual dividend payment, but thought the shrinking of premium would likely happen long before that so I switched early.
Title: Re: GM - General Motors
Post by: yitech on January 14, 2014, 06:16:40 PM
http://finance.yahoo.com/news/gm-declares-30-cents-per-214400322.html

GM declare 0.30 dividend

warrant holders, plan to exercise?

You can exercise now and lose the ~ 60c premium versus stock (equivalent to 2 dividend payments) for early exercise of American option or simply sell them and switch to common. You should never exercise an American option until right before the actual dividend payment.
Title: Re: GM - General Motors
Post by: hyten1 on January 14, 2014, 07:31:05 PM
i hear ya, i am still figuring out what to do

due to tax implications



http://finance.yahoo.com/news/gm-declares-30-cents-per-214400322.html

GM declare 0.30 dividend

warrant holders, plan to exercise?

You can exercise now and lose the ~ 60c premium versus stock (equivalent to 2 dividend payments) for early exercise of American option or simply sell them and switch to common. You should never exercise an American option until right before the actual dividend payment.
Title: Re: GM - General Motors
Post by: Avyalake on January 14, 2014, 08:07:38 PM
I think the premium of [B warrant] versus [stock - strike] has been shrinking ever since the hint of re-initiation of dividend payment. It was above 60c and now it's below that. I'd expect it to shrink further tomorrow or gradually when people realize the extra leverage will now cost them 30c/qtr or ~3%/yr.

I switched to common two days ago thanks to the discussion on this topic. I was going to wait till right before the actual dividend payment, but thought the shrinking of premium would likely happen long before that so I switched early.

yitech,Eric Do you expect premium to go negative? Why would that ever happen since I should then be able to pick up common stock at less than common price by merely buying and exercising for less than the price of common stock?
Also why would there be no positive premium for the leverage and the long expiry date at all?

Re-doing my math, it is necessary to switch to common stock as compared to the Warrants if we even expect < 15% p.a. return (outside of divs at 3%)? But if we expect more we should be holding the common stock?

Also, do you expect a strategy to buy the warrants post-dividend date while holding common stock before divs would work in a non-taxable account?

Title: Re: GM - General Motors
Post by: yitech on January 14, 2014, 08:51:22 PM
I think the premium of [B warrant] versus [stock - strike] has been shrinking ever since the hint of re-initiation of dividend payment. It was above 60c and now it's below that. I'd expect it to shrink further tomorrow or gradually when people realize the extra leverage will now cost them 30c/qtr or ~3%/yr.

I switched to common two days ago thanks to the discussion on this topic. I was going to wait till right before the actual dividend payment, but thought the shrinking of premium would likely happen long before that so I switched early.

yitech,Eric Do you expect premium to go negative? Why would that ever happen since I should then be able to pick up common stock at less than common price by merely buying and exercising for less than the price of common stock?
Also why would there be no positive premium for the leverage and the long expiry date at all?

Re-doing my math, it is necessary to switch to common stock as compared to the Warrants if we even expect < 15% p.a. return (outside of divs at 3%)? But if we expect more we should be holding the common stock?

Also, do you expect a strategy to buy the warrants post-dividend date while holding common stock before divs would work in a non-taxable account?

The premium would never get negative as market makers/arbitrageurs can simply arbitrage it away by buying warrant and shorting the underlying stock at the same time, then exercising the warrant to get stock to cover the short to lock in the risk-less profits. This in theory should push up warrant price and keep the premium larger than or equal zero if we ignore the spread and commission costs. I did not say there would be no positive premium. I meant whatever it was, it ought to be smaller than before.

Buying warrants post-dividend date repeatedly in non-taxable account may work so long as you are okay with paying 3-4 cent spread due to illiquidity of warrants at times for 4 times a year.

EDIT: I was incorrect when I said buying common and shorting warrants... It was the other way around.
Title: Re: GM - General Motors
Post by: dpetrescu on January 14, 2014, 09:25:19 PM
Unless the leaps calls or warrants have a low delta and are really really in the money or unless you expect GM to increase by just 5% a year or so, don't see the rationale behind selling warrants or leaps calls because of the dividend announcement. It's a matter of scale. volatility, time remaining, and delta/leverage and stock price movement have a much bigger effect that far outweighs the impact of dividends. Same with interest rates, sure options are cheaper because of all time low rates but it isn't very significant. It would be interesting to run some scenarios to put actual numbers to this with a BS calculator but just got back from work and it's been a long day.
Title: Re: GM - General Motors
Post by: dpetrescu on January 14, 2014, 10:07:30 PM
I can't believe I just wrote that last post, it must be late. I made a couple very fundamental errors 10 minutes ago.

1. A longer dated option will be more negatively impacted by the dividend announcement. This is because more time remaining on the option means you will miss out on more dividends
2. The more out of the money options will be more negatively impacted compared to in the money options. This is because you're controlling more shares with less cash commitment.

So it depends on the option structure if it makes more sense to sell.

For a GM at the money call with 1 year jan2015 strike with no dividend, the current value is $4.5. If we input a dividend of 30 cents quarterly starting march 18, that call is now worth $4.0, more than 10% less (assuming no price movement). Assuming the 3% after hours gain holds, and taking into account the dividend, that same call is now worth $4.67. So overall for a 1year at the money call, a 3% stock price increase has about the same effect as a 3% dividend.

I have 1 year left on my GM leaps and they are ITM.
Title: Re: GM - General Motors
Post by: yitech on January 15, 2014, 12:44:59 AM
I can't believe I just wrote that last post, it must be late. I made a couple very fundamental errors 10 minutes ago.

1. A longer dated option will be more negatively impacted by the dividend announcement. This is because more time remaining on the option means you will miss out on more dividends
2. The more out of the money options will be more negatively impacted compared to in the money options. This is because you're controlling more shares with less cash commitment.

So it depends on the option structure if it makes more sense to sell.

For a GM at the money call with 1 year jan2015 strike with no dividend, the current value is $4.5. If we input a dividend of 30 cents quarterly starting march 18, that call is now worth $4.0, more than 10% less (assuming no price movement). Assuming the 3% after hours gain holds, and taking into account the dividend, that same call is now worth $4.67. So overall for a 1year at the money call, a 3% stock price increase has about the same effect as a 3% dividend.

I have 1 year left on my GM leaps and they are ITM.

I agree with 1. above. The only options not affected by the dividend hike are the ones expire before March 18. All others are affected by it roughly proportional to time to expiration of the options/warrants. B warrant is deep in the money, so I am not sure why you mentioned 2....

Dividend attracts yield seekers like mechanical dividend ETFs that may help pump up the stock a bit, so net net like you mentioned option holders may not be affected much. But we were comparing options and common on share-per-share or same notional basis. If we use your example, common now gained 3% in addition to 3% dividend yield versus just a 3% by holding 2015 Leap. Leverage by itself is not an edge... It creates more beta, but not more alpha. Alternatively you could capture the (missing) dividends by buying using margin (via cheap financing ~ < 1% using IB) with similar leverage like the B warrant.

Guess it comes down to whether the benefit of non-recourse minus cost of loan-equivalent interest costs of the option and dividend streams outweigh the cost of margin financing and other psychological costs associated with margin(for regular folks like us, except for Eric). Anyway, it's really up to individual preferences. Leaving aside the benefit of non-recourse leverage via options versus margin, dividend hike is a risk that all option/warrant holders should be aware of before entering the trade.
Title: Re: GM - General Motors
Post by: jeffmori7 on January 15, 2014, 06:48:05 AM
So finally GM is down this morning! Ah, Mr.Market.
Title: Re: GM - General Motors
Post by: racemize on January 15, 2014, 06:57:27 AM
So finally GM is down this morning! Ah, Mr.Market.

I think due to the "modest" profit increase comments.  So that killed the dividend enthusiasm.  Too bad, I was hoping to see what the warrants and common would do with just the dividend announcement.
Title: Re: GM - General Motors
Post by: yitech on January 15, 2014, 07:00:01 AM
So finally GM is down this morning! Ah, Mr.Market.

GM Calls for Modest Improvement in 2014
Auto Maker Expects to Spend About $1.1 billion on Cost-Cutting Measures
http://online.wsj.com/news/articles/SB10001424052702303465004579322332779109034?ru=yahoo&mod=yahoo_hs

Market doesn't like it. Yeah. Racemize just replied before I did.
Title: Re: GM - General Motors
Post by: jeffmori7 on January 15, 2014, 07:10:21 AM
Ok thanks, I missed this news.
Title: Re: GM - General Motors
Post by: yitech on January 15, 2014, 08:02:45 PM
So finally GM is down this morning! Ah, Mr.Market.

I think due to the "modest" profit increase comments.  So that killed the dividend enthusiasm.  Too bad, I was hoping to see what the warrants and common would do with just the dividend announcement.

Premium of B warrant over [stock - 18.33] went from yesterday's close of 59c to today's 47c. It could be due to both the div. payment and the sell-off effects, but warrant and common no longer moved in lockstep as before.
Title: Re: GM - General Motors
Post by: fareastwarriors on January 16, 2014, 09:14:25 AM
Detroit's Gonna Drive a Corvette Over a Cliff


http://www.bloomberg.com/news/2014-01-16/detroit-s-gonna-drive-a-corvette-over-a-cliff.html (http://www.bloomberg.com/news/2014-01-16/detroit-s-gonna-drive-a-corvette-over-a-cliff.html)
Title: Re: GM - General Motors
Post by: hyten1 on January 16, 2014, 09:30:11 AM
not a very good article. (bloomberg one)

auto loan/delinquency/sub-prime is definitely worth watching

"...The American Bankers Association says delinquencies of 30-plus days on indirect auto loans, the kind originated at dealerships, were 1.64 percent in the third quarter of 2013, down from 2.08 percent a year earlier..."


http://www.autonews.com/article/20140115/FINANCE_AND_INSURANCE/301159941/fewer-late-payments-point-to-easy-car-loans-in-2014#axzz2qaEZ8fWW

http://www.autonews.com/article/20140108/FINANCE_AND_INSURANCE/301089974/automakers-shrug-off-subprime-worries#axzz2qaEZ8fWW

so far nothing alarming ... yet

hy

Detroit's Gonna Drive a Corvette Over a Cliff


http://www.bloomberg.com/news/2014-01-16/detroit-s-gonna-drive-a-corvette-over-a-cliff.html (http://www.bloomberg.com/news/2014-01-16/detroit-s-gonna-drive-a-corvette-over-a-cliff.html)
Title: Re: GM - General Motors
Post by: bmichaud on January 17, 2014, 11:22:08 AM
I struggle to get to Einhorn's $6 mid-cycle EPS figure: http://www.valuewalk.com/2012/10/david-einhorn-speaks-at-value-investing-congress-2012-live/

Curious what others get to for mid-cycle and how.
Title: Re: GM - General Motors
Post by: txlaw on January 17, 2014, 11:43:00 AM
I struggle to get to Einhorn's $6 mid-cycle EPS figure: http://www.valuewalk.com/2012/10/david-einhorn-speaks-at-value-investing-congress-2012-live/

Curious what others get to for mid-cycle and how.

He's probably baking in GM's mid-decade EBIT margin goals.  I can get to $6 in GAAP EPS, but I would note that depreciation will be lower than capex going forward, which means that EPS likely overestimates economic earnings.
Title: Re: GM - General Motors
Post by: txlaw on January 17, 2014, 11:51:36 AM
I struggle to get to Einhorn's $6 mid-cycle EPS figure: http://www.valuewalk.com/2012/10/david-einhorn-speaks-at-value-investing-congress-2012-live/

Curious what others get to for mid-cycle and how.

He's probably baking in GM's mid-decade EBIT margin goals.  I can get to $6 in GAAP EPS, but I would note that depreciation will be lower than capex going forward, which means that EPS likely overestimates economic earnings.

Actually, now that I think about it, maybe I can't get to $6 GAAP EPS.  Because my numbers take into account the non-cash taxes.
Title: Re: GM - General Motors
Post by: bmichaud on January 17, 2014, 12:05:17 PM
Using Morningstar's 2014 sales estimate of 158,561, a 7% mid-cycle EBIT margin, interest expense of 530, a 40% tax rate and after-tax JV earnings of 1,995, I get to $4.50 EPS with 1,853 shares outstanding.

That rises to $6.04 assuming a 10% m-c EBIT margin. Though 10% seems unrealistic anytime soon given how bad Europe is. Hence why I can't conservatively get to Einhorn's $6.

Agreed on CAPEX v. D&A, but difficult to ascertain in the medium term given the investments required to rationalize the global manufacturing platform and revamp product. 2011 D&A was $7.4B and Morningstar estimates "steady-state" capex of $8B, so not a huge difference.
Title: Re: GM - General Motors
Post by: fareastwarriors on January 17, 2014, 12:55:00 PM
http://online.wsj.com/news/articles/SB10001424052702304419104579325012996071596?mod=WSJ_business_whatsNews (http://online.wsj.com/news/articles/SB10001424052702304419104579325012996071596?mod=WSJ_business_whatsNews)

Cadillac Chief's Challenge: Clear Dealer Lots

Luxury Car Brand Faces a Glut of Unsold Inventory as it Looks to Compete With German Rivals
Title: Re: GM - General Motors
Post by: fareastwarriors on January 17, 2014, 01:55:45 PM
http://www.ft.com/intl/cms/s/3/8c124f8a-7e0b-11e3-95dd-00144feabdc0.html#axzz2qIcZZaE0 (http://www.ft.com/intl/cms/s/3/8c124f8a-7e0b-11e3-95dd-00144feabdc0.html#axzz2qIcZZaE0)



GM: driving force for change
 




It is good that the carmaker plans use its cash to expand
Title: Re: GM - General Motors
Post by: racemize on January 22, 2014, 07:35:58 AM
so it appears that the warrants have lost no premium based on the dividend.  Perhaps that will change once the dividend starts being paid though?
Title: Re: GM - General Motors
Post by: Avyalake on January 23, 2014, 09:49:28 AM
Any buyers of GM B Warrants here after a > 15% run down?
Title: Re: GM - General Motors
Post by: fareastwarriors on January 23, 2014, 01:21:57 PM
GM's New Chief to Accelerate Profit Push

Barra Says New Top Managers in Synch on Margins, Market Share Goals http://online.wsj.com/news/articles/SB10001424052702304632204579338751924201992?mod=WSJ_hp_LEFTWhatsNewsCollection (http://online.wsj.com/news/articles/SB10001424052702304632204579338751924201992?mod=WSJ_hp_LEFTWhatsNewsCollection)
Title: Re: GM - General Motors
Post by: fareastwarriors on January 24, 2014, 08:35:42 AM
I added some warrants this morning and then it prompty droped another 3% .
 >:(
Title: Re: GM - General Motors
Post by: dpetrescu on January 24, 2014, 08:56:18 AM
I'm considering buying now that my 2014 leaps expired. The question is when? I think if there's another 15% correction I'm in.
Title: Re: GM - General Motors
Post by: hyten1 on February 03, 2014, 06:49:06 AM
this thing have been in a nose dive since 2014 started. before we know it it'll hit $30

hy
Title: Re: GM - General Motors
Post by: Yours Truly on February 03, 2014, 08:12:28 AM
this thing have been in a nose dive since 2014 started. before we know it it'll hit $30

hy

They seem to be lagging all the big players in sales so far! It has dramatically dropped since the dividend announcement.
Title: Re: GM - General Motors
Post by: Ian L on February 03, 2014, 08:44:50 AM
General Motors January sales fell 12%, blaming cold weather. Chrysler still managed to increase sales 8%, though Ford also decreased 7.1%. http://www.ibtimes.com/here-are-january-2014-big-8-us-auto-sales-numbers-gm-ford-chrysler-toyota-honda-nissan-kiahyundai
Title: Re: GM - General Motors
Post by: plato1976 on February 03, 2014, 08:55:20 AM
yet fiat also dropped today

General Motors January sales fell 12%, blaming cold weather. Chrysler still managed to increase sales 8%, though Ford also decreased 7.1%. http://www.ibtimes.com/here-are-january-2014-big-8-us-auto-sales-numbers-gm-ford-chrysler-toyota-honda-nissan-kiahyundai
Title: Re: GM - General Motors
Post by: investor-man on February 03, 2014, 10:38:55 AM
yet fiat also dropped today

General Motors January sales fell 12%, blaming cold weather. Chrysler still managed to increase sales 8%, though Ford also decreased 7.1%. http://www.ibtimes.com/here-are-january-2014-big-8-us-auto-sales-numbers-gm-ford-chrysler-toyota-honda-nissan-kiahyundai

Good ol'Mr. Market
Title: Re: GM - General Motors
Post by: fareastwarriors on February 03, 2014, 10:58:56 AM
Ford or GM: Which One Is the Better Buy?


GM could gain 30% or more this year, as new products kick in, but Ford is the likely winner over the long term.


http://online.barrons.com/article/SB50001424053111903911904579346793177568708.html?mod=googlenews_barrons#articleTabs_article%3D0 (http://online.barrons.com/article/SB50001424053111903911904579346793177568708.html?mod=googlenews_barrons#articleTabs_article%3D0)
Title: Re: GM - General Motors
Post by: fareastwarriors on February 04, 2014, 04:12:02 PM
GM Makes More Management Changes

Two Board Members Resign, while Chevrolet and Buick Get New U.S. Sales Chiefs

http://online.wsj.com/news/articles/SB10001424052702303442704579363001958855062 (http://online.wsj.com/news/articles/SB10001424052702303442704579363001958855062)
Title: Re: GM - General Motors
Post by: Avyalake on February 06, 2014, 05:47:55 AM
GM results 2013 Slides. http://phx.corporate-ir.net/External.File?t=1&item=VHlwZT0yfFBhcmVudElEPTUwNzk3MTJ8Q2hpbGRJRD01MzE4NTg=

Title: Re: GM - General Motors
Post by: 50centdollars on February 06, 2014, 06:04:06 AM
GM results 2013 Slides. http://phx.corporate-ir.net/External.File?t=1&item=VHlwZT0yfFBhcmVudElEPTUwNzk3MTJ8Q2hpbGRJRD01MzE4NTg=



link does not work
Title: Re: GM - General Motors
Post by: Avyalake on February 06, 2014, 06:08:30 AM
GM results 2013 Slides. http://phx.corporate-ir.net/External.File?t=1&item=VHlwZT0yfFBhcmVudElEPTUwNzk3MTJ8Q2hpbGRJRD01MzE4NTg=



link does not work

Hmm. Links to webcast and the slides from the original IR webpage. http://www.gm.com/company/investors/announcements-events/event_detail_page.event_5079712.~content~gmcom~home~company~investors~announcements-events.html
Title: Re: GM - General Motors
Post by: xtreeq on February 06, 2014, 06:11:37 AM
GM Reports 2013 financial results

http://www.gm.com/company/investors/latest-news/news_detail_page.content_pages_news_emergency_news_0206-gm-reports-2013-net-income.~content~gmcom~home~company~investors.html
Title: Re: GM - General Motors
Post by: skanjete on February 06, 2014, 07:21:56 AM
Although there were quite a lot of positive developments within GM over the last year, the enterprise value per share (incl. pension deficit) hasn't changed.

On an E.V./EBIT(DA) base, the shares even look cheaper than an year ago. Interesting.
Title: Re: GM - General Motors
Post by: plato1976 on February 06, 2014, 07:59:23 AM
EV doesn't change b/c of pension deficit reduction due to rate increase - this can reverse anytime
and I don't want to call this an improvement

Although there were quite a lot of positive developments within GM over the last year, the enterprise value per share (incl. pension deficit) hasn't changed.

On an E.V./EBIT(DA) base, the shares even look cheaper than an year ago. Interesting.
Title: Re: GM - General Motors
Post by: krazeenyc on February 06, 2014, 08:11:16 AM
EV doesn't change b/c of pension deficit reduction due to rate increase - this can reverse anytime
and I don't want to call this an improvement

Although there were quite a lot of positive developments within GM over the last year, the enterprise value per share (incl. pension deficit) hasn't changed.

On an E.V./EBIT(DA) base, the shares even look cheaper than an year ago. Interesting.

is the reverse true as well? So when rates declined did you not view it as a negative?
Title: Re: GM - General Motors
Post by: skanjete on February 06, 2014, 09:01:54 AM
EV doesn't change b/c of pension deficit reduction due to rate increase - this can reverse anytime
and I don't want to call this an improvement

Although there were quite a lot of positive developments within GM over the last year, the enterprise value per share (incl. pension deficit) hasn't changed.

On an E.V./EBIT(DA) base, the shares even look cheaper than an year ago. Interesting.

is the reverse true as well? So when rates declined did you not view it as a negative?

Whatever the reason : E.V. per share didn't change.

Besides, even making abstraction of the change in pension deficit, valuation hasn't changed a lot over the last year. If anything, it looks somewhat cheaper.

Improvement : I'm sure you can think of some more important improvements within G.M. than higher interest rates (e.g. exit government, new models, Europe,...).
Title: Re: GM - General Motors
Post by: fareastwarriors on February 06, 2014, 09:29:13 AM
Is the rising inventory levels at the dealers' lot a concern?
Title: Re: GM - General Motors
Post by: negative alpha on February 06, 2014, 10:44:30 AM
I think in aggregate pricing and incentives are stable, so increased inventories by itself shouldn't be too much of a concern.
Title: Re: GM - General Motors
Post by: DCG on February 06, 2014, 11:30:16 AM
I think in aggregate pricing and incentives are stable, so increased inventories by itself shouldn't be too much of a concern.


Well, as long as dealers have a lot of vehicles on their lot, they won't be buying more from GM.
Title: Re: GM - General Motors
Post by: MYDemaray on February 06, 2014, 12:04:47 PM
Obviously, I think that inventories need to be watched.  That said, if you listened to the FIAT call, one thing they are dealing with (and we saw a version of this at GM late last year), is that the model refreshes are causing some unique dynamics.  For example, Chrysler is shutting down a plant for 30+ days to retool a factory to build another model.  They have pushed inventory to the dealer lots to cover this 30 days of downtime.  Additionally, you get manufacturers trying to flush out their old models while preparing for the new ones.  We saw this in GM trucks last year.  There seem to be so many model refreshes happening, I wonder that this isn't going on across the system.  I have no real idea, but could be.

The weather will probably cause additional inventory build, so prepare for the numbers to look worse before they get better.

The one interesting thing I see -- is that every investment thesis for all of the manufacturers cite the new products resulting in taking market share.  This can't be true for everyone.
Title: Re: GM - General Motors
Post by: fareastwarriors on February 06, 2014, 12:07:10 PM
Obviously, I think that inventories need to be watched.  That said, if you listened to the FIAT call, one thing they are dealing with (and we saw a version of this at GM late last year), is that the model refreshes are causing some unique dynamics.  For example, Chrysler is shutting down a plant for 30+ days to retool a factory to build another model.  They have pushed inventory to the dealer lots to cover this 30 days of downtime.  Additionally, you get manufacturers trying to flush out their old models while preparing for the new ones.  We saw this in GM trucks last year.  There seem to be so many model refreshes happening, I wonder that this isn't going on across the system.  I have no real idea, but could be.

The weather will probably cause additional inventory build, so prepare for the numbers to look worse before they get better.

The one interesting thing I see -- is that every investment thesis for all of the manufacturers cite the new products resulting in taking market share.  This can't be true for everyone.

Every company seems to be firing at all cylinders. Who are going to be the losers?
Title: Re: GM - General Motors
Post by: MYDemaray on February 06, 2014, 12:49:51 PM
Not sure.  Right now the rising tide is lifting all boats, as you point out.
Title: Re: GM - General Motors
Post by: fareastwarriors on February 07, 2014, 02:11:29 PM
GM Steps Up Pickup Truck Discounts After Weak January

General Motors Offering As Much As $7,000 Off the List Price After Sales Slumped in January

http://online.wsj.com/news/articles/SB10001424052702304450904579369251781691482?mod=WSJ_business_MoreArticles (http://online.wsj.com/news/articles/SB10001424052702304450904579369251781691482?mod=WSJ_business_MoreArticles)

 >:(
Title: Re: GM - General Motors
Post by: plato1976 on February 10, 2014, 07:52:46 AM
This one has dropped quite a bit since Kyle Bass released its bullish report;
not sure if it's going back to sub 30, where the warrant will be interesting again

GM Steps Up Pickup Truck Discounts After Weak January

General Motors Offering As Much As $7,000 Off the List Price After Sales Slumped in January

http://online.wsj.com/news/articles/SB10001424052702304450904579369251781691482?mod=WSJ_business_MoreArticles (http://online.wsj.com/news/articles/SB10001424052702304450904579369251781691482?mod=WSJ_business_MoreArticles)

 >:(
Title: Re: GM - General Motors
Post by: hyten1 on February 10, 2014, 10:47:58 AM
fyi

" In a note to investors, Citigroup analyst Itay Michaeli wrote ... GM's new pickup trucks, launched about 6 to 9 months ago, used to sell for $4,000 less than Ford's (F) pickup trucks, but now sell for about the same price as Ford's trucks, the analyst explained. As of January, the average transaction price of GM's pickups were up $5,000 versus January 2013, Michaeli wrote. Moreover, prices of vehicles typically peak 6 to 9 months after their launches, so price cuts at this point in the vehicles' cycles are somewhat typical, he contended."


http://blogs.barrons.com/stockstowatchtoday/2014/02/10/general-motors-how-worrisome-are-its-truck-discounts/?mod=yahoobarrons&ru=yahoo
Title: Re: GM - General Motors
Post by: bmichaud on February 10, 2014, 12:52:07 PM
This one has dropped quite a bit since Kyle Bass released its bullish report;
not sure if it's going back to sub 30, where the warrant will be interesting again

GM Steps Up Pickup Truck Discounts After Weak January

General Motors Offering As Much As $7,000 Off the List Price After Sales Slumped in January

http://online.wsj.com/news/articles/SB10001424052702304450904579369251781691482?mod=WSJ_business_MoreArticles (http://online.wsj.com/news/articles/SB10001424052702304450904579369251781691482?mod=WSJ_business_MoreArticles)

 >:(

Are you implying the "common" is attractive here but the "warrant" is not? And thus sub-$30 the warrant will be more attractive than the common?
Title: Re: GM - General Motors
Post by: fareastwarriors on February 11, 2014, 12:14:43 AM
GM’s China Sales Rise 12% to Record in January on Buick Demand



http://www.bloomberg.com/news/2014-02-11/gm-s-china-sales-rise-12-to-record-in-january-on-buick-demand.html (http://www.bloomberg.com/news/2014-02-11/gm-s-china-sales-rise-12-to-record-in-january-on-buick-demand.html)
Title: Re: GM - General Motors
Post by: fareastwarriors on February 11, 2014, 05:14:00 PM
Car Makers Snip Pricing Now to Avoid Haircuts Later

As Inventories Rise, Detroit Searches for a Goldilocks-like Pricing

http://online.wsj.com/news/articles/SB10001424052702304558804579377293202213988?mod=WSJ_business_whatsNews (http://online.wsj.com/news/articles/SB10001424052702304558804579377293202213988?mod=WSJ_business_whatsNews)


Title: Re: GM - General Motors
Post by: moody202 on February 12, 2014, 06:53:49 PM
Obviously, I think that inventories need to be watched.  That said, if you listened to the FIAT call, one thing they are dealing with (and we saw a version of this at GM late last year), is that the model refreshes are causing some unique dynamics.  For example, Chrysler is shutting down a plant for 30+ days to retool a factory to build another model.  They have pushed inventory to the dealer lots to cover this 30 days of downtime.  Additionally, you get manufacturers trying to flush out their old models while preparing for the new ones.  We saw this in GM trucks last year.  There seem to be so many model refreshes happening, I wonder that this isn't going on across the system.  I have no real idea, but could be.

The weather will probably cause additional inventory build, so prepare for the numbers to look worse before they get better.

The one interesting thing I see -- is that every investment thesis for all of the manufacturers cite the new products resulting in taking market share.  This can't be true for everyone.

Every company seems to be firing at all cylinders. Who are going to be the losers?

Part of it is the rising tide where the annual sales are just higher than last year.  Auto industry sales are measure as SAAR which was 15.6M for 2013 and is expected to be 16+M for 2014!
Title: Re: GM - General Motors
Post by: fareastwarriors on February 18, 2014, 02:27:09 PM
GM Secures Aluminum for Trucks

Auto Maker Steps Up Effort to Use Metal in High-Volume Pickups




http://online.wsj.com/news/articles/SB10001424052702303491404579391144135588938?mod=WSJ_hp_LEFTWhatsNewsCollection (http://online.wsj.com/news/articles/SB10001424052702303491404579391144135588938?mod=WSJ_hp_LEFTWhatsNewsCollection)
Title: Re: GM - General Motors
Post by: fareastwarriors on February 24, 2014, 07:59:55 AM
"Peak Car"

Quote
http://www.bloomberg.com/news/2014-02-24/woes-of-megacity-driving-signals-dawn-of-peak-car-era.html (http://www.bloomberg.com/news/2014-02-24/woes-of-megacity-driving-signals-dawn-of-peak-car-era.html)


Woes of Megacity Driving Signal Dawn of ‘Peak Car’ Era
Title: Re: GM - General Motors
Post by: Avyalake on March 09, 2014, 09:39:58 AM
Old GM, New GM

For GM, a need to show sense of urgency
http://www.autonews.com/article/20140308/OEM/303109990/for-gm-a-need-to-show-sense-of-urgency

Not even two months into her tenure as CEO, the crappy cars of old GM are having their revenge on the born-again automaker, with a global recall of 1.6 million cars over a deadly, decade-old ignition problem threatening to overshadow GM's painstaking advances in quality and customer satisfaction.

...
Until last month, the vehicles under recall -- including the Chevrolet Cobalt, rated least reliable small car in 2006 by Consumer Reports, and the Saturn Ion, Edmunds.com's choice as the sixth-worst car ever sold in America -- were merely unpleasant memories that today's GM was eager to erase.

But documents that have emerged in conjunction with the recall and related lawsuits have also spotlighted a sluggish management culture that kept urgent quality and safety issues from receiving attention from the highest levels of the company.

...
After first letting Alan Batey, GM's North American president, speak for the company in a nationally published apology, Barra last week said she has assembled and taken charge of an executive team to direct GM's response to the recall. In her message, she told employees that doing "what is best for our customer" will come above all else.
Title: Re: GM - General Motors
Post by: Avyalake on March 09, 2014, 09:47:01 AM
If the handling by GM is not perceived to be transparent and reasonable, this could blow up?

Bankruptcy terms limit GM liability in crash lawsuits
http://www.autonews.com/article/20140308/OEM11/303109989/1580

...
Under the terms of its restructuring, GM's product liability extends only to accidents that happened after the reorganized company left bankruptcy in July 2009. Plaintiffs injured before that time would have to seek redress from the defunct shell of GM in Bankruptcy Court, where the chance of compensation is slim.

...
GM says that it knows of 31 accidents in which airbags didn't deploy because of the faulty switch, and that 13 people died in these accidents. The company hasn't released data that would show how many of the accidents predate GM's emergence from bankruptcy.

At least one fatality that GM has linked to the Cobalt recall occurred in December 2009.
Title: Re: GM - General Motors
Post by: moody202 on March 09, 2014, 03:53:39 PM
I have heard a lot about new GM...but is it really the new GM?

I just finished a 2 week trip to India, GM doesn't have a good reputation there. People are not buying Chevy's. Toyota seems to the be the brand of choice. This makes me nervous!
Title: Re: GM - General Motors
Post by: fareastwarriors on March 10, 2014, 08:13:05 AM
What is going on with the B warrants...
Title: Re: GM - General Motors
Post by: fareastwarriors on March 11, 2014, 12:05:01 PM
http://www.bloomberg.com/news/2014-03-11/gm-recalls-stalled-in-10-years-of-committee-alphabet-soup.html (http://www.bloomberg.com/news/2014-03-11/gm-recalls-stalled-in-10-years-of-committee-alphabet-soup.html)


GM Recalls Stalled in 10 Years of Committee Alphabet Soup
Title: Re: GM - General Motors
Post by: fareastwarriors on March 12, 2014, 09:31:53 AM
screenshots
Title: Re: GM - General Motors
Post by: fareastwarriors on March 12, 2014, 02:12:55 PM
Replacement Part in GM's Car Recall Costs About $2 to $5

Price Could Provoke More Questions About Why the Problem Wasn't Fixed Years Ago

http://online.wsj.com/news/articles/SB10001424052702304914904579435171004763740?mod=WSJ_hp_LEFTWhatsNewsCollection&mg=reno64-wsj (http://online.wsj.com/news/articles/SB10001424052702304914904579435171004763740?mod=WSJ_hp_LEFTWhatsNewsCollection&mg=reno64-wsj)
Title: Re: GM - General Motors
Post by: buylowersellhigh on March 12, 2014, 06:04:30 PM
screenshots

Anybody buying the B warrants?
Title: Re: GM - General Motors
Post by: moody202 on March 13, 2014, 07:57:32 AM
I saw a Barron's article today recommending selling Jan'15 $30 Puts and Jan'15 $40 Call's to profit from the current situation. Total gain could be $3.42 on this strategy.

 Any insight you guys can provide on this trade?
Title: Re: GM - General Motors
Post by: Rainforesthiker on March 13, 2014, 04:15:56 PM
I bought some B warrants today; it seems that the crowd has likely over-reacted to the recall and some short term issues.

Anybody buying the B warrants?
[/quote]
Title: Re: GM - General Motors
Post by: vinod1 on March 13, 2014, 07:33:47 PM
Using Morningstar's 2014 sales estimate of 158,561, a 7% mid-cycle EBIT margin, interest expense of 530, a 40% tax rate and after-tax JV earnings of 1,995, I get to $4.50 EPS with 1,853 shares outstanding.

That rises to $6.04 assuming a 10% m-c EBIT margin. Though 10% seems unrealistic anytime soon given how bad Europe is. Hence why I can't conservatively get to Einhorn's $6.

Agreed on CAPEX v. D&A, but difficult to ascertain in the medium term given the investments required to rationalize the global manufacturing platform and revamp product. 2011 D&A was $7.4B and Morningstar estimates "steady-state" capex of $8B, so not a huge difference.

My understanding is that the Chinese JV equity income in already included in GM International (GMIO) EBIT. In the supplementary material there is a reconciliation from operating segments EBIT to net income and I do not see the equity income separated out. Other wise I think you might be double counting this portion of the earnings.

Thanks

Vinod
Title: Re: GM - General Motors
Post by: dpetrescu on March 13, 2014, 10:51:23 PM
I'm would like to buy more GM but not sure when. I'm thinking of waiting another 10% lower. How low does everyone think GM could go based on the recall issue?
Title: Re: GM - General Motors
Post by: wbr on March 14, 2014, 04:27:24 AM
I'm would like to buy more GM but not sure when. I'm thinking of waiting another 10% lower. How low does everyone think GM could go based on the recall issue?

The recall makes headlines, but is overall a very minor issue when it comes to the value of the company. The balance sheet is stronger than ever and future cashflows will not be materially impacted by this issue. There are always recalls happening in the car industry and the media likes to sensationalize them but consumers will forget soon.

In my opinion it doesnt matter whether you think GM is going lower or not, because nobody knows how much people will freak out about the recall media coverage and what the market in general is doing now. I make my decisions based on my position size. If you have no position, I would definitely take a bite now. If you have half a position I would buy some more too and when you have a full position or even an oversized one then you can afford to be a bit more patient and buy when it gets really attractive below 30.
Selling puts with strikes below 30 is also an option when your position is already big.
Title: Re: GM - General Motors
Post by: hyten1 on March 14, 2014, 08:56:15 AM
anyone familiar with FARS

http://www-fars.nhtsa.dot.gov/Main/index.aspx

trying to get data on fatality due to non air bag deployment of other automakers and models.

hy
Title: Re: GM - General Motors
Post by: plato1976 on March 14, 2014, 09:46:04 AM
Well, the estimation is a few dollar impairment, not sure how they got this estimation
a few dollar is not big but still sth

I'm would like to buy more GM but not sure when. I'm thinking of waiting another 10% lower. How low does everyone think GM could go based on the recall issue?

The recall makes headlines, but is overall a very minor issue when it comes to the value of the company. The balance sheet is stronger than ever and future cashflows will not be materially impacted by this issue. There are always recalls happening in the car industry and the media likes to sensationalize them but consumers will forget soon.

In my opinion it doesnt matter whether you think GM is going lower or not, because nobody knows how much people will freak out about the recall media coverage and what the market in general is doing now. I make my decisions based on my position size. If you have no position, I would definitely take a bite now. If you have half a position I would buy some more too and when you have a full position or even an oversized one then you can afford to be a bit more patient and buy when it gets really attractive below 30.
Selling puts with strikes below 30 is also an option when your position is already big.
Title: Re: GM - General Motors
Post by: fareastwarriors on March 17, 2014, 12:11:54 PM
http://online.wsj.com/news/articles/SB10001424052702303563304579445180043774154?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj (http://online.wsj.com/news/articles/SB10001424052702303563304579445180043774154?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj)


General Motors Recalls 1.5 Million More Vehicles

Auto Maker Plans $300 Million Charge to Cover Ignition Switch Fix, New Recalls
Title: Re: GM - General Motors
Post by: Palantir on March 17, 2014, 01:32:05 PM
^Anybody shorting this?
Title: Re: GM - General Motors
Post by: Yours Truly on March 17, 2014, 02:23:40 PM
What a coincidence that all these negative headlines and the slump in share performance coincided with the new CEO..

$300 mil seems relatively small to their cash position but the damage to the brand perception is much much larger... heck i'd never purchase a GM vehicle
Title: Re: GM - General Motors
Post by: moody202 on March 19, 2014, 06:42:52 PM
What do you think will be the fine for GM after the $1.2B for Toyota? Is GM equipped to handle this?
Title: Re: GM - General Motors
Post by: tng on March 20, 2014, 06:19:18 AM
What do you think will be the fine for GM after the $1.2B for Toyota? Is GM equipped to handle this?

The fine will be at least a couple of years down the line, so they'll have plenty of time to build the cash reserves. Legally, I'm not even sure if new GM is liable since the cars were made by old GM (although that doesn't matter, just ask any old GM bondholder).
Title: Re: GM - General Motors
Post by: fareastwarriors on March 20, 2014, 09:36:45 AM
GM’s Barra Showing Compassion Contrasts With Mishandlers



http://www.bloomberg.com/news/2014-03-20/gm-s-barra-showing-compassion-stands-out-from-crisis-mish.html
Title: Re: GM - General Motors
Post by: moody202 on March 20, 2014, 10:49:49 AM

The fine will be at least a couple of years down the line, so they'll have plenty of time to build the cash reserves. Legally, I'm not even sure if new GM is liable since the cars were made by old GM (although that doesn't matter, just ask any old GM bondholder).

I think the Government should fine itself as it was the one who did the bankruptcy and restructuring. Kidding aside! it will be tragic if Government fines Toyota 1.2B for an issue where NASA gave Toyota a clean bill of health but lets GM off the hook!
Title: Re: GM - General Motors
Post by: fareastwarriors on March 21, 2014, 10:44:03 AM
GM’s Supplier-Squeezing Days Gave Birth to Flawed Models


http://www.bloomberg.com/news/2014-03-21/gm-s-supplier-squeezing-days-gave-birth-to-flawed-models.html (http://www.bloomberg.com/news/2014-03-21/gm-s-supplier-squeezing-days-gave-birth-to-flawed-models.html)
Title: Re: GM - General Motors
Post by: muscleman on March 25, 2014, 09:44:45 AM
What is everyone doing with their GM stake? add/hold?

What is your price target on GM? :)
Title: Re: GM - General Motors
Post by: fareastwarriors on April 03, 2014, 04:07:20 PM
GM Boosts Truck Discounts in April After Sales Lag Chrysler



http://www.nytimes.com/reuters/2014/04/03/business/03reuters-autos-trucks-discounts.html?hp (http://www.nytimes.com/reuters/2014/04/03/business/03reuters-autos-trucks-discounts.html?hp)
Title: Re: GM - General Motors
Post by: fareastwarriors on April 06, 2014, 09:24:07 PM
GM Investors Unshaken as Recall Cuts $3 Billion in Value


http://www.bloomberg.com/news/2014-04-06/gm-investors-unshaken-as-recall-cuts-3-billion-in-value.html (http://www.bloomberg.com/news/2014-04-06/gm-investors-unshaken-as-recall-cuts-3-billion-in-value.html)
Title: Re: GM - General Motors
Post by: fareastwarriors on April 08, 2014, 12:01:47 PM
http://www.nytimes.com/aponline/2014/04/08/business/ap-us-general-motors-investment.html?src=busln&_r=0 (http://www.nytimes.com/aponline/2014/04/08/business/ap-us-general-motors-investment.html?src=busln&_r=0)


GM to Invest $449M in 2 Detroit-Area Factories
Title: Re: GM - General Motors
Post by: brker_guy on April 08, 2014, 12:47:32 PM
I am glad to see GM didn't make any more headlines with this crash test.  At least the Chevy SUVs come out on top for a change...

https://autos.yahoo.com/news/only-2-midsize-suvs-top-040349031--finance.html
Title: Re: GM - General Motors
Post by: 50centdollars on April 09, 2014, 06:43:47 AM
Anyone buying the Class B warrants here?
Title: Re: GM - General Motors
Post by: muscleman on April 09, 2014, 08:57:21 AM
Anyone buying the Class B warrants here?


What is your price target for GM stock? Is it $50?
I think GM is cheap if and only if some activist asks the company to pay out a large dividend. But given the warrants, shareholders are less likely to agree to that because that would benefit the warrant holders too much.
Thoughts?
Title: Re: GM - General Motors
Post by: fareastwarriors on April 09, 2014, 09:12:38 AM
http://www.bloomberg.com/news/2014-04-09/gm-workers-who-built-defective-cars-fret-about-recall.html (http://www.bloomberg.com/news/2014-04-09/gm-workers-who-built-defective-cars-fret-about-recall.html)


GM Workers Who Built Defective Cars Incredulous: 'How Does This Happen?'
Title: Re: GM - General Motors
Post by: fareastwarriors on April 10, 2014, 08:50:51 AM
New GM, New Challenges: Moving to UW, PT to $33


April 9, 2014



MORGAN STANLEY
Title: Re: GM - General Motors
Post by: MYDemaray on April 10, 2014, 08:55:40 AM
Yes...this from the Tesla bull
Title: Re: GM - General Motors
Post by: thomcapital on April 10, 2014, 08:58:24 AM
New GM, New Challenges: Moving to UW, PT to $33

April 9, 2014

MORGAN STANLEY

Citi had a note out yesterday countering MS's point on the replacement cycle. Readers here would probably like that as well.
Title: Re: GM - General Motors
Post by: fareastwarriors on April 10, 2014, 09:20:40 AM
New GM, New Challenges: Moving to UW, PT to $33

April 9, 2014

MORGAN STANLEY

Citi had a note out yesterday countering MS's point on the replacement cycle. Readers here would probably like that as well.



Citi Research 4-9-14



General Motors Company (GM)

Alert: If Someone Calls for the End of the U.S. Replacement
Cycle, Ask Them This…

What’s New? —

GM and Ford shares are under some pressure today and we’ve
received a number of investor inquiries regarding the U.S. auto sales cycle and
pricing environment. While we understand that certain voices are calling for the end
of the replacement cycle, we continue to view these declarations as misinformed. In
fact, we believe the overwhelming evidence suggests that the replacement cycle is
still in the beginning stages. As for pricing, we remind investors that many
forecasters do not possess the proper data required to asses these trends (we think
we do), often leading to confusion and blind decelerations. Let’s touch on both.



If Someone Calls for the End of the Replacement Cycle, Ask Them This —

Why did the SAAR rise from 11.5mln in 2010 to 14.4 million in 2012 without a
corresponding rise in the scrap rate? The answer isn’t appreciated by many
because it’s grounded in the very trend most people missed—vehicle density (link
here). From 2010-2012, what many people interpreted as a rapid replacement cycle
was actually a lessening of the decline in U.S. density, in our view. In fact, we
believe the replacement cycle only truly began in 2013 as this was the 1st year
scrap rates spiked. Now that some are calling for the end of the replacement cycle,
the vehicle population may just be entering the ideal age for vehicle scrapping—this
according to an extensive analysis we’ve done on scrap age (not vehicle age).
Based on our analysis, which incidentally back-tests well to the last few years of
scrap, we estimate that U.S. scrap could rise by some ~3 million units cumulatively
through 2018. Not all of these units will be converted to new replacement, per our
proprietary density survey, but enough to justify a sustained ~17mln SAAR pace for
longer than some believe. For a full analysis of this, please click here.

Pricing: Want to Know What’s Really Happening? —

There’s lots of talk today about pricing, and indeed there are some legitimate worries out there (Yen, etc.). But many observers are looking at incomplete data (incentives) and therefore
making blind declarations about the pricing environment. We publish a detailed onestop-
shop report each month called “Pricing-Made-Easy” (link here). Considering
recent pockets of industry price pressure, March was actually a pretty encouraging
month. Industry ATPs appeared to rise low-single digits both YoY & MoM—
encouraging considering the SAAR also rose to 16.3 million. To be sure, pockets of
pressure persisted in select segments like compact & mid-size cars, but the
pressures showed no incremental worsening vs. prior months. Strength in large
pickups accelerated consistent with our long-held “Go Long” pickups thesis. Luxury
segments and SUVs also performed well. Again, while the pricing environment is far
from perfect, we think March data if anything looked incrementally better, not worse.


General Motors Company - Valuation

We value GM shares at $48, which is based on 5.0x our 2014 adjusted EBITDAP of
$11.2 billion. On a straight P/E basis, our target equates to a 2014E multiple of
~12x. The relative multiples are somewhat higher than the 1990s averages to
account for the earlier part of the SAAR recovery cycle, GM's above-average
exposure to emerging markets, the upward shift in industry profitability, our OnStar
valuation, and, in our view, brighter market share recovery prospects ahead of the
product cycle and greater confidence in our “Go Long Pickups” truck thesis.
Risks

Risks to the stock not achieving our target price include a slower-than-expected
auto sales recovery or double-dip recession scenario, market share/pricing erosion,
adverse product mix shifts, worse-than-expected product launch execution, global
regulatory/political risks and worse-than-expected cost execution, particularly in
Europe.

Title: Re: GM - General Motors
Post by: sleepydragon on April 10, 2014, 06:21:07 PM
good bargain here, but i fear this will hurt their brand, which will translate to inventory build up, then more losses.. it's a very capital intensive business
Title: Re: GM - General Motors
Post by: ukvalueinvestment on April 11, 2014, 09:14:02 AM
From FT today:

A few short years ago, “subprime” was almost an expletive. During the financial crisis, mortgages linked to subprime borrowers – or those with poor credit history – caused devastating losses; so much so that many asset managers declared they would never touch subprime again.
But the financial world has a short memory, particularly when easy money and innovation collide. In recent months subprime lending has quietly staged a surprisingly powerful return, not in relation to real estate, but another American passion – cars. Some wonder how long it will be before this new boom causes another wave of casualties, not just among naive consumers, but investors too.
More
ON THIS STORY
Springleaf delays annual report
New lenders join subprime car loan boom
Alcoa accelerates on carmaker targets
On Wall Street Bold turn for subprime car loan deals
Gary Silverman Welcome to Bakersfield, California
ON THIS TOPIC
GM crisis widens with second faulty part
Regulator fines GM over botched recall
Slideshow Catalogue of car recalls
Washington ordeal for head of ‘new GM’
GILLIAN TETT
Let’s get geeks into government
The female face of the crisis quits the spotlight
Digital v human the new debate
After the Candy Crush crunch
The historical echoes are uncanny. During most of the past decade the amount of car-related debt grew only modestly. Yet outstanding car loans, which totalled $700bn in 2010, have jumped by a quarter in the past three years. This has led to a sharp increase in car sales, benefiting groups such as General Motors.
This upswing is striking, given that many other forms of consumer credit have remained weak since the 2007 financial crisis. Outstanding loans on credit cards, for example, have recently hovered near a 10-year low, and data this week showed they fell unexpectedly sharply, by $2.42bn in February.
But car finance – along with student loans – jumped in that same month. Even more notable is that this has occurred amid a sharp deterioration in loan quality. Five years ago, subprime loans represented barely a 10th of the total; today they account for a third. A particularly high proportion of GM cars sales are financed by subprime loans. Meanwhile, a 10th of new loans are now going to so-called “deep subprime”, or consumers who would previously have had little chance of getting funding – particularly given that incomes for poorer households have stayed flat or declined, even as car prices jumped.
There are several reasons for this boom. One is the fact that asset managers are currently so desperate to find something – anything – that produces a return in an ultra-low interest rate world that they are gobbling up all manner of bonds. And investors are particularly keen to buy bonds backed by car loans because these performed better than mortgages during the last credit crisis. This has spawned a widespread (and potentially dangerous) assumption that American consumers are so attached to their cars they will do anything to retain them.
However another reason for the boom is that savvy private equity firms and hedge funds have jumped into the fray, backing a plethora of new car finance companies in the past three years.
These have pushed loans to consumers in creative ways, and it has been a highly lucrative game: consumers can pay almost 20 per cent interest for subprime loans, but finance companies’ funding costs can be a mere 2 per cent, due to voracious investor demand.
Thus far there is little sign that this boom is causing tears. Default rates on car loans remain low by historical standards, at about 1 per cent. Still, if interest rates rise, defaults will almost certainly jump, particularly if incomes remain flat.
Credit rating agencies are starting to get uneasy. Some of the smartest Wall Street players are quietly cashing out. Some financiers are now so convinced that a crunch looms that they are furtively shorting automotive stocks such as GM, on fears that a loan crunch will hit car sales. That may explain why shares in the car company have slid so sharply this year, even beyond what could be explained by the recent embarrassing scandals over faulty ignition keys.
These worries may be premature; people were muttering about the last subprime bubble years before it burst. And the good news is that even if subprime car financing does create a crunch, it will not necessarily cause that much systemic impact, since it is much smaller in size.
But if nothing else, this little saga is a stark reminder that parts of America’s current recovery are built on wobbly foundations. And it is another timely illustration – if any were needed – that cheap money has a nasty habit of creating distortions in unexpected places; even if they do not usually occur in exactly the same place as before.
Title: Re: GM - General Motors
Post by: 50centdollars on April 11, 2014, 11:33:27 AM
Class B warrants down over 8%
Title: Re: GM - General Motors
Post by: fareastwarriors on April 11, 2014, 11:43:45 AM
ouch...


Class B warrants down over 8%
Title: Re: GM - General Motors
Post by: BargainValueHunter on April 12, 2014, 06:23:24 AM
Class B warrants down over 8%

...And no "AIG TARP warrant" style dividend adjustment either. :(
Title: Re: GM - General Motors
Post by: fareastwarriors on April 14, 2014, 09:24:24 AM
GM's Opel Could Break Even Ahead of Schedule

Unit Chief Karl-Thomas Neumann Is Cautiously Optimistic, Though Wary of Russia Situation



http://online.wsj.com/news/articles/SB10001424052702303887804579499500319208892?mg=reno64-wsj (http://online.wsj.com/news/articles/SB10001424052702303887804579499500319208892?mg=reno64-wsj)
Title: Re: GM - General Motors
Post by: fareastwarriors on April 15, 2014, 08:04:32 AM
Hedge Fund Manager Makes Lonely Defense of G.M.



http://dealbook.nytimes.com/2014/04/15/hedge-fund-manager-makes-lonely-defense-of-g-m/?_php=true&_type=blogs&module=BlogPost-Title&version=Blog%20Main&contentCollection=Hedge%20Funds&action=Click&pgtype=Blogs&region=Body&_r=0 (http://dealbook.nytimes.com/2014/04/15/hedge-fund-manager-makes-lonely-defense-of-g-m/?_php=true&_type=blogs&module=BlogPost-Title&version=Blog%20Main&contentCollection=Hedge%20Funds&action=Click&pgtype=Blogs&region=Body&_r=0)
Title: Re: GM - General Motors
Post by: fareastwarriors on April 15, 2014, 04:59:08 PM
GM crisis ‘catalyst for change’, says chief

http://www.ft.com/intl/cms/s/0/342f6e0c-c4e6-11e3-9aeb-00144feabdc0.html?siteedition=intl#axzz2yzWDtVnC (http://www.ft.com/intl/cms/s/0/342f6e0c-c4e6-11e3-9aeb-00144feabdc0.html?siteedition=intl#axzz2yzWDtVnC)



 
Mary Barra, chief executive of General Motors, has promised to use the crisis over the company’s delayed vehicle recall as “a catalyst for change” now that the carmaker is no longer fighting for survival.
 
In one of her first public appearances since the seriousness of the crisis became apparent last month, Ms Barra also said she wanted to change the company’s culture to increase its focus on customers.

 
Ms Barra was speaking at the JD Power automotive forum on the eve of the New York Auto Show, which is likely to be overshadowed by GM’s recall of 2.6m vehicles because of faulty ignition switches.
 
GM suspected a problem with the ignition switches in compact cars including the Chevrolet Cobalt and Saturn Ion as long ago as 2001 but failed to issue a general recall.
 
At least 12 people are thought to have died in crashes when the vehicles’ ignition switches shifted from “run” to “accessory” while the vehicle was being driven. The shift cut the vehicles’ engines and disabled the power steering and airbags.
 
Asked about the recall issue’s effect on the company, where she took charge on January 15, Ms Barra said: “We’ll use this as a catalyst for change.”
 
She had said that the company had taken “many important and meaningful steps” to change its culture after the emergence of the recall issue.
 
“Our focus is no longer on survival,” she said, referring to the period before GM’s government-managed bankruptcy in 2009. “We’re even more focused today on quality and doing what is right for the customer than at any time in my 33 years at GM.”
 
Every interaction with a customer was part of building a long-term relationship, she said. “That’s the mindset we’re using to approach this issue.”
 
Ms Barra announced at the forum that she was creating a global product integrity group within GM’s product development arm that would look at all aspects of how vehicles handled.
 
Jeff Boyer, GM’s new global head of product safety, whose job was created in response to the recall crisis, will be part of the new group.
 
Ms Barra insisted that it was no reflection on the company’s handling of the crisis that it had recalled the affected vehicles in three batches – two in February and a third in March.
 
“It was the technical analysis,” she said, of what had prompted the recalls. “It was understanding, adding all the vehicles together and understanding.”
 
GM hired Anton Valukas, a former lawyer, to probe the precise series of events and conduct an internal investigation into the delayed recall.
 
The company last week announced it was suspending two engineers while the investigation continued.
 
Ms Barra said she had agonised over the suspensions.
 
But added: “We felt it was right for the engineers and the company at this time.”
Title: Re: GM - General Motors
Post by: phil_Buffett on April 16, 2014, 03:27:27 PM
http://www.bloomberg.com/news/2014-04-16/gm-move-to-freeze-lawsuits-may-cut-customer-payouts-by-billions.html
Title: Re: GM - General Motors
Post by: argonaut on April 23, 2014, 10:26:41 AM
Is anyone tracking the B warrants using the Bloomberg app for iPhone or iPad and if so, may I ask what symbol you are using? I've tried gm/ws/b, gm.ws.b, etc...either I am missing something or it does not sync for warrants...
Title: Re: GM - General Motors
Post by: thelads on April 23, 2014, 02:27:35 PM
use GM/WS/B US
Title: Re: GM - General Motors
Post by: fareastwarriors on April 23, 2014, 02:33:44 PM
use GM/WS/B US

That is for the BB terminal ticker. The site/app is different. (at least to my knowledge...)
Title: Re: GM - General Motors
Post by: argonaut on April 23, 2014, 02:45:58 PM
yes, the app does not recognize that symbol...I called them but have not heard back yet..I also filled in a contact form...but thought perhaps one of the esteemed users on this forum might already have the symbol handy :)
Title: Re: GM - General Motors
Post by: fareastwarriors on April 30, 2014, 10:46:12 AM
US government says it lost $11.2B on GM bailout



http://www.cnbc.com/id/101628848 (http://www.cnbc.com/id/101628848)
Title: Re: GM - General Motors
Post by: thelads on April 30, 2014, 12:45:05 PM
Ok - try this - its the cusip for the warrant - hope it helps: 37045V126

Anyone have any updated opinion on valuation?
Title: Re: GM - General Motors
Post by: JPerez on May 04, 2014, 02:48:56 PM
http://money.cnn.com/video/news/2014/05/03/n-warren-buffett-general-motors-ceo-mary-barra-liability.cnnmoney/
Interesting video. Buffett saying he had lunch with Barra recently and he is very impressed 'She's dynamite ... I was really impressed.'.
I think there is a real possibility that Berkshire is increasing their stake in GM in the last few months a these depressed prices.
Also the April sales looked really good, specially considering the circumstances. And it seems that they are trying to keep price discipline in their sales.
I believe that the stock will see the 50s in the next couple of years because they are capable of earning 5$ a share and they have a very strong balance sheet.
Title: Re: GM - General Motors
Post by: EliG on May 04, 2014, 05:53:51 PM
http://dealbook.nytimes.com/2014/05/03/live-blog-berkshire-hathaways-2014-shareholder-meeting/#about-mungers-hearing

Buffett is worried about Munger's hearing. Is it just a joke, or is it a stock tip?

Quote
...

Then Mr. Buffett wades in. “I get a little worried about Charlie. I probably shouldn’t say this” — a trace of an impish smile crossing his face — “but I’m worried about Charlie.”

Why? It’s Mr. Munger’s hearing. Mr. Buffett recalls talking to a doctor about his business partner’s hearing. To test the extent of any potential hearing damage, Mr. Buffett says from across the room, “Charlie, what do you think about buying General Motors [stock] at $35?”

Nothing.

Mr. Buffett moves closer. “Charlie, what do you think about buying General Motors at $35?”

Nothing.

The billionaire then stands right next to his partner and says directly in his friend’s ear, “Charlie, what do you think about buying General Motors at $35?”

Mr. Munger turns to him and says, “For the third time, I said yes.”
Title: Re: GM - General Motors
Post by: PJM on May 04, 2014, 06:18:25 PM
http://dealbook.nytimes.com/2014/05/03/live-blog-berkshire-hathaways-2014-shareholder-meeting/#about-mungers-hearing

Buffett is worried about Munger's hearing. Is it just a joke, or is it a stock tip?

Quote
...

Then Mr. Buffett wades in. “I get a little worried about Charlie. I probably shouldn’t say this” — a trace of an impish smile crossing his face — “but I’m worried about Charlie.”

Why? It’s Mr. Munger’s hearing. Mr. Buffett recalls talking to a doctor about his business partner’s hearing. To test the extent of any potential hearing damage, Mr. Buffett says from across the room, “Charlie, what do you think about buying General Motors [stock] at $35?”

Nothing.

Mr. Buffett moves closer. “Charlie, what do you think about buying General Motors at $35?”

Nothing.

The billionaire then stands right next to his partner and says directly in his friend’s ear, “Charlie, what do you think about buying General Motors at $35?”

Mr. Munger turns to him and says, “For the third time, I said yes.”

Buffett has cracked this joke many times with different stocks but surprisingly the stock price is always 35 :)
Title: Re: GM - General Motors
Post by: txlaw on May 05, 2014, 06:54:05 AM
WEB on Barra:
http://video.cnbc.com/gallery/?video=3000272536
Title: Re: GM - General Motors
Post by: phil_Buffett on May 05, 2014, 07:45:00 AM
WEB on Barra:
http://video.cnbc.com/gallery/?video=3000272536

http://money.cnn.com/video/news/2014/05/03/n-warren-buffett-general-motors-ceo-mary-barra-liability.cnnmoney/
Interesting video. Buffett saying he had lunch with Barra recently and he is very impressed 'She's dynamite ... I was really impressed.'.
I think there is a real possibility that Berkshire is increasing their stake in GM in the last few months a these depressed prices.
Also the April sales looked really good, specially considering the circumstances. And it seems that they are trying to keep price discipline in their sales.
I believe that the stock will see the 50s in the next couple of years because they are capable of earning 5$ a share and they have a very strong balance sheet.


thanks both of you  :)
Title: Re: GM - General Motors
Post by: valueinvesting101 on May 05, 2014, 08:21:20 AM
May be there are looking at insuring liability similar to asbestos liability deal.
Title: Re: GM - General Motors
Post by: fareastwarriors on May 15, 2014, 11:43:03 AM
G.M. Recalls Another 2.7 Million Vehicles


http://www.nytimes.com/2014/05/16/automobiles/gm-recalls-another-2-7-million-vehicles.html?ref=business&_r=0 (http://www.nytimes.com/2014/05/16/automobiles/gm-recalls-another-2-7-million-vehicles.html?ref=business&_r=0)
Title: Re: GM - General Motors
Post by: redskin on May 15, 2014, 12:47:40 PM
WEB on Barra:
http://video.cnbc.com/gallery/?video=3000272536

http://money.cnn.com/video/news/2014/05/03/n-warren-buffett-general-motors-ceo-mary-barra-liability.cnnmoney/
Interesting video. Buffett saying he had lunch with Barra recently and he is very impressed 'She's dynamite ... I was really impressed.'.
I think there is a real possibility that Berkshire is increasing their stake in GM in the last few months a these depressed prices.
Also the April sales looked really good, specially considering the circumstances. And it seems that they are trying to keep price discipline in their sales.
I believe that the stock will see the 50s in the next couple of years because they are capable of earning 5$ a share and they have a very strong balance sheet.


thanks both of you  :)

I actually talked with Ted Weschler at the annual meeting.  I asked him what he would be buying if he was dealing with smaller sums of money.  He mentioned that he is allowed to invest in his personal account and mentioned the GM C warrants.  He thinks there is about a 30% chance they go to zero with the possibility they go 10X.  I wouldn't be surprised if you see Berkshire's stake increase in the 13-f filing today.
Title: Re: GM - General Motors
Post by: BRK7 on May 15, 2014, 01:18:13 PM
quick glance at 13F shows BRK sold 10M shares of GM in the quarter

WEB on Barra:
http://video.cnbc.com/gallery/?video=3000272536

http://money.cnn.com/video/news/2014/05/03/n-warren-buffett-general-motors-ceo-mary-barra-liability.cnnmoney/
Interesting video. Buffett saying he had lunch with Barra recently and he is very impressed 'She's dynamite ... I was really impressed.'.
I think there is a real possibility that Berkshire is increasing their stake in GM in the last few months a these depressed prices.
Also the April sales looked really good, specially considering the circumstances. And it seems that they are trying to keep price discipline in their sales.
I believe that the stock will see the 50s in the next couple of years because they are capable of earning 5$ a share and they have a very strong balance sheet.


thanks both of you  :)

I actually talked with Ted Weschler at the annual meeting.  I asked him what he would be buying if he was dealing with smaller sums of money.  He mentioned that he is allowed to invest in his personal account and mentioned the GM C warrants.  He thinks there is about a 30% chance they go to zero with the possibility they go 10X.  I wouldn't be surprised if you see Berkshire's stake increase in the 13-f filing today.
Title: Re: GM - General Motors
Post by: Yours Truly on May 15, 2014, 01:32:41 PM
WEB on Barra:
http://video.cnbc.com/gallery/?video=3000272536

http://money.cnn.com/video/news/2014/05/03/n-warren-buffett-general-motors-ceo-mary-barra-liability.cnnmoney/
Interesting video. Buffett saying he had lunch with Barra recently and he is very impressed 'She's dynamite ... I was really impressed.'.
I think there is a real possibility that Berkshire is increasing their stake in GM in the last few months a these depressed prices.
Also the April sales looked really good, specially considering the circumstances. And it seems that they are trying to keep price discipline in their sales.
I believe that the stock will see the 50s in the next couple of years because they are capable of earning 5$ a share and they have a very strong balance sheet.


thanks both of you  :)

I actually talked with Ted Weschler at the annual meeting.  I asked him what he would be buying if he was dealing with smaller sums of money.  He mentioned that he is allowed to invest in his personal account and mentioned the GM C warrants.  He thinks there is about a 30% chance they go to zero with the possibility they go 10X.  I wouldn't be surprised if you see Berkshire's stake increase in the 13-f filing today.

He does have personal stakes in DVA , DTV, LMCA, and STRZA as far as I know.  Thanks for the tid bit and must have been nice to talk to him.
Title: Re: GM - General Motors
Post by: snow pea on May 15, 2014, 02:15:55 PM
I actually talked with Ted Weschler at the annual meeting.  I asked him what he would be buying if he was dealing with smaller sums of money.  He mentioned that he is allowed to invest in his personal account and mentioned the GM C warrants.  He thinks there is about a 30% chance they go to zero with the possibility they go 10X.  I wouldn't be surprised if you see Berkshire's stake increase in the 13-f filing today.

I may be missing something here, but if you like the GM C warrants, mightn't you just buy comparable strike leaps instead?

According to quick info pulls:
GM-WTC:                   expire 12/31/2015;   strike is $42.31;   current price is $2.32;
GM $42 '16 leaps:     expire 1/15/2016;     strike is $42.00;   current price is $1.77

The GM warrants don't have ordinary dividend protection, no?  So in practice, I'm aware of very little difference here, other than a fairly significant valuation gap - am I missing something important?  Volume?
Title: Re: GM - General Motors
Post by: Yours Truly on May 15, 2014, 06:01:01 PM
looks like Ted just reduced Berkshires stake in GM and no warrants to be found
Title: Re: GM - General Motors
Post by: redskin on May 16, 2014, 07:08:38 AM
looks like Ted just reduced Berkshires stake in GM and no warrants to be found

He said he takes considerable more risk in his personal portfolio than what he would ever do for Berkshire.   I'm pretty certain he wouldn't buy the C warrants for BRK.   I'm not sure why you would buy the C warrants instead of the leaps.
Title: Re: GM - General Motors
Post by: fareastwarriors on May 16, 2014, 10:14:46 AM
GM to Pay Record $35 Million Fine Over Handling of Recall



http://www.bloomberg.com/news/2014-05-16/gm-said-to-agree-to-u-s-fine-over-ignition-switch-recall.html (http://www.bloomberg.com/news/2014-05-16/gm-said-to-agree-to-u-s-fine-over-ignition-switch-recall.html)
Title: Re: GM - General Motors
Post by: sleepydragon on May 18, 2014, 07:00:49 PM
I may be missing something here, but if you like the GM C warrants, mightn't you just buy comparable strike leaps instead?

According to quick info pulls:
GM-WTC:                   expire 12/31/2015;   strike is $42.31;   current price is $2.32;
GM $42 '16 leaps:     expire 1/15/2016;     strike is $42.00;   current price is $1.77

The GM warrants don't have ordinary dividend protection, no?  So in practice, I'm aware of very little difference here, other than a fairly significant valuation gap - am I missing something important?  Volume?

maybe it's because people can short the leap options (many doing covered calls) but they can't short the warrants. So the options is miss-priced? Another reason could be the warrant is cash settled (not sure if it is), and the options you have to pay brokers to exercise it or sell it before expiration?

anyway, I feel it's too risky.. look at BP.. took many years to get out of their "one-time problem". For GM, I wonder if this is a culture issue. Culture is too hard to change. Their own workers in the factory that made these cars couldn't believe this is happening. They were proud of their work. They thought they are producing good quality cars. That's a little hopeless. The same people will make the same mistakes again.
Title: Re: GM - General Motors
Post by: Avyalake on May 19, 2014, 09:06:40 PM
Cadillac Finally Makes German Luxury Prices Stick

Cadillac ratcheted up prices the old-fashioned way: by making a much better car
http://www.businessweek.com/articles/2014-05-19/cadillac-finally-makes-german-luxury-prices-stick#r=lr-sr
Title: Re: GM - General Motors
Post by: moody202 on May 20, 2014, 03:07:31 AM
GM to Pay Record $35 Million Fine Over Handling of Recall



http://www.bloomberg.com/news/2014-05-16/gm-said-to-agree-to-u-s-fine-over-ignition-switch-recall.html (http://www.bloomberg.com/news/2014-05-16/gm-said-to-agree-to-u-s-fine-over-ignition-switch-recall.html)

35M is not not substantial in today's world!
Title: Re: GM - General Motors
Post by: jeffmori7 on May 20, 2014, 07:03:27 AM
Someone's buying more B warrants, apart from Monish?

A 50$ stock in 5 years would imply a double for the warrants, 15% compounded. I'm pretty confident GM stock can trade higher than that.
Title: Re: GM - General Motors
Post by: 50centdollars on May 20, 2014, 07:13:38 AM
I think its realistic that GM can earn $5/share in 2015. If you put a P/E of 10 on that, you get $50.
Title: Re: GM - General Motors
Post by: jeffmori7 on May 20, 2014, 07:15:44 AM
I think its realistic that GM can earn $5/share in 2015. If you put a P/E of 10 on that, you get $50.

That is what I am thinking too!
Title: Re: GM - General Motors
Post by: CorpRaider on May 20, 2014, 08:59:02 AM
GM to Pay Record $35 Million Fine Over Handling of Recall



http://www.bloomberg.com/news/2014-05-16/gm-said-to-agree-to-u-s-fine-over-ignition-switch-recall.html (http://www.bloomberg.com/news/2014-05-16/gm-said-to-agree-to-u-s-fine-over-ignition-switch-recall.html)

35M is not not substantial in today's world!

As I'm sure is common knowledge, that's only for failure to timely respond/inform NTSB and it is the max allowable fine.  Of course there are likely much bigger fines coming down the pike for substantive violations/offenses, not to mention the law suits.
Title: Re: GM - General Motors
Post by: fareastwarriors on May 20, 2014, 09:11:33 AM
GM to recall another 2.42 million vehicles

http://www.cnbc.com/id/101686708 (http://www.cnbc.com/id/101686708)


Quote
General Motors said Tuesday it will recall another 2.42 million vehicles in the U.S., lifting the number of cars it has recalled so far in 2014 for more than 15 million.

The automaker also said it is doubling the charge it expects to take in the second quarter to about $400 million, mostly for recall-related repairs.
Title: Re: GM - General Motors
Post by: moody202 on May 20, 2014, 10:39:44 AM
GM to Pay Record $35 Million Fine Over Handling of Recall



http://www.bloomberg.com/news/2014-05-16/gm-said-to-agree-to-u-s-fine-over-ignition-switch-recall.html (http://www.bloomberg.com/news/2014-05-16/gm-said-to-agree-to-u-s-fine-over-ignition-switch-recall.html)

35M is not not substantial in today's world!

That's only for failure to timely respond/inform NTSB and it is the max allowable fine.  Of course there are likely much bigger fines coming down the pike for substantive violations/offenses, not to mention the law suits.

Agree. When I look at the sales numbers from past few months, it feels like the government is having a bigger reaction to the recalls than the consumer.  Not to mention, the ignition recall was all for old cars not ones being sold right now!
Title: Re: GM - General Motors
Post by: nikhil25 on May 20, 2014, 12:09:59 PM
GM to recall another 2.42 million vehicles

http://www.cnbc.com/id/101686708 (http://www.cnbc.com/id/101686708)


Quote
General Motors said Tuesday it will recall another 2.42 million vehicles in the U.S., lifting the number of cars it has recalled so far in 2014 for more than 15 million.

The automaker also said it is doubling the charge it expects to take in the second quarter to about $400 million, mostly for recall-related repairs.

And I thought it dropped ~4% because I bought a few commons this morning  :-\
Title: Re: GM - General Motors
Post by: fareastwarriors on May 21, 2014, 09:24:53 AM
Auto Bailout Leaders Reflect: ‘Battlefield Medicine Is Never Perfect’


http://blogs.wsj.com/corporate-intelligence/2014/05/21/bailout-leader-gm-recalls-reflect-company-living-on-the-brink-of-disaster/?mod=WSJBlog&mod=WSJ_corp_intel (http://blogs.wsj.com/corporate-intelligence/2014/05/21/bailout-leader-gm-recalls-reflect-company-living-on-the-brink-of-disaster/?mod=WSJBlog&mod=WSJ_corp_intel)
Title: Re: GM - General Motors
Post by: Steve on May 21, 2014, 08:00:26 PM

http://www.bloomberg.com/news/2014-05-16/gm-recalls-bring-2014-total-to-record-11-2-million-in-may.html


greenlight closed out of GM..... and berkshire hathaway reduced position.

-Steve
Title: Re: GM - General Motors
Post by: fareastwarriors on May 22, 2014, 05:02:24 PM
Midsize Malibu Tops List of Most Recalled GM Cars

Cobalt May Have Notoriety, but a Malibu Has Most Number of Recalls



http://online.wsj.com/news/articles/SB10001424052702303749904579578431121982194?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj (http://online.wsj.com/news/articles/SB10001424052702303749904579578431121982194?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj)
Title: Re: GM - General Motors
Post by: ERICOPOLY on May 22, 2014, 05:17:41 PM
Midsize Malibu Tops List of Most Recalled GM Cars

Cobalt May Have Notoriety, but a Malibu Has Most Number of Recalls



http://online.wsj.com/news/articles/SB10001424052702303749904579578431121982194?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj (http://online.wsj.com/news/articles/SB10001424052702303749904579578431121982194?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj)


I remember when the ex-CEO of GM commented that Tesla would find out what it's like to produce a car.  It's interesting that Tesla found out how to make the highest rated one on their first time trying.  Whereas here GM is, nearly 100 years later, and they're making trucks that catch on fire when idling their engines:

http://www.freeinews.com/automotive-2/gm-recalls-trucks-for-fire-risks-from-excessive-idling-one-2014-silverado-owner-tells-a-different-story

Title: Re: GM - General Motors
Post by: beerbaron on May 22, 2014, 05:58:47 PM
Midsize Malibu Tops List of Most Recalled GM Cars

Cobalt May Have Notoriety, but a Malibu Has Most Number of Recalls



http://online.wsj.com/news/articles/SB10001424052702303749904579578431121982194?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj (http://online.wsj.com/news/articles/SB10001424052702303749904579578431121982194?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj)


I remember when the ex-CEO of GM commented that Tesla would find out what it's like to produce a car.  It's interesting that Tesla found out how to make the highest rated one on their first time trying.  Whereas here GM is, nearly 100 years later, and they're making trucks that catch on fire when idling their engines:

http://www.freeinews.com/automotive-2/gm-recalls-trucks-for-fire-risks-from-excessive-idling-one-2014-silverado-owner-tells-a-different-story

Tesla, no matter howgood they are will some day or another have a recall. It's a not a question of if it will happen but a when it will happen.
Title: Re: GM - General Motors
Post by: JBird on May 22, 2014, 05:59:28 PM
Midsize Malibu Tops List of Most Recalled GM Cars

Cobalt May Have Notoriety, but a Malibu Has Most Number of Recalls



http://online.wsj.com/news/articles/SB10001424052702303749904579578431121982194?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj (http://online.wsj.com/news/articles/SB10001424052702303749904579578431121982194?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj)


I remember when the ex-CEO of GM commented that Tesla would find out what it's like to produce a car.  It's interesting that Tesla found out how to make the highest rated one on their first time trying.  Whereas here GM is, nearly 100 years later, and they're making trucks that catch on fire when idling their engines:

http://www.freeinews.com/automotive-2/gm-recalls-trucks-for-fire-risks-from-excessive-idling-one-2014-silverado-owner-tells-a-different-story

Hahaha thanks for posting
Title: Re: GM - General Motors
Post by: hardincap on May 22, 2014, 06:36:29 PM
Kyle Bass is adjusting the market cap by $14bn to get the enterprise value:

Equity Value: 60bn
Enterprise Value: 46bn.

Can anyone tell me what the specific adjustments are to get to 46?
Title: Re: GM - General Motors
Post by: ERICOPOLY on May 22, 2014, 07:11:37 PM
Midsize Malibu Tops List of Most Recalled GM Cars

Cobalt May Have Notoriety, but a Malibu Has Most Number of Recalls



http://online.wsj.com/news/articles/SB10001424052702303749904579578431121982194?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj (http://online.wsj.com/news/articles/SB10001424052702303749904579578431121982194?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj)


I remember when the ex-CEO of GM commented that Tesla would find out what it's like to produce a car.  It's interesting that Tesla found out how to make the highest rated one on their first time trying.  Whereas here GM is, nearly 100 years later, and they're making trucks that catch on fire when idling their engines:

http://www.freeinews.com/automotive-2/gm-recalls-trucks-for-fire-risks-from-excessive-idling-one-2014-silverado-owner-tells-a-different-story

Tesla, no matter howgood they are will some day or another have a recall. It's a not a question of if it will happen but a when it will happen.

Keep in mind that the GM recall for idling engines only required a software fix.  Tesla does software updates all the time, without needing to recall the cars.
Title: Re: GM - General Motors
Post by: bargainman on May 22, 2014, 07:26:56 PM
Midsize Malibu Tops List of Most Recalled GM Cars

Cobalt May Have Notoriety, but a Malibu Has Most Number of Recalls



http://online.wsj.com/news/articles/SB10001424052702303749904579578431121982194?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj (http://online.wsj.com/news/articles/SB10001424052702303749904579578431121982194?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj)


I remember when the ex-CEO of GM commented that Tesla would find out what it's like to produce a car.  It's interesting that Tesla found out how to make the highest rated one on their first time trying.  Whereas here GM is, nearly 100 years later, and they're making trucks that catch on fire when idling their engines:

http://www.freeinews.com/automotive-2/gm-recalls-trucks-for-fire-risks-from-excessive-idling-one-2014-silverado-owner-tells-a-different-story

Tesla, no matter howgood they are will some day or another have a recall. It's a not a question of if it will happen but a when it will happen.

"Last week, when GM announced it was recalling 370,000 of their brand-new heavy duty pickups for a “software fix” to address fire concerns"

if they do it won't be because of a software update...  apparently they update their software over wireless..

http://www.wired.com/2013/11/tesla-responds-model-s-fires/
http://www.wired.com/2012/09/tesla-over-the-air/

Title: Re: GM - General Motors
Post by: Liberty on May 22, 2014, 07:28:36 PM
Tesla, no matter howgood they are will some day or another have a recall. It's a not a question of if it will happen but a when it will happen.

I don't think recalls are a problem. The problem is when companies should have recalled something dangerous and didn't, or do it too late or reluctantly, or aren't transparent enough about what's going on, etc. Or when a recall reveals a serious design flaw that erodes consumer trust in the safety of the rest of their vehicle ("if they missed that, what else did they miss? did the B team work on my car?").

So far Tesla has gone above and beyond on that front. After the media ruckus over a few cars catching fire after really severe accidents (something that is more likely in a gasoline-powered car because the gas tank is much more exposed and gasoline is more flammable, btw), Tesla concluded that its cars were safe, nobody was harmed either, etc. So no need for a recall, just a minor software update to change the ground clearance by raising the dynamic suspension a tad. But they still offered to install titanium armor plates and aluminum deflectors free of charge to anyone that wanted them to further reduce the already minimal risk. That's a good way to improve trust in the brand.

It's kind of like the old story that they always repeat about how JnJ recalled all Aspirins in the US after a couple bottles were found to be tampered with or something like that. There are ways to handle a crisis that makes you come out looking better than you did going in...
Title: Re: GM - General Motors
Post by: ERICOPOLY on May 22, 2014, 08:27:48 PM
I don't think recalls are a problem. The problem is when companies should have recalled something dangerous and didn't, or do it too late or reluctantly, or aren't transparent enough about what's going on, etc. Or when a recall reveals a serious design flaw that erodes consumer trust in the safety of the rest of their vehicle ("if they missed that, what else did they miss? did the B team work on my car?").

There is something wrong with the company culture at GM.  How good does this look?


The company urged employees not to say ‘this is a lawsuit waiting to happen.’

GM suggested engineers avoid ‘judgment words’ like ‘death trap,’ ‘grenade-like’


Read more: http://www.politico.com/story/2014/05/gm-death-trap-grenademaker-106787.html#ixzz32VPcAQtW

GM told engineers to avoid using dozens of words when communicating about vehicle problems that could potentially lead to recalls, including everything from “safety” to “Kevorkianesque.”

Here is an endearing term for their cars:   “rolling sarcophagus (tomb or coffin),”

I detect an air of frustration that the engineers feel like management won't let them fix the problems.  That's why they have these cynical names for their own product.  One theory is that they want to fix things, but the upper management won't let them (likely for fear of costs and publicity).

Title: Re: GM - General Motors
Post by: fareastwarriors on May 23, 2014, 10:43:53 AM
GM Sales Appear Resilient Amid Recalls, Dealers Optimistic



http://www.nytimes.com/reuters/2014/05/23/business/23reuters-gm-recall-dealers.html?src=busln&_r=0 (http://www.nytimes.com/reuters/2014/05/23/business/23reuters-gm-recall-dealers.html?src=busln&_r=0)
Title: Re: GM - General Motors
Post by: fareastwarriors on May 26, 2014, 09:58:48 AM
G.M. to Recall Nearly 46,000 Cars in Australia and New Zealand


http://www.nytimes.com/2014/05/27/business/gm-to-recall-nearly-46000-cars-in-australia-and-new-zealand.html?src=busln&_r=0 (http://www.nytimes.com/2014/05/27/business/gm-to-recall-nearly-46000-cars-in-australia-and-new-zealand.html?src=busln&_r=0)
Title: Re: GM - General Motors
Post by: hellsten on May 26, 2014, 10:11:14 AM
I detect an air of frustration that the engineers feel like management won't let them fix the problems.  That's why they have these cynical names for their own product.  One theory is that they want to fix things, but the upper management won't let them (likely for fear of costs and publicity).

Reminds me of the Challenger disaster and Richard Feynman's role in the investigation:
http://en.wikipedia.org/wiki/Rogers_Commission_Report#Role_of_Richard_Feynman

Quote
he could not in good conscience recommend that such a deeply flawed organization as NASA should continue without a suspension of operations and a major overhaul

Management was living in a fantasy. Tesla = Science. GM = Politics.
Title: Re: GM - General Motors
Post by: fareastwarriors on May 30, 2014, 10:22:25 AM
An Increase in Recalls Goes Beyond Just G.M.



http://www.nytimes.com/2014/05/30/business/ford-recalls-1-1-million-suvs-because-of-faulty-power-steering.html?ref=business (http://www.nytimes.com/2014/05/30/business/ford-recalls-1-1-million-suvs-because-of-faulty-power-steering.html?ref=business)
Title: Re: GM - General Motors
Post by: phil_Buffett on June 03, 2014, 06:41:01 AM
http://www.reuters.com/article/2014/06/03/gm-brief-idUSS8N0N600G20140603
Title: Re: GM - General Motors
Post by: fareastwarriors on June 04, 2014, 09:43:16 AM
Inside New CEO Mary Barra's Urgent Mission To Fix GM



http://www.forbes.com/sites/joannmuller/2014/05/28/exclusive-inside-mary-barras-urgent-mission-to-fix-gm/ (http://www.forbes.com/sites/joannmuller/2014/05/28/exclusive-inside-mary-barras-urgent-mission-to-fix-gm/)
Title: Re: GM - General Motors
Post by: fareastwarriors on June 06, 2014, 09:07:16 AM
G.M. Inquiry Cites Years of Neglect Over Fatal Defect




http://www.nytimes.com/2014/06/06/business/gm-ignition-switch-internal-recall-investigation-report.html?src=me&_r=0 (http://www.nytimes.com/2014/06/06/business/gm-ignition-switch-internal-recall-investigation-report.html?src=me&_r=0)
Title: Re: GM - General Motors
Post by: fareastwarriors on June 06, 2014, 03:24:19 PM
GM’s New Recalls Adds to Company’s Record-Breaking Tally


http://www.bloomberg.com/news/2014-06-06/gm-s-new-recalls-adds-to-company-s-record-breaking-tally.html (http://www.bloomberg.com/news/2014-06-06/gm-s-new-recalls-adds-to-company-s-record-breaking-tally.html)
Title: Re: GM - General Motors
Post by: fareastwarriors on June 13, 2014, 10:23:50 AM
GM's Latest Recall Wreck Claims the Storied Camaro


http://www.businessweek.com/articles/2014-06-13/gms-latest-recall-wreck-the-camaro (http://www.businessweek.com/articles/2014-06-13/gms-latest-recall-wreck-the-camaro)
Title: Re: GM - General Motors
Post by: fareastwarriors on June 16, 2014, 02:04:22 PM
GM Recall Charge at $700 Million as Tally Hits 20 Million



http://www.bloomberg.com/news/2014-06-16/gm-recalling-3-16-million-additional-cars-for-ignition-issues.html (http://www.bloomberg.com/news/2014-06-16/gm-recalling-3-16-million-additional-cars-for-ignition-issues.html)
Title: Re: GM - General Motors
Post by: PLynchJr on June 20, 2014, 10:55:27 AM
Ex GM engineer gives insight into screwed up culture at GM.

http://jalopnik.com/ex-gm-engineer-explains-how-companys-culture-rewards-in-1593313126/+laceydonohue
Title: Re: GM - General Motors
Post by: Liberty on June 20, 2014, 11:44:37 AM
Ex GM engineer gives insight into screwed up culture at GM.

http://jalopnik.com/ex-gm-engineer-explains-how-companys-culture-rewards-in-1593313126/+laceydonohue

Good read. Scary to think how many companies have cultures like that..
Title: Re: GM - General Motors
Post by: fareastwarriors on June 26, 2014, 11:24:13 PM
 Air bag accident, lawsuit led to GM Cruze recall


http://www.cnbc.com/id/101794005 (http://www.cnbc.com/id/101794005)
Title: Re: GM - General Motors
Post by: fareastwarriors on June 30, 2014, 12:44:52 PM
GM Recalls 8.45 Million Vehicles in North America in 6 Actions

http://www.bloomberg.com/news/2014-06-30/gm-recalls-8-45-million-vehicles-in-north-america-in-6-actions.html (http://www.bloomberg.com/news/2014-06-30/gm-recalls-8-45-million-vehicles-in-north-america-in-6-actions.html)
Title: Re: GM - General Motors
Post by: merkhet on July 01, 2014, 08:53:55 AM
http://online.wsj.com/articles/chryslers-u-s-sales-rise-9-2-in-june-1404216833?mod=WSJ_hp_LEFTWhatsNewsCollection

Quote
GM—which has recalled about 29 million cars and trucks in North America this year—said it sold 267,461 total vehicles in June, up 1% from a year earlier. Auto researcher Kelley Blue Book had expected GM sales to slip 3.7%, while automotive-information provider Edmunds.com had anticipated an 8.% drop.
Title: Re: GM - General Motors
Post by: Avyalake on July 01, 2014, 09:19:05 PM
 GM Owners Buy New Models While Recalled Autos Go to Shop

http://www.bloomberg.com/news/2014-07-02/gm-owners-buy-new-models-while-recalled-autos-go-to-shop.html

“You bring in a 2007 Saturn with 140,000 miles on it, we’re certainly prepared and ready to do the recall,” said Paddock, whose store near Buffalo, New York, is deriving as much as 12 percent of its business from recall customers. “The next thing you know, the consumer is in the showroom, saying, ‘Boy, oh boy, that Cruze looks sharp.’”

“The hardest part of selling is getting people in the door,” said Jesse Toprak, an analyst with researcher Cars.com. “Multiply that by millions of recalls and that’s a lot of people coming to the dealership.”
Title: Re: GM - General Motors
Post by: fareastwarriors on July 01, 2014, 10:53:45 PM
GM Owners Buy New Models While Recalled Autos Go to Shop

http://www.bloomberg.com/news/2014-07-02/gm-owners-buy-new-models-while-recalled-autos-go-to-shop.html

“You bring in a 2007 Saturn with 140,000 miles on it, we’re certainly prepared and ready to do the recall,” said Paddock, whose store near Buffalo, New York, is deriving as much as 12 percent of its business from recall customers. “The next thing you know, the consumer is in the showroom, saying, ‘Boy, oh boy, that Cruze looks sharp.’”

“The hardest part of selling is getting people in the door,” said Jesse Toprak, an analyst with researcher Cars.com. “Multiply that by millions of recalls and that’s a lot of people coming to the dealership.”

that's one way to get people in the door...
Title: Re: GM - General Motors
Post by: LC on July 02, 2014, 07:27:17 AM
What are the terms of these recalls? Are dealers/owners given some sort of credit towards a new vehicle?
Title: Re: GM - General Motors
Post by: hyten1 on July 02, 2014, 07:45:05 AM
funny how this turn out (in some respect), would this allow GM to reduce some marketing spent or i guess redirect them to making sure its reputation is not tarnish too much :)

hy
Title: Re: GM - General Motors
Post by: jay21 on July 07, 2014, 02:15:28 PM
Digging through some old data/articles to better understand the history of GM and their problems:

The remarkable thing is that, once you account for the economic cycles, the trend for GM is exceptionally steady — an exceptionally steady trend downward. There were still bad times thirty years ago — but they weren’t bad enough to threaten GM’s survival, and conversely, the good times were much better. These are General Motors’ operating margins by decade:

Average Annual Operating Margin, General Motors
1960s: 8.7%
1970s: 5.5%
1980s: 3.0%
1990s: 1.3%*
2000s: -0.5%
* Excludes one-time $20 billion accounting charge for retiree health benefits in 1992.

http://fivethirtyeight.com/features/gms-problems-are-50-years-in-making/

What's GM's current operating margin target?  Does it make sense relative to their peak operating margins?

Title: Re: GM - General Motors
Post by: fareastwarriors on July 07, 2014, 10:46:59 PM
G.M. Resists Recalling Trucks Over Brake Lines



http://www.nytimes.com/2014/07/08/automobiles/gm-resists-recalling-trucks-over-brake-line-problem.html?_r=0 (http://www.nytimes.com/2014/07/08/automobiles/gm-resists-recalling-trucks-over-brake-line-problem.html?_r=0)
Title: Re: GM - General Motors
Post by: dcollon on July 15, 2014, 01:06:54 PM
Warren Buffett Shares The Inside Scoop: He Bought A Cadillac, Not A Subaru

http://www.forbes.com/sites/joannmuller/2014/07/15/warren-buffett-shares-the-inside-scoop-he-bought-a-cadillac-not-a-subaru/
Title: Re: GM - General Motors
Post by: fareastwarriors on July 16, 2014, 03:30:22 PM
GM says sold 2.5 million autos in second quarter, best since 2005


http://www.chicagotribune.com/classified/automotive/sns-rt-us-autos-gm-sales-20140716,0,7782726.story (http://www.chicagotribune.com/classified/automotive/sns-rt-us-autos-gm-sales-20140716,0,7782726.story)
Title: Re: GM - General Motors
Post by: fareastwarriors on July 18, 2014, 09:25:44 AM
At Hearing on G.M. Recall, Mary Barra Gives Little Ground


http://www.nytimes.com/2014/07/18/business/senate-hearing-on-general-motors.html?ref=business (http://www.nytimes.com/2014/07/18/business/senate-hearing-on-general-motors.html?ref=business)
Title: Re: GM - General Motors
Post by: compounding on July 19, 2014, 05:25:27 AM
New Caddy boss knows luxury - De Nysschen's track record brings him to GM

http://www.autonews.com/article/20140714/OEM02/307149918/new-caddy-boss-knows-luxury

http://www.autonews.com/article/20140710/OEM02/140719982/infiniti-boss-de-nysschen-to-leave-nissan-s-luxury-brand

Seems like an interesting appointment due to GM's relative lack of success in the luxury segment.
Title: Re: GM - General Motors
Post by: fareastwarriors on July 21, 2014, 07:56:07 AM
GM orders sales halt for recalled Cadillacs



http://www.cnbc.com/id/101852011?trknav=homestack:topnews:19 (http://www.cnbc.com/id/101852011?trknav=homestack:topnews:19)
Title: Re: GM - General Motors
Post by: fareastwarriors on July 23, 2014, 03:27:33 PM
GM Recalls Continue With Newer Model Camaros, Cadillacs



http://www.bloomberg.com/news/2014-07-23/gm-recalls-continue-as-newer-model-camaros-cadillacs-flagged.html (http://www.bloomberg.com/news/2014-07-23/gm-recalls-continue-as-newer-model-camaros-cadillacs-flagged.html)
Title: Re: GM - General Motors
Post by: nikhil25 on July 25, 2014, 11:17:23 AM
GM's Profit, Hit by Recalls, Tumbles 80%
Auto Maker Sets Aside $400 Million for Ignition-Switch Compensation Plan
http://online.wsj.com/articles/gms-profit-hit-by-recalls-tumbles-80-1406201978

Quote
A $2.5 billion pretax bill for safety recalls and a victims' compensation fund slashed General Motors Co. GM -1.99%  's second-quarter profit and highlighted the work it must do to close a profitability gap with rival Ford Motor Co. F -1.46%  , which reported stronger results for the quarter ahead of a critical product launch.

GM on Thursday reported a $278 million profit, off 80% from a year earlier, as special items offset North American operating-margin expansion and continued growth in China.
Title: Re: GM - General Motors
Post by: fareastwarriors on July 31, 2014, 10:41:01 AM
GM Misses Red Flags From Rental Car Canaries on Crashes



http://www.bloomberg.com/news/2014-07-31/rental-car-firms-pushed-gm-on-fatal-crashes-before-recall.html (http://www.bloomberg.com/news/2014-07-31/rental-car-firms-pushed-gm-on-fatal-crashes-before-recall.html)
Title: Re: GM - General Motors
Post by: MYDemaray on August 04, 2014, 08:39:07 AM
Move over Bank of America...there's a new pinata in town:

http://online.wsj.com/articles/gm-financial-says-justice-department-subpoenaed-documents-1407165787?mod=yahoo_hs
Title: Re: GM - General Motors
Post by: fareastwarriors on August 05, 2014, 08:48:27 AM
Thai unrest knocks GM off course in Asean


http://www.ft.com/intl/cms/s/0/1bbb90d0-1c75-11e4-98d8-00144feabdc0.html#axzz39RglzbQF (http://www.ft.com/intl/cms/s/0/1bbb90d0-1c75-11e4-98d8-00144feabdc0.html#axzz39RglzbQF)
 
General Motors said it was “struggling” in southeast Asia as the recent political upheaval in Thailand knocked sales, compounding stiff competition from Japanese rivals and local currency weakness that has hurt the profitability of vehicles due to imported parts.
 
The admission is a sign that fluctuations in emerging market currencies are causing the largest US carmaker by sales to rethink its strategy in a region seen by carmakers as one of the world’s most promising and increasingly benefiting from a rising middle class.

 
“We are struggling in Asean for many reasons – mainly due to the political impact in Thailand,” said Stefan Jacoby, head of GM’s consolidated international operations, a unit that includes all of the carmaker’s businesses outside North America except China and Latin America.
 
Asean is the 10-member bloc known as the Association of Southeast Asian Nations, of which Thailand is the second-biggest economy after Indonesia.

In Thailand, where GM claims a 4.3 per cent market share, Japanese carmakers Toyota and Honda have for decades been dominant, and they have built extensive supplier networks across Asean.

While Toyota and Nissan have also suffered falling sales as a result of the political turmoil in Thailand, GM’s reliance on imported parts for some of its vehicles sold in the country has been exposed by the declining Thai currency, Mr Jacoby said.
 
He estimated that annual vehicle sales in Thailand were now under 850,000 units, well down from 1.45m in 2013.

The Detroit-based carmaker plans to increase the proportion of vehicles made locally to reduce its exposure to the Thai baht – a move Mr Jacoby indicated had wider implications for the company’s regional operations.
 
“With relative weakness in emerging market currencies you need to be independent from those currency fluctuations and that means you have to create deep local content not only with ‘tier one’ but also ‘tier two’ suppliers,” he said at the official opening of a new regional office in Singapore on Tuesday.

 
He declined to say how much of GM’s vehicles in Thailand were made using locally produced parts, but admitted that the company was “less localised” than its main competitors.

He said the carmaker had no plans to withdraw from production at its plant in Rayong province, in which GM has invested $1.5bn and opened in 2000.

However, the former chief executive of Volvo said GM still needed “the right scale of products” and had “a lot of homework to do when it comes to our dealer network and our brand”.

GM recently redoubled efforts to penetrate Asean, where it has yet to turn a profit on a regional basis since establishing a southeast Asian unit in 1993.
 
That has included spending $150m on refurbishing an assembly plant outside Jakarta that it closed in 2006.

GM’s new Singapore office marks a return to the Asian city-state, which hosted the company’s Asian headquarters until 2004 when the carmaker moved to Shanghai.
 
However, GM last year said it would return to Singapore, where its consolidated international operations unit oversees markets in Asean, Africa, India, South Korea and the Middle East, as well as the European operations of Chevrolet – its best-selling brand – and Cadillac, its luxury marque.
Title: Re: GM - General Motors
Post by: fareastwarriors on August 05, 2014, 10:56:03 AM
Focusing on G.M. Unit, U.S. Starts Civil Inquiry of Subprime Car Lending


http://dealbook.nytimes.com/2014/08/04/focusing-on-g-m-unit-u-s-starts-civil-inquiry-of-subprime-car-lending/?module=BlogPost-Title&version=Blog Main&contentCollection=Legal/Regulatory&action=Click&pgtype=Blogs&region=Body (http://dealbook.nytimes.com/2014/08/04/focusing-on-g-m-unit-u-s-starts-civil-inquiry-of-subprime-car-lending/?module=BlogPost-Title&version=Blog Main&contentCollection=Legal/Regulatory&action=Click&pgtype=Blogs&region=Body)
Title: Re: GM - General Motors
Post by: Picasso on August 07, 2014, 12:38:47 PM
Any views here on the pension liability?  I have always viewed GM stock as a play on interest rates given the size of the pension and unfunded liability gap.  If I remember correctly, each 1% change in rates affected about $13 billion of pension liability.  I need to take another look at the recent 10K.

If rates here in the US start to converge with other parts of the world, there may be a situation where that liability increases another $10 billion or so which makes the stock not as inexpensive as it originally looks.

However if rates move up a lot then you are looking at a massive upward adjustment in book value.
Title: Re: GM - General Motors
Post by: fareastwarriors on August 12, 2014, 10:04:15 AM
Looking at G.M., China Widens Crackdown on Multinationals


http://www.nytimes.com/2014/08/13/business/international/looking-at-gm-china-widens-crackdown-on-multinationals.html?ref=business&_r=0 (http://www.nytimes.com/2014/08/13/business/international/looking-at-gm-china-widens-crackdown-on-multinationals.html?ref=business&_r=0)
Title: Re: GM - General Motors
Post by: CorpRaider on August 15, 2014, 10:18:40 AM
I apologize if this has been previously discussed in the thread, but is this generally considered to be a WEB position?  Seems like it is right around the area where it would be big enough for him to maybe be personally calling the shots on it.  I noted that BRK upped the position by a bit on the latest 13F.  Thanks.
Title: Re: GM - General Motors
Post by: Picasso on August 15, 2014, 10:34:15 AM
I apologize if this has been previously discussed in the thread, but is this generally considered to be a WEB position?  Seems like it is right around the area where it would be big enough for him to maybe be personally calling the shots on it.  I noted that BRK upped the position by a bit on the latest 13F.  Thanks.

Nope this is Weschler.
Title: Re: GM - General Motors
Post by: jeffmori7 on August 15, 2014, 10:58:05 AM
I apologize if this has been previously discussed in the thread, but is this generally considered to be a WEB position?  Seems like it is right around the area where it would be big enough for him to maybe be personally calling the shots on it.  I noted that BRK upped the position by a bit on the latest 13F.  Thanks.

Nope this is Weschler.

Could it be Combs and Weschler? Because the position was cut by 25% last quarter, but now is up by 10% again one quarter later?
Title: Re: GM - General Motors
Post by: CorpRaider on August 15, 2014, 11:31:41 AM
Thanks.  With him cracking jokes about Charlie's hearing and purchasing GM at $36, I started to wonder.
Title: Re: GM - General Motors
Post by: fareastwarriors on September 02, 2014, 01:09:48 PM
Credit Holds the Key to Auto Sales

Booming Auto Sales Could Be Dented if the Tonic of Cheap Credit Were Removed

http://online.wsj.com/articles/credit-holds-the-key-to-auto-sales-ahead-of-the-tape-1409686892 (http://online.wsj.com/articles/credit-holds-the-key-to-auto-sales-ahead-of-the-tape-1409686892)
Title: Re: GM - General Motors
Post by: Mephistopheles on September 14, 2014, 07:22:54 AM
Can anyone recommend some good books/sites where I can learn about the auto business and how to value auto stocks? Thanks
Title: Re: GM - General Motors
Post by: DCG on September 14, 2014, 08:12:58 AM
I work in the auto business, but on the software side. I might be able to answer some questions though.
Title: Re: GM - General Motors
Post by: compounding on September 15, 2014, 03:35:08 AM
Can anyone recommend some good books/sites where I can learn about the auto business and how to value auto stocks? Thanks

Overhaul and Once Upon A Car are probably good books to start off with. For more company-specific material Mondo Agnelli, Shift (by Ghosn) or American Turnaround were good reads as well.

I didn't really enjoy My Years With General Motors or Iacocca that much, but I've seen other people recommend them highly.

There's also a chapter in Beating The Street that can be useful, with Lynch's take on how to think about auto investments and the pent-up demand cycle.
Title: Re: GM - General Motors
Post by: Mephistopheles on September 15, 2014, 07:52:37 AM
Can anyone recommend some good books/sites where I can learn about the auto business and how to value auto stocks? Thanks

Overhaul and Once Upon A Car are probably good books to start off with. For more company-specific material Mondo Agnelli, Shift (by Ghosn) or American Turnaround were good reads as well.

I didn't really enjoy My Years With General Motors or Iacocca that much, but I've seen other people recommend them highly.

There's also a chapter in Beating The Street that can be useful, with Lynch's take on how to think about auto investments and the pent-up demand cycle.

Thanks compounding, I'll check these out.

I work in the auto business, but on the software side. I might be able to answer some questions though.

Thanks DCG, will do. :)
Title: Re: GM - General Motors
Post by: fareastwarriors on September 25, 2014, 05:48:58 PM
GM Raised to Investment Grade By S&P

Ratings Firm Says Recall Remains Negative Factor


http://online.wsj.com/articles/gm-raised-to-investment-grade-by-s-p-1411679235?mod=WSJ_hp_LEFTWhatsNewsCollection (http://online.wsj.com/articles/gm-raised-to-investment-grade-by-s-p-1411679235?mod=WSJ_hp_LEFTWhatsNewsCollection)
Title: Re: GM - General Motors
Post by: Picasso on September 25, 2014, 08:23:25 PM
Has anyone thought about the likelihood of an activist investor in GM?

Cash makes up 60% of the current market cap, you have a pension liability with a below market discount rate (seems very manageable), and now a return to investment grade in the corporate bond market.

Seems like there is a lot to do in terms of optimizing the capital structure and more efficiency in operations given low margins compared to other peers.

This seems like a stock where share repurchases near the current share price would add a ton of value to the long-term value.

They repurchased 20% of the shares from the government at $27.50 (if I remember correctly) but reissued shares at $40 or so when the convertible preferred stock matured.  Now the share price is back down to $33 and is depressed from a combination of recalls and from what seems like a lot of hedge fund liquidations of what was once a hedge fund hotel.

There are no catalysts but cheap enough to provide a wide margin of safety.  The right kind of activism and the stock can provide some very healthy returns.  Thoughts?
Title: Re: GM - General Motors
Post by: wisdom on September 25, 2014, 10:10:04 PM
Buffett said in a recent interview that Ted has 15% of the money he manages in GM. Kyle Bass called this his best idea.

Pabrai has a huge investment GM warrant B and according to poster above Ted said for his personal portfolio he would have bought the C warrants a he can take on more risk.

analyst expect close to $5 EPS in 2016 + you have $17 cash per share. US car fleet is old and the replacement cycle is on.

Current share price is at $33. At 10x you are looking at $50 share plus cash gives you options.

The catalyst could be the recalls ending and the cases being settled.
Title: Re: GM - General Motors
Post by: Picasso on September 25, 2014, 10:26:51 PM
Buffett said in a recent interview that Ted has 15% of the money he manages in GM. Kyle Bass called this his best idea.

Pabrai has a huge investment GM warrant B and according to poster above Ted said for his personal portfolio he would have bought the C warrants a he can take on more risk.

analyst expect close to $5 EPS in 2016 + you have $17 cash per share. US car fleet is old and the replacement cycle is on.

Current share price is at $33. At 10x you are looking at $50 share plus cash gives you options.

The catalyst could be the recalls ending and the cases being settled.

The C warrants trade for a dollar, while the 42 strike 2016 options also trade for a dollar.  Any advantage to the warrants aside from liquidity on large purchases?

I guess I have two hesitancies on GM.  The first is the likes of competition from TSLA.  The second is the generally low valuations for all automakers.  Even the Japanese automakers trade for a small premium to book value and near 10x earnings. 

So would it be better to buy the best (Toyota Motors) at 1.3x book and 10x earnings or GM at 1x book and 7x earnings?  Or is it better to buy a highly levered one (Fiat) which trades at a very low multiple or normalized earnings?

Perhaps the thing I like best about GM is the optionality of cash, close to a 4% dividend to reduce some opportunity cost risk, and generally distaste among investors.

I'm under the impression that the valuation more than offsets any potential negatives but if those negatives present themselves as further hurdles in the years ahead it would be prudent to change the thesis (looking at you SHLD investors).
Title: Re: GM - General Motors
Post by: karthikpm on September 26, 2014, 07:55:17 AM
Any thoughts on GM common vs Warrants at today's prices?
Title: Re: GM - General Motors
Post by: fareastwarriors on September 26, 2014, 09:14:43 AM
U.S. Car Sales Hitting the Speed Limit

http://online.wsj.com/articles/u-s-car-sales-hitting-the-speed-limit-heard-on-the-street-1411573081?mod=Markets_newsreel_10 (http://online.wsj.com/articles/u-s-car-sales-hitting-the-speed-limit-heard-on-the-street-1411573081?mod=Markets_newsreel_10)
Title: Re: GM - General Motors
Post by: peter1234 on September 27, 2014, 04:38:53 AM
Buffett said in a recent interview that Ted has 15% of the money he manages in GM.

Ted Weschler, Buffett and Mary Barra GM CEO went out for lunch together in Buffetts 2006 Cadillac.

Buffett asks her if the new Cadilllacs are any better?

Answer is ... yes!

Buffett sends Susie Buffett to get him the newest Cadillac the next day.

 ;D
Title: Re: GM - General Motors
Post by: peter1234 on September 27, 2014, 04:40:25 AM
Mary Barra is a total car 'guy' that is passionate about what she does.

Buffetts 1 line employment interview:

Are you passionate?

;D
Title: Re: GM - General Motors
Post by: Mephistopheles on September 28, 2014, 01:05:47 PM
Has anyone thought about the likelihood of an activist investor in GM?

Cash makes up 60% of the current market cap, you have a pension liability with a below market discount rate (seems very manageable), and now a return to investment grade in the corporate bond market.

Do they disclose the discount rate? I'm having trouble finding it in the 10-k. Unless you're talking about the rate of return assumption, which is 6.5%.
Title: Re: GM - General Motors
Post by: Picasso on September 28, 2014, 05:33:16 PM
Has anyone thought about the likelihood of an activist investor in GM?

Cash makes up 60% of the current market cap, you have a pension liability with a below market discount rate (seems very manageable), and now a return to investment grade in the corporate bond market.
Do they disclose the discount rate? I'm having trouble finding it in the 10-k. Unless you're talking about the rate of return assumption, which is 6.5%.

Page 100 of the last 10-K.  The discount rate is just under 4%.

From a 2013 Bloomberg article http://www.bloomberg.com/news/2013-07-26/gm-to-ford-pension-gains-frees-cash-for-fusion-like-hits.html (http://www.bloomberg.com/news/2013-07-26/gm-to-ford-pension-gains-frees-cash-for-fusion-like-hits.html)

For GM, each increase of 1 percentage point in the discount rate cuts $8.76 billion from the present value of its U.S. pension obligation, according to its 2012 annual report. A similar increase would reduce Ford’s U.S. total obligation by $5.2 billion, its regulatory filing shows.
Title: Re: GM - General Motors
Post by: Mephistopheles on September 28, 2014, 06:26:28 PM
Has anyone thought about the likelihood of an activist investor in GM?

Cash makes up 60% of the current market cap, you have a pension liability with a below market discount rate (seems very manageable), and now a return to investment grade in the corporate bond market.
Do they disclose the discount rate? I'm having trouble finding it in the 10-k. Unless you're talking about the rate of return assumption, which is 6.5%.

Page 100 of the last 10-K.  The discount rate is just under 4%.

From a 2013 Bloomberg article http://www.bloomberg.com/news/2013-07-26/gm-to-ford-pension-gains-frees-cash-for-fusion-like-hits.html (http://www.bloomberg.com/news/2013-07-26/gm-to-ford-pension-gains-frees-cash-for-fusion-like-hits.html)

For GM, each increase of 1 percentage point in the discount rate cuts $8.76 billion from the present value of its U.S. pension obligation, according to its 2012 annual report. A similar increase would reduce Ford’s U.S. total obligation by $5.2 billion, its regulatory filing shows.


Great, thx!
Title: Re: GM - General Motors
Post by: muscleman on September 29, 2014, 08:25:29 AM
Has anyone thought about the likelihood of an activist investor in GM?

Cash makes up 60% of the current market cap, you have a pension liability with a below market discount rate (seems very manageable), and now a return to investment grade in the corporate bond market.

Seems like there is a lot to do in terms of optimizing the capital structure and more efficiency in operations given low margins compared to other peers.

This seems like a stock where share repurchases near the current share price would add a ton of value to the long-term value.

They repurchased 20% of the shares from the government at $27.50 (if I remember correctly) but reissued shares at $40 or so when the convertible preferred stock matured.  Now the share price is back down to $33 and is depressed from a combination of recalls and from what seems like a lot of hedge fund liquidations of what was once a hedge fund hotel.

There are no catalysts but cheap enough to provide a wide margin of safety.  The right kind of activism and the stock can provide some very healthy returns.  Thoughts?

Are you sure about that? 60% of market cap should be $31.8bn. I only see $19.8 bn in their 10-Q.
Title: Re: GM - General Motors
Post by: Picasso on September 29, 2014, 08:28:31 AM
I included marketable securities which are mostly Treasury notes.
Title: Re: GM - General Motors
Post by: Picasso on September 29, 2014, 02:02:19 PM
Ford Sees Pretax Profit $6 Billion, Missing 2014 Profit Goals

http://www.bloomberg.com/news/2014-09-29/ford-sees-pretax-profit-6-billion-missing-2014-profit-goals.html (http://www.bloomberg.com/news/2014-09-29/ford-sees-pretax-profit-6-billion-missing-2014-profit-goals.html)

GM seems to have tracked this move down in Ford.  GM has about 17% market share in Brazil versus Ford at 9.2%.  I wonder how these losses in South America will compare to GM.
Title: Re: GM - General Motors
Post by: fareastwarriors on September 29, 2014, 06:10:10 PM
GM Hopes to Shift Gears After Recalls

CEO Will Outline Strategy to Deliver Profit, Quality and Satisfaction Goals



http://online.wsj.com/articles/gm-to-shift-gears-set-new-goals-1412036113?mod=WSJ_hp_RightTopStories (http://online.wsj.com/articles/gm-to-shift-gears-set-new-goals-1412036113?mod=WSJ_hp_RightTopStories)
Title: Re: GM - General Motors
Post by: CorpRaider on September 30, 2014, 05:16:56 AM
Ford Sees Pretax Profit $6 Billion, Missing 2014 Profit Goals

http://www.bloomberg.com/news/2014-09-29/ford-sees-pretax-profit-6-billion-missing-2014-profit-goals.html (http://www.bloomberg.com/news/2014-09-29/ford-sees-pretax-profit-6-billion-missing-2014-profit-goals.html)

GM seems to have tracked this move down in Ford.  GM has about 17% market share in Brazil versus Ford at 9.2%.  I wonder how these losses in South America will compare to GM.

Hopefully, this is new CEO tanking guidance.  I sure wouldn't want to have to meet Mullaly's guidance.  Strong dollar and weak europe and imploding brazil won't be good in the short term.
Title: Re: GM - General Motors
Post by: muscleman on September 30, 2014, 08:10:27 AM
Buffett said in a recent interview that Ted has 15% of the money he manages in GM. Kyle Bass called this his best idea.

Pabrai has a huge investment GM warrant B and according to poster above Ted said for his personal portfolio he would have bought the C warrants a he can take on more risk.

analyst expect close to $5 EPS in 2016 + you have $17 cash per share. US car fleet is old and the replacement cycle is on.

Current share price is at $33. At 10x you are looking at $50 share plus cash gives you options.

The catalyst could be the recalls ending and the cases being settled.

The C warrants trade for a dollar, while the 42 strike 2016 options also trade for a dollar.  Any advantage to the warrants aside from liquidity on large purchases?

I guess I have two hesitancies on GM.  The first is the likes of competition from TSLA.  The second is the generally low valuations for all automakers.  Even the Japanese automakers trade for a small premium to book value and near 10x earnings. 

So would it be better to buy the best (Toyota Motors) at 1.3x book and 10x earnings or GM at 1x book and 7x earnings?  Or is it better to buy a highly levered one (Fiat) which trades at a very low multiple or normalized earnings?

Perhaps the thing I like best about GM is the optionality of cash, close to a 4% dividend to reduce some opportunity cost risk, and generally distaste among investors.

I'm under the impression that the valuation more than offsets any potential negatives but if those negatives present themselves as further hurdles in the years ahead it would be prudent to change the thesis (looking at you SHLD investors).

This is hard to say...
Fiat has been aggressively taking market shares from GM, especially the truck sector, which is the profit center of US auto makers.
On the other hand, GM is indeed cheap. If an activist pushes for $12 per share special dividend, GM's balance sheet will look somewhat like Fiat's, and it has potential to double in the next few years.
I am interested in this one, but I am not sure if GM's cars are as competitve as Fiat's. ::)
Title: Re: GM - General Motors
Post by: fareastwarriors on October 01, 2014, 09:15:13 AM
GM Outlines Aggressive Financial Outlook

Auto Maker Sees Profits Boosted by Cost Cuts, Better Marketing, Business Changes


http://online.wsj.com/articles/gm-outlines-financial-plans-1412173772?mod=WSJ_hp_LEFTTopStories (http://online.wsj.com/articles/gm-outlines-financial-plans-1412173772?mod=WSJ_hp_LEFTTopStories)
Title: Re: GM - General Motors
Post by: nikhil25 on October 01, 2014, 10:01:53 AM
Chrysler, GM, Nissan sales soar; Ford down
http://www.usatoday.com/story/money/cars/2014/10/01/september-2014-auto-sales/16521289/

Quote
Chrysler and General Motors reported that September sales of their cars and trucks soared 19% and 19.4% respectively, as the two Detroit automakers' performance easily outpaced the expected overall industry sales increase for the month.
Title: Re: GM - General Motors
Post by: Homestead31 on October 02, 2014, 11:04:47 AM
Wisdom - you cited a Buffett interview where he said that Weschler had 15% of his portfolio in GM...  I have tried to find that interview but have been unable.  Can you supply a link?  TY

Any thoughts from warrant holders on special dividend risk?
Title: Re: GM - General Motors
Post by: wisdom on October 02, 2014, 11:08:02 AM
15% of Ted's portfolio as it is Wescheler's investment. I will have to look it up - i believe it might have been the one with Dan Gilbert in Detroit.
Title: Re: GM - General Motors
Post by: valueinvesting101 on October 02, 2014, 11:15:41 AM
It's about $1.07bn position with BRK holding 32,960,056 shares. Assuming Ted's allocation was $7bn, it is about 15%.
Title: Re: GM - General Motors
Post by: CorpRaider on October 02, 2014, 11:24:15 AM
15% of Ted's portfolio as it is Wescheler's investment. I will have to look it up - i believe it might have been the one with Dan Gilbert in Detroit.

That's the one.
Title: Re: GM - General Motors
Post by: argonaut on October 02, 2014, 11:45:24 AM
Buffet mentioned they are each running about 9b now ... They have had gains which pushed the value higher.
Title: Re: GM - General Motors
Post by: fareastwarriors on October 02, 2014, 11:50:58 AM
GM Won't Follow All-Aluminum Strategy in Future Cars

Auto Maker Plans to Use a Mix of Materials to Shed Pounds From Future Cars, Trucks


http://online.wsj.com/articles/gm-wont-follow-all-aluminum-strategy-in-future-cars-1412271919?mod=WSJ_hp_LEFTWhatsNewsCollection (http://online.wsj.com/articles/gm-wont-follow-all-aluminum-strategy-in-future-cars-1412271919?mod=WSJ_hp_LEFTWhatsNewsCollection)
Title: Re: GM - General Motors
Post by: Homestead31 on October 02, 2014, 11:53:41 AM
thanks.

i didn't realize it was specifically known as one of ted's positions.

i know at the BRK meeting this year (or maybe last year?) during the movie there was a skit that had warren on the phone w/ charlie and they were talking about buying GM at $34, so i assumed it was one of his.
Title: Re: GM - General Motors
Post by: MYDemaray on October 02, 2014, 12:04:33 PM
Wisdom - you cited a Buffett interview where he said that Weschler had 15% of his portfolio in GM...  I have tried to find that interview but have been unable.  Can you supply a link?  TY

Any thoughts from warrant holders on special dividend risk?

A special dividend will adjust the exercise price

Quote
Section 5.01. Adjustments to Exercise Price. The Exercise Price for the Warrants shall be subject to adjustment (without duplication) upon the occurrence of any of the following events:...

(c) The dividend or distribution to all holders of Common Stock of (i) shares of the Company’s Capital Stock (other than Common Stock), (ii) evidences of the Company’s indebtedness, (iii) rights or warrants to purchase the Company’s securities or the Company’s assets or (iv) property or Cash (excluding any ordinary cash dividends declared by the Board of Directors and excluding any dividend, distribution or issuance covered by clauses (a) or (b) above), in which event the Exercise Price will be adjusted based on the following formula:

http://www.sec.gov/Archives/edgar/data/1467858/000119312510078119/dex1030.htm
Title: Re: GM - General Motors
Post by: JPerez on October 02, 2014, 12:53:20 PM
I think there is a very small chance of a special dividend.
From yesterdays presentation they said that their priorities with the cash are:
1. Invest back in the business
2. Maintaining a "Fortress balance sheet"
3. Return to shareholders, mainly through incremental dividends but also through opportunistic actions.

What is interesting is what a "fortress balance sheet" means to them they are targeting
Auto Cash and equivalents 20-25B
Auto Debt and underfund pension 25-30

The actual numbers at YE13 from the 10K are:
Auto Cash and equivalents 27.9B
Auto Debt and underfund pension 33.4

So they are above their target on both but they will need the cash to buy the financial business in China later in the year and the preferred stock and I would hope that the underfund pension will come down by year end 14 so pretty much on target on both accounts.
So according to them they have no excess cash because they want to be conservative which is understandable in a company that has gone through bankruptcy not too long ago.
What I would expect is that most of their free cash flow will be return to shareholders coming forward and I would expect given their expected cash flows that dividends hit 0.5 a quarter in the mid term.
I was hoping they would be more aggresive on buy backs but it looks like they prefer to return cash through dividends which makes little sense when the stock is at this levels.
What i think is that they might repurchase blocks of stock as they come for sale from people that got them in the bankruptcy procedure.
There is quite a bit of negativity in auto stocks in the last while because some investors have the view that this is as good as it gets and this is the peak of the auto market and it is not sustainable. I dont believe it seems to me that there is still pent-up demand out there (I hope I am not wrong)
There are also plenty of people that hate GM because of their political views and that shows in the share price.
I believe the stock should be worth 45-55$ based on earning power and they have one of the strongest balance sheets in the auto industry
Title: Re: GM - General Motors
Post by: JPerez on October 02, 2014, 12:58:54 PM
By the way if somebody would have a link to a transcript from yesterday event would be great as it is not available in the gm web.
Thanks
Title: Re: GM - General Motors
Post by: fareastwarriors on October 03, 2014, 09:03:01 AM
oops


Quote
http://online.wsj.com/articles/gm-recalls-more-vehicles-1412340536 (http://online.wsj.com/articles/gm-recalls-more-vehicles-1412340536)


General Motors Recalls Another Half-Million Vehicles

Cadillacs, Saabs and Chevrolet Sparks Recalled for Potential Torque, Latch Hood Problems
Title: Re: GM - General Motors
Post by: Cervelo on October 03, 2014, 09:46:38 AM
Keep in mind that as interest rates rise, and they will eventually, that underfunded pension will improve as the actuaries apply a higher rate of return. I think its something in the neighborhood of $6Billion for every 1% increase in interest rates. Don't see rates going up 3% but 1% is not out of the realm of possibilities.
Title: Re: GM - General Motors
Post by: nikhil25 on October 06, 2014, 07:18:58 AM
GM Halts Pickup Sales While Searching for Air-Bag Fix
http://www.bloomberg.com/news/2014-10-03/gm-halts-pickup-sales-while-searching-for-air-bag-fix.html

Quote
General Motors Co. (GM), already reeling from a record number of vehicle recalls this year, is halting sales on two new pickup truck models after discovering an electrical flaw that could cause the air bags to misfire.

The issue affects an undisclosed number of 2015 Chevrolet Colorado and GMC Canyon midsized pickups. The air bags were wired incorrectly, which will disrupt the firing process, the company said in a statement yesterday.

“GM is working to validate the correction for the condition,” Alan Adler, a spokesman for the Detroit-based automaker, said in the statement. “Once that service procedure is released to dealers, customer deliveries can resume.”

The largest U.S. automaker is trying to move beyond a year in which it has recalled almost 30 million cars and trucks in North America. Chief Executive Officer Mary Barra faced four separate congressional hearings over the handling of an ignition-switch recall now tied to 23 fatalities.
Title: Re: GM - General Motors
Post by: fareastwarriors on October 07, 2014, 01:56:54 PM
GM Recalls Nearly 7,600 Chevy Caprices Over Transmission Issue

Latest Recall of Police Patrol Cruisers Marks GM’s 75th Safety Action This Year


http://online.wsj.com/articles/gm-recalls-nearly-7-600-chevy-caprices-1412684018?mod=WSJ_hp_LEFTWhatsNewsCollection (http://online.wsj.com/articles/gm-recalls-nearly-7-600-chevy-caprices-1412684018?mod=WSJ_hp_LEFTWhatsNewsCollection)
Title: Re: GM - General Motors
Post by: nikhil25 on October 10, 2014, 07:05:36 AM
Morgan Stanley Downgrades General Motors

http://www.businessinsider.com/morgan-stanley-downgrades-general-motors-2014-10
Title: Re: GM - General Motors
Post by: tombgrt on October 10, 2014, 07:51:13 AM
Nice, keep 'em coming! I'm buying soon enough at this pace.
Title: Re: GM - General Motors
Post by: fareastwarriors on October 10, 2014, 08:25:05 AM
52 wk low for the B warrants.
Title: Re: GM - General Motors
Post by: muscleman on October 10, 2014, 08:28:55 AM
I am still scratching my head on GM. It sounds like your price target would be $40-45, so why bother buying at $30? ::)
How would you view Fiaty compared with GM?
GM has low leverage and potentially lower returns and lower risks, right?
Title: Re: GM - General Motors
Post by: Mephistopheles on October 10, 2014, 01:05:56 PM
Has anyone thought about the likelihood of an activist investor in GM?

Cash makes up 60% of the current market cap, you have a pension liability with a below market discount rate (seems very manageable), and now a return to investment grade in the corporate bond market.
Do they disclose the discount rate? I'm having trouble finding it in the 10-k. Unless you're talking about the rate of return assumption, which is 6.5%.

Page 100 of the last 10-K.  The discount rate is just under 4%.

From a 2013 Bloomberg article http://www.bloomberg.com/news/2013-07-26/gm-to-ford-pension-gains-frees-cash-for-fusion-like-hits.html (http://www.bloomberg.com/news/2013-07-26/gm-to-ford-pension-gains-frees-cash-for-fusion-like-hits.html)

For GM, each increase of 1 percentage point in the discount rate cuts $8.76 billion from the present value of its U.S. pension obligation, according to its 2012 annual report. A similar increase would reduce Ford’s U.S. total obligation by $5.2 billion, its regulatory filing shows.


So the discount rate you're talking about, is the one to determine the net expenses, at 3.59% for U.S. and 3.69% for non-U.S., right?

The one used to calculate the benefit obligation, which is shown on the balance sheet, are 4.46% and 4.10%, which are still low.

Shouldn't we be thinking about the latter two if we are looking at the balance sheet liability?
Title: Re: GM - General Motors
Post by: Mephistopheles on October 10, 2014, 04:52:46 PM
Has anyone thought about the likelihood of an activist investor in GM?

Cash makes up 60% of the current market cap, you have a pension liability with a below market discount rate (seems very manageable), and now a return to investment grade in the corporate bond market.
Do they disclose the discount rate? I'm having trouble finding it in the 10-k. Unless you're talking about the rate of return assumption, which is 6.5%.

Page 100 of the last 10-K.  The discount rate is just under 4%.

From a 2013 Bloomberg article http://www.bloomberg.com/news/2013-07-26/gm-to-ford-pension-gains-frees-cash-for-fusion-like-hits.html (http://www.bloomberg.com/news/2013-07-26/gm-to-ford-pension-gains-frees-cash-for-fusion-like-hits.html)

For GM, each increase of 1 percentage point in the discount rate cuts $8.76 billion from the present value of its U.S. pension obligation, according to its 2012 annual report. A similar increase would reduce Ford’s U.S. total obligation by $5.2 billion, its regulatory filing shows.


So the discount rate you're talking about, is the one to determine the net expenses, at 3.59% for U.S. and 3.69% for non-U.S., right?

The one used to calculate the benefit obligation, which is shown on the balance sheet, are 4.46% and 4.10%, which are still low.

Shouldn't we be thinking about the latter two if we are looking at the balance sheet liability?

So I guess I'm confused about pension accounting. If anybody can help me with this: what is the difference between the discount rate for expense and the one used for the obligation on the balance sheet?
Title: Re: GM - General Motors
Post by: tylerdurden on October 10, 2014, 09:24:12 PM
Any views on the impact of potential European slowdown on GM's prospects? Europe at around 16% of the revenues should not be an issue that GM cannot weather with the help of still robust NA sales I think. Oil/gas price decreases is a new plus. China story based on September sales data is still on track. SA is going through usual volatility as expected from those countries. Bottomline I don't see any reason for this huge selloff on the stock but perhaps I am missing something. Morgan Stanley downgrade and the language used by the analyst ("They didn't warn, so we're doing it for them.") which I find very cocky didn't really help for sure...

Thanks.
Title: Re: GM - General Motors
Post by: rishig on October 11, 2014, 01:21:18 AM
I am still scratching my head on GM. It sounds like your price target would be $40-45, so why bother buying at $30? ::)
How would you view Fiaty compared with GM?
GM has low leverage and potentially lower returns and lower risks, right?

Here are my numbers for GM:

Shares outstanding: 1,685 million
Stock price: 30
Market cap: 50.5$ billion
Cash & Equivalents: $30 billion
Debt (including prefs): $10 billion
Net Cash: $20 billion
Enterprise Value: 30.5$ billion

Sales (current):
North America: $100 billion
Europe: $20 billion
International: $20 billion
South America: $16 billion
Total: $156 billion

EBITDA margin:
North America (current): 12%
Europe (2016-2017): 0%
International (current): 15%
South America: 5% current but projected to weaken going forward. Assume 0%

EBITDA:
North America (current): $12 billion
Europe: 0
International: $3 
South America: 0
Total: $15 billion

Capex:
5% of revenue on a run-rate basis (based on recent investor day comments)

Cash Taxes: ~1 billion

Normalized FCF: $6.5 billion
Normalized FCF yield: 20%

Current FCF: $4 billion
Current FCF Yield: 13%

Why not include underfunded pension in the enterprise value calculation? As per pension regulations, GM is not required to make any additional contributions for a few years. And management does not expect to make any additional contributions. Further as commented in the thread here, every 1% move up in discount rate wipes out ~8$ billion of pension liability. Discount rate in 2006 was 5.9%. If we go back to 5.9%, this would wipe out ~20$ billion in liability.

On a run-rate basis, in another 5 years, GM would generate at least $4 billion x 5 years = $20 billion in FCF. Add that to current cash of $30 billion and you get the entire market cap in cash (they do plan to pay out higher dividends).

The downgrade by the JP is totally irrelevant to the thesis in my opinion. We aren't making any assumptions about margin growth, sales growth. We are assuming Europe stops losing money but at the same time we are assuming that South America goes from making money to no money. I think of this as a 1-2 foot hurdle (don't lose market share, stable ATP, stable SAARs), not 6 feet hurdle. Whatever way one looks at this, I think it is cheap.

If management manages to do half of what they claim, FCF goes up due to operational leverage. As per management comments, at this point, additional margin dollars will drop straight to bottom line. But that's just the sizzle on the steak.

Low case: 6.5 billion FCF + discount rate stays where they are today + net debt of $10 billion
Multiple: 8x
Enterprise Value: $50 billion + $50 billion cash - $10 billion debt - $25 billion pension = $65 billion
Upside: 30%
IRR: 5%

Base case: 6.5 billion FCF + discount rate same as 2006 (pension liability: 5$ billion) + net debt of $6 billion ($4 billion prefs bought out)
Multiple: 10x
Enterprise Value: $65 billion + $50 billion cash - $6 billion debt - $5 billion = $105 billion
Upside: 100%
IRR: 15%
Title: Re: GM - General Motors
Post by: muscleman on October 11, 2014, 08:32:51 AM
Thank you rising.
I think an IRR of 5-15% is too low for me.  :P
Title: Re: GM - General Motors
Post by: tombgrt on October 11, 2014, 08:59:37 AM
Good overview rishig, I have equal numbers in mind.

Thank you rising.
I think an IRR of 5-15% is too low for me.  :P

Well you do get a 4% dividend that will grow while waiting. Downside should be very low over a few years time unless they do some stupid things with their cash. Or you can buy the B warrants and in a best case scenario you could get an IRR of almost 35% over 4 years ($60 stock). I'm laying of leverage at the moment but if the market corrects further I'll be glad to pick some warrants up.
Title: Re: GM - General Motors
Post by: Picasso on October 11, 2014, 09:20:59 AM
The point of investing in GM is not to make 5-15 percent a year.

The point is, even if the business does not do well in the future you are still likely to turn a tidy profit. It's that cheap. But if one of a few, or all, catalysts happen you will make a lot more than 20 percent a year. Tails you lose, heads I win.

The problem is, people think the probability of those catalysts are fairly low. That is what is probably important to focus on here.
Title: Re: GM - General Motors
Post by: rishig on October 11, 2014, 09:32:27 AM
Thank you rising.
I think an IRR of 5-15% is too low for me.  :P

The low case is extremely low probability in my opinion. Most likely scenario is better than base case fcf  on normalized basis. IMHO, margins at NA will expand by 150-200 bps and sales will continue to grow in China.

With warrants b and higher than base case fcf will generate north of 20% irr.

Title: Re: GM - General Motors
Post by: EliG on October 11, 2014, 10:06:00 AM
The low case assumes:
- no additional pension contributions for a few years
- no change in discount rate

Is it really the low case? What happens in deflationary scenario? Won't the rate go down? Can it trigger additional contributions?
Title: Re: GM - General Motors
Post by: mvalue on October 11, 2014, 11:10:08 AM
Has anyone wondered why so many automakers are so cheap? Fiat and GM are discussed here, but a highly intelligent person just walked me through all the pieces of VW you back out to see that it is an extremely low multiple as well. Given the widely-held view about the renewed health of the industry, what is the reason for this?
Title: Re: GM - General Motors
Post by: EliG on October 11, 2014, 11:30:58 AM
Has anyone wondered why so many automakers are so cheap?
Industry overcapacity combined with high capital requirements. A round of consolidation would help.
Title: Re: GM - General Motors
Post by: karthikpm on October 11, 2014, 11:57:28 AM
Marchionne was talking about consolidation

http://www.autonews.com/article/20141008/OEM02/141009795/marchionne-foresees-merger-creating-a-new-no.-1-automaker
Title: Re: GM - General Motors
Post by: rishig on October 12, 2014, 02:07:28 AM
The low case assumes:
- no additional pension contributions for a few years
- no change in discount rate

Is it really the low case? What happens in deflationary scenario? Won't the rate go down? Can it trigger additional contributions?

From 2013 10-K underfunded pensions breakdown:
U.S. hourly and salaried $6,552
U.S. nonqualified  $762
Total U.S. pension plans$7,314
Non-U.S.$12,542
Total underfunded$19,856

Comments about underfunding from VIC GM writeup by JRSteelers:

On US pension deficit:
The GAAP and hypothetical termination calculations are overly near-term focused.  In July 2012, the U.S. government enacted legislation known as “MAP-21” which allows pension plan sponsors such as GM to adjust the interest rates used to calculate its pension liabilities and therefore its current funding ratio and required contributions. GM can now use a band of +/- 15% in 2013, +/-20% in 2014, +/-25% in 2015 and +/-30% in 2016 of 25-year average corporate rates rather than simply using 24-month average corporate rates.  GM will have no federal requirement to contribute capital to its hourly retiree pension plan through 2017 based on GM’s calculations, and so New GM has flexibility with respect to its pension plan. MAP-21 does not impact GM’s GAAP accounting for its pension deficit.  Misperceptions about the pension deficit will persist through 2017. 

On non US pension deficit:
The largest plans are in Canada, Germany and the UK.  While the U.S. historically required funding pension plans on a ratio of 80% assets to funding target, not all countries have required pension funding levels.  An example, Germany-based Volkswagen has domestic projected benefit obligations of $30bn against assets of $9bn or a deficit of $21bn.  Further, it is likely that pension obligations do not pierce through to New GM, and New GM is shielded from these deficits.  Further, it’s likely that each of GM’s foreign subsidiaries are funded with cash from New GM on a secured basis, and these unsecured pension obligations are junior to New GM’s capital.  It is appropriate to exclude the Non-U.S. pension deficit from enterprise value because these obligations do not have mandatory contributions or reach up into New GM.
Title: Re: GM - General Motors
Post by: compounding on October 12, 2014, 04:49:30 AM
Has anyone wondered why so many automakers are so cheap?
Industry overcapacity combined with high capital requirements. A round of consolidation would help.

Have you checked utilization rates in the U.S. lately? Many are running over 100%. Are you suggesting this will change? In Europe it's a bit different and quite a few are rationalizing, but much smaller market (ie not as important) and recovery of demand is likely to happen at some point. In China most need new capacity to keep up with growing demand.

It's an interesting question. Hyundai, Ford, Renault, and almost BMW are others that have hit 52w lows recently.
Title: Re: GM - General Motors
Post by: beerbaron on October 12, 2014, 06:09:36 AM
I would say that part of the undervaluation comes from the real possibility that the conversion to electric vehicle will accelerate. Tesla and byd taking much of the pie.
Title: Re: GM - General Motors
Post by: wisdom on October 12, 2014, 06:26:46 AM
US will have 17 million car sales.

Tesla will not even have 50,000 car sales in 2014. While electric cars will gain market share, it is not a threat at this time to the industry. Eg. a recent goal set was to have 30% of all cars be electric by 2030.
Title: Re: GM - General Motors
Post by: beerbaron on October 12, 2014, 06:40:57 AM
US will have 17 million car sales.

Tesla will not even have 50,000 car sales in 2014. While electric cars will gain market share, it is not a threat at this time to the industry. Eg. a recent goal set was to have 30% of all cars be electric by 2030.

It might start to happen sooner than that, look at Tesla walking circle around it's competitors. EV and Self Driving Cars are disruptives technology today's leader has nothing to do with tomorrow.

BeerBaron
Title: Re: GM - General Motors
Post by: merkhet on October 12, 2014, 06:52:52 AM
The $6.5 billion of FCF that someone mentioned above is too low if you figure NA gets to a 10% pre-tax margin by the time we hit 2016 -- as Mary Barra has indicated she's targeting.

If NA margins hit 10% and Europe is no longer negative by 2016, keeping everything else the same, you'll get to almost $5 per share of earnings and/or FCF by 2016.
Title: Re: GM - General Motors
Post by: compounding on October 12, 2014, 08:48:08 AM
US will have 17 million car sales.

Tesla will not even have 50,000 car sales in 2014. While electric cars will gain market share, it is not a threat at this time to the industry. Eg. a recent goal set was to have 30% of all cars be electric by 2030.

It might start to happen sooner than that, look at Tesla walking circle around it's competitors. EV and Self Driving Cars are disruptives technology today's leader has nothing to do with tomorrow.

BeerBaron

There are a couple of counterpoints that I can think of off the top of my head, others can surely contribute with more. Even if we assume that a large part of the market will be EV's, how do you determine if there is a first-mover advantage? The base-rate probability for new car companies taking a large chunk of market share is very small.

And then there's the problem with that first assumption; why EV's and not natural gas? Or even fuel-cell? And again, why so sure the incumbents will be disrupted? They are all working on EV, fuel-cell, automated cars etc, in more or less scale.

Title: Re: GM - General Motors
Post by: EliG on October 12, 2014, 11:45:56 AM
Have you checked utilization rates in the U.S. lately? Many are running over 100%. Are you suggesting this will change? In Europe it's a bit different and quite a few are rationalizing, but much smaller market (ie not as important) and recovery of demand is likely to happen at some point. In China most need new capacity to keep up with growing demand.

Two counterpoints:

1. They may be running 100% in the US, but do they have any pricing power? Can they clear dealers' lots without offering incentives?
2. Auto OEMs are global players. They may be running 100% in the U.S. at the moment. That doesn't mean that global overcapacity is not an issue.

Fiat F-1 filing (http://www.sec.gov/Archives/edgar/data/1605484/000119312514369330/d755216df1.htm#rom755216_8):

"Competition, particularly in pricing, has increased significantly in the automotive industry in recent years. Global vehicle production capacity significantly exceeds current demand, partly as a result of lower growth in demand for vehicles. This overcapacity, combined with high levels of competition and weakness of major economies, has intensified and may further intensify pricing pressures."

KPMG Global Automotive Executive Survey 2014 (http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/global-automotive-executive-survey/Documents/2014-report.pdf):

Page 48: Overcapacity remains a challenge

(http://i.imgur.com/h4gbYm0.png)
Title: Re: GM - General Motors
Post by: compounding on October 13, 2014, 01:17:13 AM
Have you checked utilization rates in the U.S. lately? Many are running over 100%. Are you suggesting this will change? In Europe it's a bit different and quite a few are rationalizing, but much smaller market (ie not as important) and recovery of demand is likely to happen at some point. In China most need new capacity to keep up with growing demand.

Two counterpoints:

1. They may be running 100% in the US, but do they have any pricing power? Can they clear dealers' lots without offering incentives?
2. Auto OEMs are global players. They may be running 100% in the U.S. at the moment. That doesn't mean that global overcapacity is not an issue.

Fiat F-1 filing (http://www.sec.gov/Archives/edgar/data/1605484/000119312514369330/d755216df1.htm#rom755216_8):

"Competition, particularly in pricing, has increased significantly in the automotive industry in recent years. Global vehicle production capacity significantly exceeds current demand, partly as a result of lower growth in demand for vehicles. This overcapacity, combined with high levels of competition and weakness of major economies, has intensified and may further intensify pricing pressures."

KPMG Global Automotive Executive Survey 2014 (http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/global-automotive-executive-survey/Documents/2014-report.pdf):

Page 48: Overcapacity remains a challenge

(http://i.imgur.com/h4gbYm0.png)

1. I'd say some segments have pricing power (trucks/luxury/premium) and some don't. There was a chart in the article you posted on the topic of price increases. They talked some about this at GM's recent investor day, and Pabrai has spoken about US trucks as a sort of franchise, if you want other points of view and data. The profit margins of these segment seem to support this analysis.

2. Thanks for posting the survey, I hadn't read it before. As I said Europe is challenging, but Italy had the worst level of sales since he beginning of he seventies last year. Sustainable? And the other countries aren't exactly at the top of the cycle either.

Of course overcapacity is a risk, but a large part of the thesis in GM and Chrysler is that they are in much much better shape in terms of cost structure and organisation post re-org. Frankly, I would be more concerned if the executives weren't worried about overcapacity. That they are worried about overcapacity is not evidence of overcapacity. An issue generally with the survey was that almost all of it was just forecasting.

And if you look at Fiat-Chrysler they are using under-utilised factories in Europe to export premium/luxury vehicles until Europe starts looking better. You make it sound like being global is a negative? I am of diametrically opposed opinion.

Title: Re: GM - General Motors
Post by: intothebreach on October 14, 2014, 07:18:02 PM
Just catching up on this whole thread after (finally) getting intrigued due to the negative headlines + existence of warrants.

I can perhaps add a little context on the industry as a former employee of two Tier-1 suppliers, one Japanese (very remote subsidiary of Toyota) and as a Plant Manager in another US-based. Both sold directly to GM.

For those not familiar with the industry, I would suggest threading carefully. Aside from a few exceptions such as the airlines, the auto industry has got to be one of the most dysfunctional industries around, and my personal belief is what we are currently seeing at GM in terms of recalls is just a reflection of "inbred" management (in the sense of always having been in this one industry) coupled with a certain complacency/arrogance  and a focus on short-term results (granted this last one being fairly widespread).

A few examples come to mind: way back when Saturn first launched, GM were reinventing the automobile and its manufacturing, with a ground-breaking partnership with its unions (and of course, new materials), then promptly proceeded to never renew the Saturn line-up (after adding a few more models, the last one an Opel rebranding), leading to its eventual demise. Almost 10 years back, I remember attending a GM Purchasing function where we were told by the person in charge that GM had learned its lessons, and that it was about to undergo a "product-lead revolution". Following which, it kept focusing mostly on rebates, marketing and fleet sales.

Add to this the dual structure of the industry where the manufacturers' and the dealers' interests are far from being aligned (which I believe constitutes one of Tesla's major competitive advantages), the massive reinvestment costs that are easily pushed back a few years when convenient. The MASSIVE amount of capital destroyed in ill-fated scale/platform acquisitions and divestures. No wonder both Daimler and Cerberus failed to do anything worthwhile with Chrysler before it ended up with Marchionne. And also that it took an ex-Boeing guy to prevent Ford from ending up in the same spot as GM. What significant innovation came or are coming from the US auto manufacturers these days (other than Tesla)? Google is the one pioneering the self-driving cars, the electric car was developed by the Japanese first, even Ford's MyTouch is going to be leapfrogged by Apple even though it launched years before...  I am surely missing some, but all in all far from being very reassuring as a shareholder.

That said, I have absolutely no insight on the new CEO, other than what I view as a few positives to compensate for being an industry insider (a woman CEO in an industry run by men should be good news, and what seems to be a willingness to clean up the recalls board).

As you can tell, I'm not exactly a fan of either GM or its industry, but as headlines continue pushing prices lower, I'm getting more and more intrigued. Berkshire may have bought in, but this is certainly not one wonderful businesses that you hold forever.

Edit: corrected typo in Opel and missing plurals
Title: Re: GM - General Motors
Post by: nikhil25 on October 15, 2014, 10:32:32 AM
GM Sued for $10 Billion Over Losses on 27 Million Cars
http://www.bloomberg.com/news/2014-10-15/gm-sued-for-10-billion-over-losses-on-27-million-cars.html

Quote
General Motors Co. (GM) was hit with its biggest lawsuit so far over serial recalls, brought on behalf of drivers of 27 million vehicles seeking more than $10 billion in compensation for fallen car prices.

The would-be class action against GM aims to represent everyone who bought or leased a recalled car from July 2009 to July 2014 and still owns it, or sold it after mid-February when the recalls started, or had an accident that destroyed it after that date.

According to the suits, 2010 and 2011 Chevy Camaros lost $2,000 in value as a result of recalls. The price drop of the 2009 Pontiac Solstice is $2,900.

Common is down to $28ish
Title: Re: GM - General Motors
Post by: fareastwarriors on October 15, 2014, 10:46:16 AM
General Motors’s Third-Quarter Global Sales Increase 2%

Auto Maker Posts Best Third Quarter Since 1980; Sales in China Improve 14%


http://online.wsj.com/articles/general-motorss-third-quarter-global-sales-increase-2-1413384493?mod=WSJ_hp_LEFTWhatsNewsCollection (http://online.wsj.com/articles/general-motorss-third-quarter-global-sales-increase-2-1413384493?mod=WSJ_hp_LEFTWhatsNewsCollection)
Title: Re: GM - General Motors
Post by: fareastwarriors on October 15, 2014, 06:29:51 PM
Class-Action Case Accuses G.M. of Neglect Beyond Ignition Switch



http://www.nytimes.com/2014/10/16/business/class-action-case-accuses-gm-of-neglect-beyond-ignition-switch.html?src=busln (http://www.nytimes.com/2014/10/16/business/class-action-case-accuses-gm-of-neglect-beyond-ignition-switch.html?src=busln)
Title: Re: GM - General Motors
Post by: xazp on October 17, 2014, 06:55:01 PM
Tesla's #1 advantage (and it is huge right now) is their battery technology means they can get higher ranges at lower prices than anyone else.   Last year, they were probably half the cost of anyone else.  That advantage is eroding quickly away right now.  I think in 2016, they'll have only a 15% cost advantage vs a 100% cost advantage now.  I would suggest to you that GM is second only to Tesla in EV technology.

People think of the Volt as a sales dud, while they sing the praises of Tesla.  Volt outsells Tesla.  It looks to me like GM cars (Volt, Sonic, and whatever Cadillac appears) will always outsell Tesla.  That's not to slam Tesla: Tesla is a high-margin, low volume company; GM is a high-volume, low-margin company. 


US will have 17 million car sales.

Tesla will not even have 50,000 car sales in 2014. While electric cars will gain market share, it is not a threat at this time to the industry. Eg. a recent goal set was to have 30% of all cars be electric by 2030.

It might start to happen sooner than that, look at Tesla walking circle around it's competitors. EV and Self Driving Cars are disruptives technology today's leader has nothing to do with tomorrow.

BeerBaron
Title: Re: GM - General Motors
Post by: xazp on October 17, 2014, 07:01:51 PM
I think Europe will be profitable in 2016.  If you look at their current earnings, you'll see they are almost break-even when you back-out restructuring costs.  They are losing about $100-$200MM/quarter (ex-restructuring).  My view is that excluding Chevy (they're removing the brand from Europe) which is their worst brand there, and including various plant closures (not yet complete) they are already modestly profitable in Europe. 

However: I'd like to see someone defend the view that GM will have 10% N.A. margins.  I've read many analyst reports and they are openly skeptical.  To my knowledge, even the most bullish analysts don't model 10% N.A. margins in 2016.  Which means, more upside if GM can achieve their goals.  But while I've figured out how they'll make their European targets, I'm not sure about their U.S. targets.  I have some ideas but would like to provoke a discussion about it. 



The $6.5 billion of FCF that someone mentioned above is too low if you figure NA gets to a 10% pre-tax margin by the time we hit 2016 -- as Mary Barra has indicated she's targeting.

If NA margins hit 10% and Europe is no longer negative by 2016, keeping everything else the same, you'll get to almost $5 per share of earnings and/or FCF by 2016.
Title: Re: GM - General Motors
Post by: Mephistopheles on October 21, 2014, 11:15:43 PM
Is there a good primer to understand the auto loan market/ABS, specifically for sub prime?
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 22, 2014, 05:25:49 AM
People think of the Volt as a sales dud, while they sing the praises of Tesla.  Volt outsells Tesla.

Volt outsells Tesla?  Where did you read that?

Here is a reference from June 2014 that says Volt had only sold 8,615 YTD (in June).

http://insideevs.com/chevrolet-volt-sales-june-2014/

That seems low compared to the Tesla sales.
 
Title: Re: GM - General Motors
Post by: jeffmori7 on October 22, 2014, 05:48:19 AM
People think of the Volt as a sales dud, while they sing the praises of Tesla.  Volt outsells Tesla.

Volt outsells Tesla?  Where did you read that?

Here is a reference from June 2014 that says Volt had only sold 8,615 YTD (in June).

http://insideevs.com/chevrolet-volt-sales-june-2014/

That seems low compared to the Tesla sales.

Guys, here are the data as of September 30th in the US: http://insideevs.com/september-2014-plug-electric-vehicle-sales-report-card/

Tesla sales are estimated, but insideEVs does a good estimate.

or http://insideevs.com/cumulative-us-plug-electric-vehicle-sales-model-model-breakdown-market-share-data/

And a World top ten as of August 31th:  http://ev-sales.blogspot.ca/search/label/World


Title: Re: GM - General Motors
Post by: jay21 on October 22, 2014, 06:05:33 AM
Is there a good primer to understand the auto loan market/ABS, specifically for sub prime?

I can look more into it, but I think the rating agencies publish some free articles. That should be a good starting point.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 22, 2014, 06:16:47 AM
People think of the Volt as a sales dud, while they sing the praises of Tesla.  Volt outsells Tesla.

Volt outsells Tesla?  Where did you read that?

Here is a reference from June 2014 that says Volt had only sold 8,615 YTD (in June).

http://insideevs.com/chevrolet-volt-sales-june-2014/

That seems low compared to the Tesla sales.

Guys, here are the data as of September 30th in the US: http://insideevs.com/september-2014-plug-electric-vehicle-sales-report-card/

Tesla sales are estimated, but insideEVs does a good estimate.

or http://insideevs.com/cumulative-us-plug-electric-vehicle-sales-model-model-breakdown-market-share-data/

And a World top ten as of August 31th:  http://ev-sales.blogspot.ca/search/label/World

That makes more sense.

The Volt entered production in 2010, literally years ahead of Tesla's Model S.  Hence the higher cumulative global sales to date, which is the only category in which it leads Tesla.

How about $100 bet that Tesla sells 50%-100% more Model S than GM sells Volts in Q4 '14? Global sales.  Loser donates it to Sanjeev's board charity arrangement.
Title: Re: GM - General Motors
Post by: Mephistopheles on October 22, 2014, 07:35:03 AM
Is there a good primer to understand the auto loan market/ABS, specifically for sub prime?

I can look more into it, but I think the rating agencies publish some free articles. That should be a good starting point.

Thank you! Will check there.
Title: Re: GM - General Motors
Post by: fareastwarriors on October 22, 2014, 10:12:30 AM
Hayman still owns General Motors

http://video.cnbc.com/gallery/?video=3000322710&play=1 (http://video.cnbc.com/gallery/?video=3000322710&play=1)
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 22, 2014, 11:35:04 AM
Hayman still owns General Motors

http://video.cnbc.com/gallery/?video=3000322710&play=1 (http://video.cnbc.com/gallery/?video=3000322710&play=1)

He had a good point about the recalls.  I think we're at the apex of Recallmageddon.

So I actually decided to make my first-ever GM purchase today.  The CEO is just cleaning up the old issues that they've known about and buried.  It's a nice refreshing management change and the storm will soon pass.
Title: Re: GM - General Motors
Post by: dutchman on October 22, 2014, 11:41:39 AM
Eric, can I ask if you bought the common or b-warrants ? 
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 22, 2014, 11:45:29 AM
Eric, can I ask if you bought the common or b-warrants ?

I bought the common.
Title: Re: GM - General Motors
Post by: Homestead31 on October 22, 2014, 12:55:09 PM
Eric, if you could walk us through your reasoning on common vs warrants I'm sure many of us would greatly appreciate it. I'm new here and have been going through the BAC leverage thread, but would love to see your thought process real time rather than historical.

thanks in advance
Title: Re: GM - General Motors
Post by: fareastwarriors on October 22, 2014, 01:10:08 PM
Must be Eric's buying that is moving up the stock even in down market day.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 22, 2014, 03:16:51 PM
Well, there's about $1.10 premium in the B warrants in addition to the lost dividend of $1.20 annually.

So the warrants give you a synthetic non-recourse loan with these aforementioned expenses in lieu of interest payments and explicit hedging costs.

So I don't know, that's somewhere in the ballpark of 8% annually.

Okay, but that's roughly the same annualized cost as hedging the common with the $30 strike put.  The only extra expense is interest, and my portfolio margin rates at IB are really low.

So instead of being a cheapskate and going with the warrants with their $18.33 strike embedded put, I'd rather pay a wee bit extra annualized and go with a near-the-money put.

That was the only reason.  I just like the non-recourse loan terms better (much more favorable strike price but not much more expensive).  Other opinions are free to vary on this subject.


Title: Re: GM - General Motors
Post by: ERICOPOLY on October 22, 2014, 03:23:51 PM
Expressed differently, I prefer the zero-money-down terms better (hedging at-the-money).

The GM warrants give you protection of a price drop below $18.33 -> but the drop from these levels down to $18.33 would be painful if leveraged, and these warrants are of course leveraged.  You have a lot more skin in the game with the warrants.

Compare to real estate non-recourse example:
good:   30% down payment with 70% LTV
best:   0% down payment with 100% LTV

So when the 0% down financing is available without too much additional financing cost, I like it.
Title: Re: GM - General Motors
Post by: biaggio on October 22, 2014, 03:36:20 PM
Hayman still owns General Motors

http://video.cnbc.com/gallery/?video=3000322710&play=1 (http://video.cnbc.com/gallery/?video=3000322710&play=1)

Don t get what he is talking about. He says that GM is selling for $28 or $29b?? With free cash flow expected of $6B. This made me have a look

Today sells for $31.31 per share x  ~1.7million shares plus $60B+ in debt. Cash of ~ $30B  That works out to  EV ~ $82 B vs FCF ~ $6b. --->7% FCF yield. Looks fairly valued,no?

Although impressive list of investors including WEB and Tepper to clone...My calculation above may be wrong.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 22, 2014, 04:17:18 PM
Hayman still owns General Motors

http://video.cnbc.com/gallery/?video=3000322710&play=1 (http://video.cnbc.com/gallery/?video=3000322710&play=1)

Don t get what he is talking about. He says that GM is selling for $28 or $29b?? With free cash flow expected of $6B. This made me have a look

Today sells for $31.31 per share x  ~1.7million shares plus $60B+ in debt. Cash of ~ $30B  That works out to  EV ~ $82 B vs FCF ~ $6b. --->7% FCF yield. Looks fairly valued,no?

Although impressive list of investors including WEB and Tepper to clone...My calculation above may be wrong.

I get lost in the EV talk myself.  I just like the laundry list of top-shelf names owning the stock, as well as the longer term earnings consensus amongst the wall street analysts. 

2015 EPS:  4.44
2016 EPS:  4.83
2017 EPS:  5.8

The lowest estimate given amongst any of the 12 analysts is 3.62 for 2015 EPS. 

So if you put a 10x multiple on any of those earnings, this is not bad today at this price.
Title: Re: GM - General Motors
Post by: CorpRaider on October 22, 2014, 04:38:29 PM
Exactly how I sized it up.  Not sure if that's a positive or not.   hah! 

I suppose the one thing to try and handicap is where we are in the automotive cycle, because the trailing multiple should, of course, be pretty low at the top of the cycle.
Title: Re: GM - General Motors
Post by: TonyG on October 22, 2014, 04:44:28 PM
biaggio, the automotive debt is around 7B. He might not be adding some of the Pension liabilities of 25B because they will be going down when rates go up soon. So assume out of 25B of Pensions, 10B goes down.

So Mkt Cap                          50B
     Less: Cash                      30B
     Add: Debt                        7B
     Add: Preferred                 3B
     Add: Pension                    15B
     Less: NOL(~50% haircut)  10B
     EV  is roughly 35B. Depends on his assumptions I guess. Also didn't subtract out the book value of GM Financial but the BV is roughly 3B I believe. If someone see's something's not right with that calculation, let me know.
     
Title: Re: GM - General Motors
Post by: moody202 on October 22, 2014, 05:56:13 PM
Agree that we are getting to the top of the auto cycle. The best years were 2006/7 SAAR at 17.3 million. We are now hovering around 16.5 so not a lot of domestic upside from here. What about international though? China is already over 20 million SAAR and growing.

Exactly how I sized it up.  Not sure if that's a positive or not.   hah! 

I suppose the one thing to try and handicap is where we are in the automotive cycle, because the trailing multiple should, of course, be pretty low at the top of the cycle.
Title: Re: GM - General Motors
Post by: pabraifan on October 22, 2014, 06:20:54 PM
biaggio, the automotive debt is around 7B. He might not be adding some of the Pension liabilities of 25B because they will be going down when rates go up soon. So assume out of 25B of Pensions, 10B goes down.

So Mkt Cap                          50B
     Less: Cash                      30B
     Add: Debt                        7B
     Add: Preferred                 3B
     Add: Pension                    15B
     Less: NOL(~50% haircut)  10B
     EV  is roughly 35B. Depends on his assumptions I guess. Also didn't subtract out the book value of GM Financial but the BV is roughly 3B I believe. If someone see's something's not right with that calculation, let me know.
   

Nope, GM Financial book is $6.6 bil as of June 30th, 2014. See here: http://www.gmfinancial.com/investors-information/financial-information/sec-filings.aspx

Title: Re: GM - General Motors
Post by: wisdom on October 22, 2014, 06:58:56 PM
average car in the US is 11 year sold - the oldest it has ever been. potentially 50% of cars are older than 11 years today and need to be replaced over the next 5-6 years.

This is one of Buffett's reason for buying the auto dealership. He expects the sales to stay here for a few years.
Title: Re: GM - General Motors
Post by: Avyalake on October 22, 2014, 10:48:51 PM
Why do we believe that we are closer to the auto peak? Take a look at this snippet from beating the street.
In conjunction with saar auto sales data from http://www.calculatedriskblog.com/2014/05/vehicle-sales-forecasts-over-16-million.html?m=1, it is reasonable to assume that the average rate is 16.2 or so million vehicles and we should expect another 3 years of above trend sales.
Title: Re: GM - General Motors
Post by: CorpRaider on October 23, 2014, 04:41:07 AM
average car in the US is 11 year sold - the oldest it has ever been. potentially 50% of cars are older than 11 years today and need to be replaced over the next 5-6 years.

This is one of Buffett's reason for buying the auto dealership. He expects the sales to stay here for a few years.

That was my key takeaway as well.   Not sure how impacts of car sharing and growth in emerging impact things over the longer term.  Lots of moving parts.  Seems cheap based on current and next 3-5 years.  Better to be roughly right than precisely wrong. 
Title: Re: GM - General Motors
Post by: 50centdollars on October 23, 2014, 06:03:41 AM
http://www.ctvnews.ca/autos/gm-reports-profit-nearly-doubled-in-third-quarter-1.2067315
Title: Re: GM - General Motors
Post by: Homestead31 on October 23, 2014, 08:49:36 AM
Eric - just want to make sure i'm following you...

$1.10 warrant premium + $1.20 dividend = $2.30

$2.30 / share price when you bought of ~$30 = 7.6% (roughly 8%)

so you are paying 8% for the warrant, which you describe as an $18.38 put.  the cost of leverage here is essentially 8%.

and then if i'm not mistaken, what you are saying is you bought X shares of common with cash, and Y shares of common on margin from IB (any color on the relationship between X/Y is appreciated).

you then bought $30 strike puts to protect your purchase of Y shares of common that were bought on margin.

the cost of your leverage on this position is essentially the cost of the put (put price / stock price) + the cost of the margin divided by the cost of the common, or  ((put price/stock price) + margin cost %) / stock price.

you then compare the cost of the 2 different leverage set ups, consider the downside protection (ie $18.38 put vs $30 put) and make a decision accordingly.

is that about right?

ty

Title: Re: GM - General Motors
Post by: xazp on October 23, 2014, 08:51:07 AM
That makes more sense.

The Volt entered production in 2010, literally years ahead of Tesla's Model S.  Hence the higher cumulative global sales to date, which is the only category in which it leads Tesla.

How about $100 bet that Tesla sells 50%-100% more Model S than GM sells Volts in Q4 '14? Global sales.  Loser donates it to Sanjeev's board charity arrangement.

>>

Of course Tesla will outsell the Volt in Q4, but that's because Volt is launching a new version soon and they're clearing out the old model. 

I will do a gentlemen's bet that GM sells more EVs and variants (Volts, Sonics, whatever Cadillac comes out with etc) than Tesla does in 2015, 2016, 2017, 2018, etc. 

The problem with Tesla is they're capacity constrained to one factory.
Title: Re: GM - General Motors
Post by: xazp on October 23, 2014, 08:54:58 AM
I think the hand-wringing over SAAR misses the investment thesis on GM.   Whether or not the U.S. is near peak SAAR, China, India, Europe, S. AMerica are nowhere near peak SAAR.   Unless one thinks SAAR in the U.S. drops dramatically, the only thing that really matters is U.S. margins. 

10% U.S. margins + China growth + Europe profit ~ $5/share in earnings in 2016. 

Of these, I believe China and Europe are 'in the bag' so it's really whether they can hit their U.S. margin targets. 

But the larger issue is, why is it that GM can do $1/share of earnings and still be trading at $31/share?  The market obviously thinks even a P/E of 10 is "too expensive." 


Agree that we are getting to the top of the auto cycle. The best years were 2006/7 SAAR at 17.3 million. We are now hovering around 16.5 so not a lot of domestic upside from here. What about international though? China is already over 20 million SAAR and growing.

Exactly how I sized it up.  Not sure if that's a positive or not.   hah! 

I suppose the one thing to try and handicap is where we are in the automotive cycle, because the trailing multiple should, of course, be pretty low at the top of the cycle.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 09:22:49 AM

Of course Tesla will outsell the Volt in Q4, but that's because Volt is launching a new version soon and they're clearing out the old model. 


I will bet that Tesla sells more model S next year than GM sells Volt.  Every single quarter.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 09:26:58 AM
I will do a gentlemen's bet that GM sells more EVs and variants (Volts, Sonics, whatever Cadillac comes out with etc) than Tesla does in 2015, 2016, 2017, 2018, etc. 

The problem with Tesla is they're capacity constrained to one factory.

I bet that Tesla will be selling more pure EVs than GM does right now, next year, and the year after that  ;)

Any car that has a gasoline tank, I expect GM to sell more than Tesla which will sell zero.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 09:39:10 AM
Eric - just want to make sure i'm following you...

$1.10 warrant premium + $1.20 dividend = $2.30

$2.30 / share price when you bought of ~$30 = 7.6% (roughly 8%)

so you are paying 8% for the warrant, which you describe as an $18.38 put.  the cost of leverage here is essentially 8%.

and then if i'm not mistaken, what you are saying is you bought X shares of common with cash, and Y shares of common on margin from IB (any color on the relationship between X/Y is appreciated).

you then bought $30 strike puts to protect your purchase of Y shares of common that were bought on margin.

the cost of your leverage on this position is essentially the cost of the put (put price / stock price) + the cost of the margin divided by the cost of the common, or  ((put price/stock price) + margin cost %) / stock price.

you then compare the cost of the 2 different leverage set ups, consider the downside protection (ie $18.38 put vs $30 put) and make a decision accordingly.

is that about right?

ty

There is an $18.33 "loan" synthetically embedded in the warrant.

The cost of that $18.33 is the $1.10 warrant premium in addition to the lost dividend of (at least) $1.20 annually.

$18.33 - $1.10 = $17.23

$17.23 grows to $18.33 at what annualized rate by 2019 expiry?  That's rate is the annualized cost of the warrant premium.  I get roughly 1.5% annually.

You take that annualized cost, and then you add the annualized cost of missing the $1.20 dividend.  So you add 6.5% ($1.20 divided by $18.33).

1.5% + 6.5% = 8%.

And for what?  What's so important about insuring that the stock won't be lower than $18.33 in 2019? 

I don't think worrying about $18.33 in 2019 is a realistic fear that worth paying 8% annually for.

More realistic is $30 by 2016.  It costs about 12% annually.  At least you are getting some real insurance for your buck.

However the cost of rolling that $30 put along will drop dramatically if the stock rises as expected by 2016, 2017, 2018.  So the blended average cost of that $30 put will likely be 8% or less.  But it's a $30 strike put, not an $18.33 strike.

I expect the interest rate on my margin loan to rise at some point (a knock on my strategy), but I expect the GM dividend to rise as well (a knock on the warrant).
Title: Re: GM - General Motors
Post by: Homestead31 on October 23, 2014, 10:04:02 AM
ty eric.

my take away is that your focus is strongly on the downside rather than the upside - is that correct?

in other words i definitely understand your logic in terms of down side, but not as much on the upside.  in other words, if in 2016 the common trades at $50, the upside from the common at today's prices will be ~66%+ dividends, so call it 74%, while the upside on the warrants will be ~100%.

this is of course based on a 1:1 common:warrant analysis.

however, if i'm not mistaken you are leveraging your common via margin.  would you mind walking through the math there? ie if the stock is at $50 in 2016 your common bought with cash will be up ~74%... but your stock bought on margin will be up more... but how much more?  i'm not sure how much you margin or how much it costs to margin.

i appreciate your patience with this topic on this thread and the BAC one. 
Title: Re: GM - General Motors
Post by: krazeenyc on October 23, 2014, 10:06:39 AM
Eric - just want to make sure i'm following you...

$1.10 warrant premium + $1.20 dividend = $2.30

$2.30 / share price when you bought of ~$30 = 7.6% (roughly 8%)

so you are paying 8% for the warrant, which you describe as an $18.38 put.  the cost of leverage here is essentially 8%.

and then if i'm not mistaken, what you are saying is you bought X shares of common with cash, and Y shares of common on margin from IB (any color on the relationship between X/Y is appreciated).

you then bought $30 strike puts to protect your purchase of Y shares of common that were bought on margin.

the cost of your leverage on this position is essentially the cost of the put (put price / stock price) + the cost of the margin divided by the cost of the common, or  ((put price/stock price) + margin cost %) / stock price.

you then compare the cost of the 2 different leverage set ups, consider the downside protection (ie $18.38 put vs $30 put) and make a decision accordingly.

is that about right?

ty

There is an $18.33 "loan" synthetically embedded in the warrant.

The cost of that $18.33 is the $1.10 warrant premium in addition to the lost dividend of (at least) $1.20 annually.

$18.33 - $1.10 = $17.23

$17.23 grows to $18.33 at what annualized rate by 2019 expiry?  That's rate is the annualized cost of the warrant premium.  I get roughly 1.5% annually.

You take that annualized cost, and then you add the annualized cost of missing the $1.20 dividend.  So you add 6.5% ($1.20 divided by $18.33).

1.5% + 6.5% = 8%.

And for what?  What's so important about insuring that the stock won't be lower than $18.33 in 2019? 

I don't think worrying about $18.33 in 2019 is a realistic fear that worth paying 8% annually for.

More realistic is $30 by 2016.  It costs about 12% annually.  At least you are getting some real insurance for your buck.

However the cost of rolling that $30 put along will drop dramatically if the stock rises as expected by 2016, 2017, 2018.  So the blended average cost of that $30 put will likely be 8% or less.  But it's a $30 strike put, not an $18.33 strike.

I expect the interest rate on my margin loan to rise at some point (a knock on my strategy), but I expect the GM dividend to rise as well (a knock on the warrant).

Eric,

Are you buying the common in your roth? and selling the puts in a taxable account?
Also are you selling puts in other companies to cover the cost of the put? (If so, curious what companies you've picked)

Thanks.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 10:09:54 AM
Eric - just want to make sure i'm following you...

$1.10 warrant premium + $1.20 dividend = $2.30

$2.30 / share price when you bought of ~$30 = 7.6% (roughly 8%)

so you are paying 8% for the warrant, which you describe as an $18.38 put.  the cost of leverage here is essentially 8%.

and then if i'm not mistaken, what you are saying is you bought X shares of common with cash, and Y shares of common on margin from IB (any color on the relationship between X/Y is appreciated).

you then bought $30 strike puts to protect your purchase of Y shares of common that were bought on margin.

the cost of your leverage on this position is essentially the cost of the put (put price / stock price) + the cost of the margin divided by the cost of the common, or  ((put price/stock price) + margin cost %) / stock price.

you then compare the cost of the 2 different leverage set ups, consider the downside protection (ie $18.38 put vs $30 put) and make a decision accordingly.

is that about right?

ty

There is an $18.33 "loan" synthetically embedded in the warrant.

The cost of that $18.33 is the $1.10 warrant premium in addition to the lost dividend of (at least) $1.20 annually.

$18.33 - $1.10 = $17.23

$17.23 grows to $18.33 at what annualized rate by 2019 expiry?  That's rate is the annualized cost of the warrant premium.  I get roughly 1.5% annually.

You take that annualized cost, and then you add the annualized cost of missing the $1.20 dividend.  So you add 6.5% ($1.20 divided by $18.33).

1.5% + 6.5% = 8%.

And for what?  What's so important about insuring that the stock won't be lower than $18.33 in 2019? 

I don't think worrying about $18.33 in 2019 is a realistic fear that worth paying 8% annually for.

More realistic is $30 by 2016.  It costs about 12% annually.  At least you are getting some real insurance for your buck.

However the cost of rolling that $30 put along will drop dramatically if the stock rises as expected by 2016, 2017, 2018.  So the blended average cost of that $30 put will likely be 8% or less.  But it's a $30 strike put, not an $18.33 strike.

I expect the interest rate on my margin loan to rise at some point (a knock on my strategy), but I expect the GM dividend to rise as well (a knock on the warrant).

Eric,

Are you buying the common in your roth? and selling the puts in a taxable account?
Also are you selling puts in other companies to cover the cost of the put? (If so, curious what companies you've picked)

Thanks.

No, this is strictly just buying the common on margin (portfolio margin) and hedging with the puts.  Not writing anything else to cover the cost of the premiums.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 10:10:40 AM
ty eric.

my take away is that your focus is strongly on the downside rather than the upside - is that correct?

I wouldn't be using any leverage at all if that were the case.

But given that I am using leverage, I'm capping the maximum losses at something reasonable.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 10:24:21 AM
in other words i definitely understand your logic in terms of down side, but not as much on the upside.  in other words, if in 2016 the common trades at $50, the upside from the common at today's prices will be ~66%+ dividends, so call it 74%, while the upside on the warrants will be ~100%.

this is of course based on a 1:1 common:warrant analysis.

however, if i'm not mistaken you are leveraging your common via margin.  would you mind walking through the math there? ie if the stock is at $50 in 2016 your common bought with cash will be up ~74%... but your stock bought on margin will be up more... but how much more?  i'm not sure how much you margin or how much it costs to margin.

i appreciate your patience with this topic on this thread and the BAC one.


The warrants are 13.89 at last tick and the common is 30.95.

So if you have 30.95 in cash, you can:
A)  buy one common share
or
B)  synthetically leverage into 2.23 shares of common via investing it all in the warrants

So the warrant gives you exposure to 2.23 shares of common stock upside. 

To to replicate the same upside as the warrant (but with a different strike put and a different cost of leverage), you could do the following:

step 1)  pay cash for the first share of common
step 2)  purchase 1.23 additional shares of common using margin. 
step 3)  hedge the 1.23 shares using puts

This way, you have 2.23 underlying shares of upside (same as the warrants) but you get to pick the strike price of the put that protects your margin loan.  And the costs are different.
Title: Re: GM - General Motors
Post by: xazp on October 23, 2014, 10:35:48 AM
I will take both bets!

GM pure EVs outsell Tesla EVs starting in 2016 or 2017 ...
and
GM Volt outsells Tesla-S, after the new Volt comes out (sometime next year).   

Who knows if we remember this bet.  But, my research suggests GM is second only to Tesla in EV technology.  Tesla's big advantage is battery costs.  The price differential of batteries will be small beginning in 2016, and minimal in 2017.  Not sure if you know, but GM is doing a $30,000, 200-mile EV in 2016.  I believe that will sell well enough at least in 2017 to exceed Tesla's car capacity.  Just my guess!



I will do a gentlemen's bet that GM sells more EVs and variants (Volts, Sonics, whatever Cadillac comes out with etc) than Tesla does in 2015, 2016, 2017, 2018, etc. 

The problem with Tesla is they're capacity constrained to one factory.

I bet that Tesla will be selling more pure EVs than GM does right now, next year, and the year after that  ;)

Any car that has a gasoline tank, I expect GM to sell more than Tesla which will sell zero.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 10:41:35 AM
I will take both bets!

GM pure EVs outsell Tesla EVs starting in 2016 or 2017 ...
and
GM Volt outsells Tesla-S, after the new Volt comes out (sometime next year).   


To clarify, I said "now" "next year" "and the year after that"

So that does not include 2017.
Title: Re: GM - General Motors
Post by: Mephistopheles on October 23, 2014, 10:50:16 AM
in other words i definitely understand your logic in terms of down side, but not as much on the upside.  in other words, if in 2016 the common trades at $50, the upside from the common at today's prices will be ~66%+ dividends, so call it 74%, while the upside on the warrants will be ~100%.

this is of course based on a 1:1 common:warrant analysis.

however, if i'm not mistaken you are leveraging your common via margin.  would you mind walking through the math there? ie if the stock is at $50 in 2016 your common bought with cash will be up ~74%... but your stock bought on margin will be up more... but how much more?  i'm not sure how much you margin or how much it costs to margin.

i appreciate your patience with this topic on this thread and the BAC one.


The warrants are 13.89 at last tick and the common is 30.95.

So if you have 30.95 in cash, you can:
A)  buy one common share
or
B)  synthetically leverage into 2.23 shares of common via investing it all in the warrants

So the warrant gives you exposure to 2.23 shares of common stock upside. 

To to replicate the same upside as the warrant (but with a different strike put and a different cost of leverage), you could do the following:

step 1)  pay cash for the first share of common
step 2)  purchase 1.23 additional shares of common using margin. 
step 3)  hedge the 1.23 shares using puts

This way, you have 2.23 underlying shares of upside (same as the warrants) but you get to pick the strike price of the put that protects your margin loan.  And the costs are different.

If you are hedging with puts, that adds to the cost no? So you're buying a share and borrowing to buy 1.23 more. In order to hedge the 1.23, you'd also have to buy 1.23 puts, so you need to put up additional capital on top of the 30.95 for this insurance (or borrow more on margin to buy the put). What am I getting wrong?
Title: Re: GM - General Motors
Post by: Liberty on October 23, 2014, 10:52:51 AM
Who knows if we remember this bet.  But, my research suggests GM is second only to Tesla in EV technology.  Tesla's big advantage is battery costs.  The price differential of batteries will be small beginning in 2016, and minimal in 2017.  Not sure if you know, but GM is doing a $30,000, 200-mile EV in 2016.  I believe that will sell well enough at least in 2017 to exceed Tesla's car capacity.  Just my guess!

This reminds me a lot of what I see happening with Apple vs. Android. People look at spec lists rather than at how good the overall products are, and what the experience is for customers.

If volume is the only thing you care about (as opposed to profits per EV), GM has a big advantage because they sell at much lower price points than Tesla at the moment, so more people can afford them. The Model 3 will help, but that's only in a few years.

But GM has a huge handicap too: To properly sell EVs, they would have to explain to customers the disadvantages of their others products and properly incentivize dealers to do so (but dealers make most of their money on maintenance of non-EVs), which they won't really do.

They would also need to make their most attractive models be EVs, rather than just 'ok' models. The Spark EV reminds me of the Nissan LEAF, except worse. Rather than take one of your best-selling models with the most mass-appeal and try to make it electric and as good as possible (a top fof the line electric Altima or Malibu), they do something that they think won't cannibalize their other sales too much but will still be good enough for those who really want EVs. It's half-hearted. They're pulling their punches.

Tesla is aiming squarely at the mainstream, not just EV lovers. They want to make the best cars, period.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 11:04:11 AM
in other words i definitely understand your logic in terms of down side, but not as much on the upside.  in other words, if in 2016 the common trades at $50, the upside from the common at today's prices will be ~66%+ dividends, so call it 74%, while the upside on the warrants will be ~100%.

this is of course based on a 1:1 common:warrant analysis.

however, if i'm not mistaken you are leveraging your common via margin.  would you mind walking through the math there? ie if the stock is at $50 in 2016 your common bought with cash will be up ~74%... but your stock bought on margin will be up more... but how much more?  i'm not sure how much you margin or how much it costs to margin.

i appreciate your patience with this topic on this thread and the BAC one.


The warrants are 13.89 at last tick and the common is 30.95.

So if you have 30.95 in cash, you can:
A)  buy one common share
or
B)  synthetically leverage into 2.23 shares of common via investing it all in the warrants

So the warrant gives you exposure to 2.23 shares of common stock upside. 

To to replicate the same upside as the warrant (but with a different strike put and a different cost of leverage), you could do the following:

step 1)  pay cash for the first share of common
step 2)  purchase 1.23 additional shares of common using margin. 
step 3)  hedge the 1.23 shares using puts

This way, you have 2.23 underlying shares of upside (same as the warrants) but you get to pick the strike price of the put that protects your margin loan.  And the costs are different.

If you are hedging with puts, that adds to the cost no? So you're buying a share and borrowing to buy 1.23 more. In order to hedge the 1.23, you'd also have to buy 1.23 puts, so you need to put up additional capital on top of the 30.95 for this insurance (or borrow more on margin to buy the put). What am I getting wrong?

You have it correct, but it's pretty minor.  Rough math, it puts me off by about 10% of the margin rate.

So if your margin rate is 60 bps, you add 6 bps to account for it.  Or if your margin rate is 100 bps, you add 10 bps to account for it.

Well, I suppose you could argue that the loan itself used to finance the put is unhedged.  So in order to buy yet more puts to hedge that, it really raises the entire cost of everything by 10%.  So instead of 12% cost of leverage, it becomes 13.2%.  I'm just doing mental math, not with a calculator.

EDIT:  Actually, I was up late last night and I'll need more time to think about it.  Specifically, all non-recourse loans have interest that needs to be paid (presumably out of more borrowed money or other cash-flow).  Whereas in this case the interest is pre-paid upfront.  So fully hedging the money used to buy the puts could work as long as you unhedge it steadily at the pace that interest would be accruing on an ordinary loan.  In which case it wouldn't cost as much as 13.2% -- it would be somewhere in between that and the original estimate of 12%.
Title: Re: GM - General Motors
Post by: xazp on October 23, 2014, 12:04:51 PM
Absolutely.  Tesla will make more per car, but, GM will sell more cars.  I was really just trying to make the point that Tesla gets all the attention, but, GM will have pure EV sales too - quite possibly in excess of Tesla's. 

I'm going to digress a little bit, but it's a topic that interests me as I've been looking into GM. 

My view is that Tesla's really big innovation was to find a way to get battery costs way down.  I think in 2012 they were probably 1/3rd of anyone else.  So they could build a great car like the model S which can go 200+ miles, and no one else could copy them, because at 3x the battery costs per kWh, it was just not financially feasible. 

Nissan built the Leaf, but, because their battery costs were 3x, they basically just put in 1/3rd the battery.  So you get a leaf that goes, roughly, 1/3 the distance of the Tesla. 

GM's idea - which I like, but is widely panned - was the Volt.  So, they put in an even smaller battery - 30 miles, plus a gas range extender.  The idea here is many people drive 30 miles or less per day, so, most of the time it's acting like an EV.  But the range extender meant you could drive 300 miles if necessary.   You get the best of both worlds here.  But, it's been a poor seller.  And the reason (I think) is due to poor interior quality, having four seats, etc.  But the engineering of the actual power train and battery and engine - I think they make a lot of sense. 

Fast forward to 2015. 
I believe the new Volt will do something like 50 miles on the battery and another 300 on gas.  More importantly, it will have 5 seats and they'll improve the quality of the interior dramatically.  Since I believe the Volt is fundamentally a good design where the flubbed the interior details, I am hoping it will sell well. 

In 2016, I believe battery costs per kWh will shrink dramatically.  So, 2016 is the first time you will see legitimate competition for Tesla.  You'll see 200-mile cars for $30,000.  And you'll see (this is just speculation on my part) something from Cadillac that is a lot like the Model S, but less expensive.

I don't agree with you that GM is playing half-assed with EVs.  I think it is driven by battery prices, and it won't be until 2016 or 2017 that GM or anyone can really compete head-to-head with Tesla.  This is quite similar to how Apple had a multiple-year lead on Android, but today, the delta is pretty small.  Where the analogy falls apart is, I don't believe Tesla (with one factory and not the financial resources of a big company) can do the volumes of GM.  So Tesla by necessity will be a niche player, and someone else will take the profits.  My view is that GM's EV technology is superior to everyone but Tesla, so, I think GM is a candidate for being the "Samsung" to Tesla's "Apple." 

Anyway, I could go on and on about this :).  I'm now more interested in GM than BAC.  Never been a car guy in my life, but, I've read a lot of car stuff and really believe that GM's engineering has gotten vastly better than before.  Like ... I'm going to buy a hybrid CT-6 if this crappy stock gets to $42+. 







Who knows if we remember this bet.  But, my research suggests GM is second only to Tesla in EV technology.  Tesla's big advantage is battery costs.  The price differential of batteries will be small beginning in 2016, and minimal in 2017.  Not sure if you know, but GM is doing a $30,000, 200-mile EV in 2016.  I believe that will sell well enough at least in 2017 to exceed Tesla's car capacity.  Just my guess!

This reminds me a lot of what I see happening with Apple vs. Android. People look at spec lists rather than at how good the overall products are, and what the experience is for customers.

If volume is the only thing you care about (as opposed to profits per EV), GM has a big advantage because they sell at much lower price points than Tesla at the moment, so more people can afford them. The Model 3 will help, but that's only in a few years.

But GM has a huge handicap too: To properly sell EVs, they would have to explain to customers the disadvantages of their others products and properly incentivize dealers to do so (but dealers make most of their money on maintenance of non-EVs), which they won't really do.

They would also need to make their most attractive models be EVs, rather than just 'ok' models. The Spark EV reminds me of the Nissan LEAF, except worse. Rather than take one of your best-selling models with the most mass-appeal and try to make it electric and as good as possible (a top fof the line electric Altima or Malibu), they do something that they think won't cannibalize their other sales too much but will still be good enough for those who really want EVs. It's half-hearted. They're pulling their punches.

Tesla is aiming squarely at the mainstream, not just EV lovers. They want to make the best cars, period.
Title: Re: GM - General Motors
Post by: CorpRaider on October 23, 2014, 12:09:24 PM

Anyway, I could go on and on about this :).  I'm now more interested in GM than BAC.  Never been a car guy in my life, but, I've read a lot of car stuff and really believe that GM's engineering has gotten vastly better than before.  Like ... I'm going to buy a hybrid CT-6 if this crappy stock gets to $42+. 


Haha!  I like it. 
Title: Re: GM - General Motors
Post by: Picasso on October 23, 2014, 12:20:43 PM
I disagree that you get the best of both worlds with the Volt.  It actually highlights the limitations of electric and gas by compromising on both. 

It fits a certain niche but the goal of Tesla is to get companies like GM to focus on pure EV.  The more success Tesla has in this regard, the more GM will be backing away from products like the Volt.
Title: Re: GM - General Motors
Post by: xazp on October 23, 2014, 12:35:05 PM
When the Volt was released, there was no way to make a 200-mile EV without using Tesla's batteries, at any reasonable price.  Within the constraints that GM had at the time, I think it was an excellent compromise to get a mostly-EV car that also had range.  Here's actual Volt stats:  http://www.voltstats.net/  There are people who have driven nearly 70,000 miles on their batteries. 

With battery costs coming down in 2016 or 2017, they don't need to make compromises, they can simply make a 200-mile EV from scratch for $30,000. 

Fundamentally, I view Tesla's "monopoly" on EV's being related to battery costs.  As such, I think it only lasts until about 2016 or 2017.  I think Tesla's engineering is darned good, but, GM has recently proven itself at "borrowing" ideas from competitors and coming out with equally good cars.  I don't say that GM can beat Tesla, but, GM should have a cost and scaling advantage on Tesla in the long run. 

Alternately, I think that Tesla could merge with GM, and then Tesla could use Cadillac's manufacturing and dealers to scale up sales.  They sort of have complimentary strengths. 



I disagree that you get the best of both worlds with the Volt.  It actually highlights the limitations of electric and gas by compromising on both. 

It fits a certain niche but the goal of Tesla is to get companies like GM to focus on pure EV.  The more success Tesla has in this regard, the more GM will be backing away from products like the Volt.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 12:42:01 PM

Anyway, I could go on and on about this :).  I'm now more interested in GM than BAC.  Never been a car guy in my life, but, I've read a lot of car stuff and really believe that GM's engineering has gotten vastly better than before.  Like ... I'm going to buy a hybrid CT-6 if this crappy stock gets to $42+. 


I'll probably go with the Tesla "D" if this crappy stock gets to $42+.

We can drive our new cars head-on into each other and see who gets out and walks away from it  :D
Title: Re: GM - General Motors
Post by: Picasso on October 23, 2014, 12:51:16 PM
When the Volt was released, there was no way to make a 200-mile EV without using Tesla's batteries, at any reasonable price.  Within the constraints that GM had at the time, I think it was an excellent compromise to get a mostly-EV car that also had range.  Here's actual Volt stats:  http://www.voltstats.net/  There are people who have driven nearly 70,000 miles on their batteries. 

With battery costs coming down in 2016 or 2017, they don't need to make compromises, they can simply make a 200-mile EV from scratch for $30,000. 

Fundamentally, I view Tesla's "monopoly" on EV's being related to battery costs.  As such, I think it only lasts until about 2016 or 2017.  I think Tesla's engineering is darned good, but, GM has recently proven itself at "borrowing" ideas from competitors and coming out with equally good cars.  I don't say that GM can beat Tesla, but, GM should have a cost and scaling advantage on Tesla in the long run. 

Alternately, I think that Tesla could merge with GM, and then Tesla could use Cadillac's manufacturing and dealers to scale up sales.  They sort of have complimentary strengths. 



I disagree that you get the best of both worlds with the Volt.  It actually highlights the limitations of electric and gas by compromising on both. 

It fits a certain niche but the goal of Tesla is to get companies like GM to focus on pure EV.  The more success Tesla has in this regard, the more GM will be backing away from products like the Volt.

Tesla would never merge with GM.  GM destroyed the electric car many years ago.  Why would Musk let his baby in the hands of convicted murderers?  Maybe Tesla gets big enough to buy GM since their enterprise value is almost the market cap of Tesla.  That would be funny to watch unfold.

Tesla sources the batteries from Panasonic.  If GM wanted to make an electric car, assuming it was so easy, they would have done it.  The fact is a good electric car is best designed with a blank sheet of paper.  There are little if any compromises that Tesla have made in designing the Model S.  Given they focus on cash flow and not EPS, they are willing to not focus on profits until it forces the competition to do the same. 

There is a lot more to Tesla's "monopoly" than just the batteries.  Not to say the Volt isn't okay for what it is. 
Title: Re: GM - General Motors
Post by: xazp on October 23, 2014, 12:57:05 PM
OK then I'm getting an Escalade :).

I'm actually not a car guy.  I don't even like driving.  But since I've gotten involved in GM I read the auto blogs to get a sense of the quality of GM's and competitor cars. 

I'm finding GM annoying, like BAC it seems stuck at a low P/E.  What good is $5/share in earnings if the market only says a P/E of 6? 

I think they can raise their dividend and maybe that will drive valuations higher. 


Anyway, I could go on and on about this :).  I'm now more interested in GM than BAC.  Never been a car guy in my life, but, I've read a lot of car stuff and really believe that GM's engineering has gotten vastly better than before.  Like ... I'm going to buy a hybrid CT-6 if this crappy stock gets to $42+. 


I'll probably go with the Tesla "D" if this crappy stock gets to $42+.

We can drive our new cars head-on into each other and see who gets out and walks away from it  :D
Title: Re: GM - General Motors
Post by: xazp on October 23, 2014, 01:11:08 PM
I know  Tesla and GM would never merge.  Neither side would enjoy that. 

What Tesla figured out was how to efficiently put a lot of cheap, commodity batteries together - cheaply.  They took something like 8,000 commodity batteries.  Now traditionally you'd need some dude to solder in 8,000 little points into the car, which would blow the costs out of the water.  But Tesla figured out how to efficiently solder them together, then to cover them with a fire-resistant goop, and then patented their techniques.  It's the "putting them together" that GM doesn't know how to do (obviously they know how to buy batteries).  Tesla did it very cleverly, and GM never even had the imagination to do it.  Tesla was really clever and smart here.  So while a custom-built car battery might be $600/kWh (for GM), Tesla's cost $140/kWh + $60/kWh to combine them together.  Until Tesla released their patents earlier this year, it wasn't in the cards for GM to copy Tesla's strategy. 

And likely, GM never will.  Because eventually, custom-designed car batteries will get to a scale where they are at similar prices to Tesla, but more specifically designed for a car.  I view Tesla's strategy as very good in the short-term, but eventually I think Tesla and GM will use similar battery technologies. 

I view Tesla's primary "moat" being putting together commodity parts into a cheap car battery.  I think they've done other smart things with design, but, once you level the battery playing field, I don't think their engineering moat is very wide.  I do however believe the brand is very good, they've got Tesla charging stations, etc - that's where I think their long term moat resides.




When the Volt was released, there was no way to make a 200-mile EV without using Tesla's batteries, at any reasonable price.  Within the constraints that GM had at the time, I think it was an excellent compromise to get a mostly-EV car that also had range.  Here's actual Volt stats:  http://www.voltstats.net/  There are people who have driven nearly 70,000 miles on their batteries. 

With battery costs coming down in 2016 or 2017, they don't need to make compromises, they can simply make a 200-mile EV from scratch for $30,000. 

Fundamentally, I view Tesla's "monopoly" on EV's being related to battery costs.  As such, I think it only lasts until about 2016 or 2017.  I think Tesla's engineering is darned good, but, GM has recently proven itself at "borrowing" ideas from competitors and coming out with equally good cars.  I don't say that GM can beat Tesla, but, GM should have a cost and scaling advantage on Tesla in the long run. 

Alternately, I think that Tesla could merge with GM, and then Tesla could use Cadillac's manufacturing and dealers to scale up sales.  They sort of have complimentary strengths. 



I disagree that you get the best of both worlds with the Volt.  It actually highlights the limitations of electric and gas by compromising on both. 

It fits a certain niche but the goal of Tesla is to get companies like GM to focus on pure EV.  The more success Tesla has in this regard, the more GM will be backing away from products like the Volt.

Tesla would never merge with GM.  GM destroyed the electric car many years ago.  Why would Musk let his baby in the hands of convicted murderers?  Maybe Tesla gets big enough to buy GM since their enterprise value is almost the market cap of Tesla.  That would be funny to watch unfold.

Tesla sources the batteries from Panasonic.  If GM wanted to make an electric car, assuming it was so easy, they would have done it.  The fact is a good electric car is best designed with a blank sheet of paper.  There are little if any compromises that Tesla have made in designing the Model S.  Given they focus on cash flow and not EPS, they are willing to not focus on profits until it forces the competition to do the same. 

There is a lot more to Tesla's "monopoly" than just the batteries.  Not to say the Volt isn't okay for what it is.
Title: Re: GM - General Motors
Post by: intothebreach on October 23, 2014, 01:17:15 PM
So Tesla by necessity will be a niche player, and someone else will take the profits.  My view is that GM's EV technology is superior to everyone but Tesla, so, I think GM is a candidate for being the "Samsung" to Tesla's "Apple." 

This is an interesting conversation and the different view points are actually building a better overall story. No position yet, but looking more into this one (and for the record, I'd love for you guys to make the bet : )

Just want to extend the above analogy a little: There is really only 3 comfortable competitive positions in any competitive market: the premium which requires a superior product capable of commanding a premium pricing, the lowest-cost provider which can also be extremely profitable provided you are cost-advantaged, and being able to connect and serve a given niche market better than anybody else.

Tesla currently occupies the premium spot for EV, and may also be developing a cost advantage tied to batteries provided they can produce enough vehicles to offset their fixed costs.

I don't see GM as being built to service niche markets, and if that assumption is valid, will the new GM be able to establish itself as the lowest cost provider? Otherwise, it risks ending up precisely in the uncomfortable "stuck-in-the-middle" spot where Samsung seems to be headed: having its very profitable business eaten away by cheaper providers while not quite being able to command premium pricing? In theory it should, but if past is prologue, then the road ahead may be difficult...
Title: Re: GM - General Motors
Post by: MYDemaray on October 23, 2014, 01:19:57 PM
I'm finding GM annoying, like BAC it seems stuck at a low P/E.  What good is $5/share in earnings if the market only says a P/E of 6? 

Any thoughts on Leon Cooperman's off-the-cuff remarks about GM being a cyclical and the market "getting it"...i.e., trades at low valuations at cyclical peaks and high valuation at troughs? I think that is the variant perception here...the belief that even though we're selling lots of cars, the cyclical peak is a few years down the road, not tomorrow. That, and GM's new cost structure -- this time, it really is different.
Title: Re: GM - General Motors
Post by: Picasso on October 23, 2014, 01:20:17 PM
They figured out a lot more than just putting together a bunch of batteries.  Maybe when I have some extra time I can list them for you. 

I would caution against Tesla/GM takeaways from online blogs you have read on the issue.  I find most of them have no idea what they are talking about. 
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 01:20:23 PM
I know  Tesla and GM would never merge.  Neither side would enjoy that. 

What Tesla figured out was how to efficiently put a lot of cheap, commodity batteries together - cheaply.  They took something like 8,000 commodity batteries.  Now traditionally you'd need some dude to solder in 8,000 little points into the car, which would blow the costs out of the water.  But Tesla figured out how to efficiently solder them together, then to cover them with a fire-resistant goop, and then patented their techniques.  It's the "putting them together" that GM doesn't know how to do (obviously they know how to buy batteries).  Tesla did it very cleverly, and GM never even had the imagination to do it.  Tesla was really clever and smart here.  So while a custom-built car battery might be $600/kWh (for GM), Tesla's cost $140/kWh + $60/kWh to combine them together.  Until Tesla released their patents earlier this year, it wasn't in the cards for GM to copy Tesla's strategy. 

And likely, GM never will.  Because eventually, custom-designed car batteries will get to a scale where they are at similar prices to Tesla, but more specifically designed for a car.  I view Tesla's strategy as very good in the short-term, but eventually I think Tesla and GM will use similar battery technologies. 

I view Tesla's primary "moat" being putting together commodity parts into a cheap car battery.  I think they've done other smart things with design, but, once you level the battery playing field, I don't think their engineering moat is very wide.  I do however believe the brand is very good, they've got Tesla charging stations, etc - that's where I think their long term moat resides.




When the Volt was released, there was no way to make a 200-mile EV without using Tesla's batteries, at any reasonable price.  Within the constraints that GM had at the time, I think it was an excellent compromise to get a mostly-EV car that also had range.  Here's actual Volt stats:  http://www.voltstats.net/  There are people who have driven nearly 70,000 miles on their batteries. 

With battery costs coming down in 2016 or 2017, they don't need to make compromises, they can simply make a 200-mile EV from scratch for $30,000. 

Fundamentally, I view Tesla's "monopoly" on EV's being related to battery costs.  As such, I think it only lasts until about 2016 or 2017.  I think Tesla's engineering is darned good, but, GM has recently proven itself at "borrowing" ideas from competitors and coming out with equally good cars.  I don't say that GM can beat Tesla, but, GM should have a cost and scaling advantage on Tesla in the long run. 

Alternately, I think that Tesla could merge with GM, and then Tesla could use Cadillac's manufacturing and dealers to scale up sales.  They sort of have complimentary strengths. 



I disagree that you get the best of both worlds with the Volt.  It actually highlights the limitations of electric and gas by compromising on both. 

It fits a certain niche but the goal of Tesla is to get companies like GM to focus on pure EV.  The more success Tesla has in this regard, the more GM will be backing away from products like the Volt.

Tesla would never merge with GM.  GM destroyed the electric car many years ago.  Why would Musk let his baby in the hands of convicted murderers?  Maybe Tesla gets big enough to buy GM since their enterprise value is almost the market cap of Tesla.  That would be funny to watch unfold.

Tesla sources the batteries from Panasonic.  If GM wanted to make an electric car, assuming it was so easy, they would have done it.  The fact is a good electric car is best designed with a blank sheet of paper.  There are little if any compromises that Tesla have made in designing the Model S.  Given they focus on cash flow and not EPS, they are willing to not focus on profits until it forces the competition to do the same. 

There is a lot more to Tesla's "monopoly" than just the batteries.  Not to say the Volt isn't okay for what it is.

Don't forget charging the batteries.  Putting them together is one thing, super-charging them with 120 kW is another.

Tesla needed to design both the charger, the battery, and the charging babysitter to make them all work together properly.

Batteries heat up when you charge them quickly -- it's really tricky to charge the battery at the speed of Tesla's superchargers.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 01:35:36 PM
GM's 200 mile range pure EV for $30,000 will have to use Tesla's supercharging network, or perhaps GM will have to build one of their own.

Otherwise the $35,000 Tesla will have a huge charging advantage for not much extra monthly payment on the car.

So that's fine if GM joins Tesla's network of chargers -- there will be a lot of money paid by GM to Tesla that will fund expansion of the network.
Title: Re: GM - General Motors
Post by: xazp on October 23, 2014, 04:45:18 PM
GM is really strong in two profitable (and related) areas.  They're something like 70% market share in large SUV space (Suburban, Escalade, etc).   And they're strong in pickups which is basically an American industry.  I don't even feel like foreign car companies have a desire to compete.  I feel like most U.S. pickup buyers prefer U.S. trucks.  And politician motorcades will always be composed of U.S. built SUVs and cars.

Where GM, Ford, and Chrysler are generally weak is "luxury" cars - Cadillac, Lincoln.  That's a profit area that is dominated by foreign cars. 

Eric:  NRG (an electricity company I used to own and follow closely) is adding charging stations which you can buy subscriptions to.  I believe the Leaf, for example, comes with a 1-year subscription.  There's plenty of room to add charging stations for other cars, though, ideally this would just standardize the way gas fueling is standard, and everyone can collaboratively expand the network. 

Picasso:  Sorry, we went too far afield.  I think Tesla is #1 in EV, but GM is #2.  Can we leave it at that?  Plenty of space for EVs in the next decade. 


So Tesla by necessity will be a niche player, and someone else will take the profits.  My view is that GM's EV technology is superior to everyone but Tesla, so, I think GM is a candidate for being the "Samsung" to Tesla's "Apple." 

This is an interesting conversation and the different view points are actually building a better overall story. No position yet, but looking more into this one (and for the record, I'd love for you guys to make the bet : )

Just want to extend the above analogy a little: There is really only 3 comfortable competitive positions in any competitive market: the premium which requires a superior product capable of commanding a premium pricing, the lowest-cost provider which can also be extremely profitable provided you are cost-advantaged, and being able to connect and serve a given niche market better than anybody else.

Tesla currently occupies the premium spot for EV, and may also be developing a cost advantage tied to batteries provided they can produce enough vehicles to offset their fixed costs.

I don't see GM as being built to service niche markets, and if that assumption is valid, will the new GM be able to establish itself as the lowest cost provider? Otherwise, it risks ending up precisely in the uncomfortable "stuck-in-the-middle" spot where Samsung seems to be headed: having its very profitable business eaten away by cheaper providers while not quite being able to command premium pricing? In theory it should, but if past is prologue, then the road ahead may be difficult...
Title: Re: GM - General Motors
Post by: CorpRaider on October 23, 2014, 05:40:08 PM
Combining the gas with the EV is a really smart and practical way to deal with the costs and infrastructure limitations though.  If the volt wasn't a POS subcompact, I would be into it.  The EV makes the most sense for your daily commute. 


On an unrelated note.  I had to take the GD driver's seat out of my audi suv to change the freaking battery. I'm done with sie germans.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 06:03:52 PM
Combining the gas with the EV is a really smart and practical way to deal with the costs and infrastructure limitations though.  If the volt wasn't a POS subcompact, I would be into it.  The EV makes the most sense for your daily commute. 


On an unrelated note.  I had to take the GD driver's seat out of my audi suv to change the freaking battery. I'm done with sie germans.


Yes, if you are happy with a gutless EV it's a wonderful way to go.

The larger the battery, the more "oomph" when you step on the gas. 
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 23, 2014, 06:08:17 PM
Eric:  NRG (an electricity company I used to own and follow closely) is adding charging stations which you can buy subscriptions to.  I believe the Leaf, for example, comes with a 1-year subscription.  There's plenty of room to add charging stations for other cars, though, ideally this would just standardize the way gas fueling is standard, and everyone can collaboratively expand the network. 


I have a charging unit in my garage.  However, it doesn't output 120kW to the car.

And neither does anything that NRG offers with that subscription.
Title: Re: GM - General Motors
Post by: wisdom on October 24, 2014, 07:48:50 AM
http://www.usatoday.com/story/money/cars/2014/10/24/ford-tesla/17827533/

I believe BYD has claimed that they will have something similar in the next year or 2.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 24, 2014, 07:58:04 AM
http://www.usatoday.com/story/money/cars/2014/10/24/ford-tesla/17827533/

I believe BYD has claimed that they will have something similar in the next year or 2.

Ford Mustang drivers are tired of their noisy cars being left in the dust at the traffic light?

There must be something emasculating about driving a muscle car with it's roaring engine but being "muscle bound".  All that bark, and no bite.  Reminds me of a line from the Reservoir Dogs "Are you going to bark all day, little doggy, or are you going to bite?".

Same goes for their truck lines -- you get a lot more torque out of an electric motor.  A Tesla heavy-duty pickup would be just awesome.
Title: Re: GM - General Motors
Post by: jeffmori7 on October 24, 2014, 10:23:36 AM
Guys, some worlwide stats on plug-in cars: http://cleantechnica.com/2014/10/23/sales-of-plug-in-cars-exceed-600000-worldwide/

We can say it is becoming less and less a niche market. It will be interesting to watch it unfold in the next few years. So far, Tesla, Nissan and GM seemed the more dedicated, with Tesla being the obvious leader, but BMW and the Volswagen group are trying to catch up a little bit.
Title: Re: GM - General Motors
Post by: frommi on October 24, 2014, 10:56:56 AM
When we talk about hybrid/plugin cars i think its worth mentioning that Toyota is the current leading seller of these cars.
The Prius Plugin engine is vastly superior to everything i know when it comes to efficiency and mechanical design (and of course patent protected).
In 2015 they start the first fuel cell car, which is in my eyes probably even better than a pure EV because you get all advantages of a pure EV without the disadvantages.
But GM is of course a lot cheaper in valuation. :)
Title: Re: GM - General Motors
Post by: Liberty on October 24, 2014, 11:32:47 AM
When we talk about hybrid/plugin cars i think its worth mentioning that Toyota is the current leading seller of these cars.
The Prius Plugin engine is vastly superior to everything i know when it comes to efficiency and mechanical design (and of course patent protected).
In 2015 they start the first fuel cell car, which is in my eyes probably even better than a pure EV because you get all advantages of a pure EV without the disadvantages.
But GM is of course a lot cheaper in valuation. :)

Toyota is a leader in hybrids. But their plug-ins are basically glorified hybrids. Not much extra pure EV range or technology, and they haven't done much of note in the EV field. Like Honda, they missed the boat on EVs, despite a few token concept models and low-volume models to meet California's ZEV regulations and such.

Fuel cells probably won't ever amount to anything in transportation (might have more success with stationary applications, though). We already have an electric grid, but we don't have an hydrogen infrastructure, and hydrogen is hard to move around (very 'leaky') and getting it in the first place either requires lots of electricity or natural gas reforming or whatever. If we could just mine pure hydrogen somewhere on earth, maybe they'd be more viable, but as things stand, hydrogen is not an energy source, it's just a carrier, like a battery -- the energy has to come from somewhere else.
Title: Re: GM - General Motors
Post by: Picasso on October 24, 2014, 02:00:45 PM
     Oct. 24 (Bloomberg) -- Florida Attorney General Pam Bondi
is reviewing General Motors Co.’s lending arm to determine
whether she has jurisdiction to join a widening probe into its
subprime auto loan underwriting practices.
     GM Financial, which specializes in loans to people with
spotty credit, has disclosed that attorneys general of states it
didn’t identify and other government offices are demanding
documents related to its business of making car loans and
pooling them into bonds that are sold to investors.
     A spokesman for Bondi said the Florida attorney general
hasn’t issued a subpoena and is reviewing the matter.
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 24, 2014, 02:52:27 PM
In 2015 they start the first fuel cell car, which is in my eyes probably even better than a pure EV because you get all advantages of a pure EV without the disadvantages.

Batteries... drive it home, plug it in.
Hydrogen... drive somewhere to refill it.

All the advantages of a pure EV?
Title: Re: GM - General Motors
Post by: frommi on October 24, 2014, 09:51:28 PM
I have to guess, but probably more than 50% of all people that drive a car have no power outlet to plug their EV into. And of course there exists no infrastructure at the moment, but building it is already planned. (germany for example plans to have 50 stations by 2015, california 68 by 2016.) Production of the hydrocarbon can even happen locally, you just need power and water.

And its superior because cars get super cheap that way when you don`t need a battery and you can refill it in 1-3 minutes. I mean who doesn`t want a cheap car that drives with cheap and clean energy where just water comes out of your exhaust and is super silent? And looking further out an EV car with a battery is useless after 7-10 years, when the battery has to be changed. (who guarantees you that you get a new one for your car?)

http://www.fuel-cell-e-mobility.com/ (http://www.fuel-cell-e-mobility.com/)
http://www.fuelcellpartnership.org/ (http://www.fuelcellpartnership.org/)
Title: Re: GM - General Motors
Post by: frommi on October 24, 2014, 10:16:51 PM
And btw. GM has a fuel cell car, too.  :)
http://media.gm.com/media/us/en/gm/news.detail.html/content/Pages/news/us/en/2014/May/0507-fuel-cell.html (http://media.gm.com/media/us/en/gm/news.detail.html/content/Pages/news/us/en/2014/May/0507-fuel-cell.html)
Title: Re: GM - General Motors
Post by: ERICOPOLY on October 25, 2014, 05:03:01 AM
I mean who doesn`t want a cheap car that drives with cheap and clean energy where just water comes out of your exhaust and is super silent?


People like me who care about the amount of energy that is wasted:

According to the United States Department of Energy Office of Power, the most daunting problem associated with current hydrogen production is the energy needed to produce it and to provide for energy losses in the hydrogen-to-application chain. Using existing conventional technology, "hydrogen requires at least twice as much energy as electricity twice the tonnage of coal, twice the number of nuclear plants, or twice the field of PV panels to perform an equivalent unit of work. Most of today's hydrogen is produced from natural gas, which is only an interim solution since it discards 30% of the energy in one valuable but depletable fuel (natural gas) to obtain 70% of another (hydrogen). The challenge is to develop more appropriate methods based on sustainable energy sources, methods that do not employ electricity as an intermediate step."

http://www.altenergy.org/renewables/hydrogen_and_fuel_cells_production.html


There are some powerful interests who want hydrogen to succeed -- can you guess who they might be?  ::) ::) ::)

Anyone remember ethanol?  What was wrong about ethanol?  Who could argue with growing fuel in the fields, turning lawn clippings into fuel?  What is the problem with the equation that creates ethanol?  Yes, the amount of energy required in the process of conversion to ethanol.  So, how could it possibly be that it ever got political support... if it required a lot of energy?  ::) ::) ::)
Title: Re: GM - General Motors
Post by: frommi on October 25, 2014, 06:06:54 AM
Do you really think the average customer is interested in where the hydrocarbon comes from in the first place?

I must admit i don`t know what will win in the end. Perhaps you are right. But when the entire oil & gas industry is behind it, i am pretty sure we see a lot of governmental help for this.

http://www.fastcompany.com/3033198/duel-for-fuel (http://www.fastcompany.com/3033198/duel-for-fuel)
http://green.autoblog.com/2014/08/05/why-battery-electric-vehicles-will-beat-fuel-cells/ (http://green.autoblog.com/2014/08/05/why-battery-electric-vehicles-will-beat-fuel-cells/)
http://qz.com/186432/why-hydrogen-powered-cars-will-drive-elon-musk-crazy/ (http://qz.com/186432/why-hydrogen-powered-cars-will-drive-elon-musk-crazy/)
Title: Re: GM - General Motors
Post by: Liberty on October 25, 2014, 07:11:05 AM
Hydrogen is not a hydrocarbon btw.
Title: Re: GM - General Motors
Post by: wisdom on October 25, 2014, 07:36:39 AM
The reason batteries may succeed is because batteries do not care about the source of power. You can switch to any system that is the cheapest and clean at any given time.

Infrastructure - most of the infrastructure is already in place- you just need the chargers set up - one of the cheaper and quicker solutions.

Large plants tend to be more efficient in generating power - less waste. Thus, you are better off when you generate electricity at a central location and transmit it rather than having a small inefficient plant in each automobile.

With all other solutions you are making a bet on 1 tech or source of energy.

These are some of the reasons i believe EV's could win as long as battery tech improves over time.
Title: Re: GM - General Motors
Post by: frommi on October 25, 2014, 08:24:13 AM
Hydrogen is not a hydrocarbon btw.

Ups.  ;D
Title: Re: GM - General Motors
Post by: frommi on October 25, 2014, 08:35:21 AM
The reason batteries may succeed is because batteries do not care about the source of power. You can switch to any system that is the cheapest and clean at any given time.

Infrastructure - most of the infrastructure is already in place- you just need the chargers set up - one of the cheaper and quicker solutions.

Large plants tend to be more efficient in generating power - less waste. Thus, you are better off when you generate electricity at a central location and transmit it rather than having a small inefficient plant in each automobile.

With all other solutions you are making a bet on 1 tech or source of energy.

These are some of the reasons i believe EV's could win as long as battery tech improves over time.

No. A fuel cell is a storage of energy, too. I guess Toyota choose this technology because they see an advantage in mass production/scale vs. batteries. Price of lithium can probably kill the battery scale at some point.
Title: Re: GM - General Motors
Post by: jeffmori7 on October 25, 2014, 09:07:33 AM
An old article on hydrogen, but still useful: http://phys.org/news85074285.html

Title: Re: GM - General Motors
Post by: ERICOPOLY on October 25, 2014, 10:49:33 AM
I guess Toyota choose this technology because they see an advantage in mass production/scale vs. batteries.

IMO, they are diverting tax incentives away from battery electric in order to slow/kill it's adoption.

It's basically like fouling the player to prevent a layup.
Title: Re: GM - General Motors
Post by: Value^2 on October 26, 2014, 11:09:29 PM
I there (free) tool, which could show price history (chart) of those warrants?

Thanks!
Title: Re: GM - General Motors
Post by: rishig on October 27, 2014, 12:21:12 AM
I there (free) tool, which could show price history (chart) of those warrants?

Thanks!

https://dl.dropboxusercontent.com/u/31093934/GM.WS.B.png
Title: Re: GM - General Motors
Post by: fareastwarriors on October 27, 2014, 09:25:01 AM
GM and Ford Should Be Pumped About Gas

Economic Woes Overseas Could Boost Car Makers as Price of Gasoline Drops



http://online.wsj.com/articles/gm-and-ford-should-be-pumped-about-gas-heard-on-the-street-1414183502 (http://online.wsj.com/articles/gm-and-ford-should-be-pumped-about-gas-heard-on-the-street-1414183502)
Title: Re: GM - General Motors
Post by: xtreeq on October 27, 2014, 09:25:35 AM
I there (free) tool, which could show price history (chart) of those warrants?

Thanks!

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=GM.WS.A&insttype=Stock
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=GM.WS.B&insttype=Stock
Title: Re: GM - General Motors
Post by: fareastwarriors on October 28, 2014, 04:32:57 PM
GM’s Next-Generation Volt to Go Further on Electric Charge

Mary Barra Says New Model Will Launch in Second Half of 2015


http://online.wsj.com/articles/gm-ceo-says-next-generation-chevrolet-volt-to-go-further-on-electric-charge-1414516450 (http://online.wsj.com/articles/gm-ceo-says-next-generation-chevrolet-volt-to-go-further-on-electric-charge-1414516450)
Title: Re: GM - General Motors
Post by: snow pea on October 30, 2014, 08:34:18 AM
How about that product placement:

http://www.sbnation.com/lookit/2014/10/30/7130409/poor-nervous-chevy-guy-giving-the-mvp-trophy-to-madison-bumgarner-is
Title: Re: GM - General Motors
Post by: DCG on October 30, 2014, 08:56:43 AM
 ;D  "It combines, class winning and leading...you know..technology and stuff".
Title: Re: GM - General Motors
Post by: brker_guy on October 30, 2014, 09:50:59 AM
(http://cdn1.vox-cdn.com/thumbor/dwWEx7dRuApqmsrhI8lnjisGtWw=/800x0/filters:no_upscale()/cdn3.vox-cdn.com/uploads/chorus_asset/file/2406318/chevy.0.png)

The look on Selig's face is PRICELESS!   :D :D :D :D :D
Title: Re: GM - General Motors
Post by: DCG on October 30, 2014, 09:54:28 AM
Chevy's new tagline: "Cars made with technology and stuff".
Title: Re: GM - General Motors
Post by: CorpRaider on October 30, 2014, 10:49:08 AM
Holy sheesh man.  I'm sorely tempted sell this thing just because any organization that would pick that guy to be the one making the presentation is doomed to failure (not to mention all the GD recalls).  The GD truck they awarded is on recall.
Title: Re: GM - General Motors
Post by: compounding on October 30, 2014, 12:11:30 PM
Holy sheesh man.  I'm sorely tempted sell this thing just because any organization that would pick that guy to be the one making the presentation is doomed to failure (not to mention all the GD recalls).  The GD truck they awarded is on recall.

You were fine with the bankruptcy and recalls of over 30 million cars. But when a dealer guy that gets chosen to hand over a car because he's a baseball fan gets a little nervous in front of a superstar, an attractive woman and a couple of million viewers, you draw the line?  :)
Title: Re: GM - General Motors
Post by: 50centdollars on October 30, 2014, 12:21:29 PM
Chevy's new tagline: "Cars made with technology and stuff".

LOL
Title: Re: GM - General Motors
Post by: CorpRaider on October 30, 2014, 01:07:12 PM
Holy sheesh man.  I'm sorely tempted sell this thing just because any organization that would pick that guy to be the one making the presentation is doomed to failure (not to mention all the GD recalls).  The GD truck they awarded is on recall.

You were fine with the bankruptcy and recalls of over 30 million cars. But when a dealer guy that gets chosen to hand over a car because he's a baseball fan gets a little nervous in front of a superstar, an attractive woman and a couple of million viewers, you draw the line?  :)


Haha.  The bankruptcy was a positive for post BK equity holders.  As it often is.  But I can't say I bought it then.  They should have let the commish do it.  Didn't he make his money in selling cars?
Title: Re: GM - General Motors
Post by: JAllen on October 30, 2014, 09:44:33 PM
Is there a concise GM thesis somewhere?  Is it just a stock selling for very cheap?
Title: Re: GM - General Motors
Post by: peter1234 on October 31, 2014, 01:03:31 AM
Is there a concise GM thesis somewhere?  Is it just a stock selling for very cheap?

Kyle Bass had a short presentation on GM (December 2013).
Title: Re: GM - General Motors
Post by: compounding on October 31, 2014, 01:51:46 AM
Is there a concise GM thesis somewhere?  Is it just a stock selling for very cheap?

Post restructuring cost structure much lower, global scale, stock very cheap, trucks in us sort of franchise, pent-up demand us, Cadillac opportunity, good balance sheet.
Title: Re: GM - General Motors
Post by: merkhet on October 31, 2014, 05:29:11 AM
Is there a concise GM thesis somewhere?  Is it just a stock selling for very cheap?

Kyle Bass had a short presentation on GM (December 2013).

You mean a short presentation on his long position in GM. Just clarifying for others since the statement could be construed as Kyle Bass being short GM.
Title: Re: GM - General Motors
Post by: jay21 on October 31, 2014, 05:47:05 AM
Is there a concise GM thesis somewhere?  Is it just a stock selling for very cheap?

- Post-restructure, the industry/GM is actually decent to good
- Low breakeven relative to SARR, which means hard to ever have negative net income
- Model rationalization means less models -> more capex per model -> better models -> stable to gaining market share
- Long run way for high SAAR (most debatable)
- Cheap from an EV/EBITDA perspective

GM is one of the few things that I am very close to buying.
Title: Re: GM - General Motors
Post by: peter1234 on October 31, 2014, 05:54:06 AM
Is there a concise GM thesis somewhere?  Is it just a stock selling for very cheap?

Kyle Bass had a short presentation on GM (December 2013).

You mean a short presentation on his long position in GM. Just clarifying for others since the statement could be construed as Kyle Bass being short GM.

Yes, thanks for clarifying.

Since he was asking for a concise thesis, I thought Kyle Bass' 13 page presentation would qualify.

He recently said GM was still a large long position.

 ;)
Title: Re: GM - General Motors
Post by: sleepydragon on October 31, 2014, 06:03:28 AM
Is there a concise GM thesis somewhere?  Is it just a stock selling for very cheap?

- Post-restructure, the industry/GM is actually decent to good
- Low breakeven relative to SARR, which means hard to ever have negative net income
- Model rationalization means less models -> more capex per model -> better models -> stable to gaining market share
- Long run way for high SAAR (most debatable)
- Cheap from an EV/EBITDA perspective

GM is one of the few things that I am very close to buying.

just that their culture seems hard to change, like IBM ... that's really making me biting my nails
Title: Re: GM - General Motors
Post by: xazp on October 31, 2014, 01:50:36 PM
It's Kyle Basses largest holding ... though I personally don't weight that very heavily. 

But what does interest me, I believe Ted Weschler bought a few million during Q3 in the $34 range. 

Is there a concise GM thesis somewhere?  Is it just a stock selling for very cheap?

Kyle Bass had a short presentation on GM (December 2013).

You mean a short presentation on his long position in GM. Just clarifying for others since the statement could be construed as Kyle Bass being short GM.

Yes, thanks for clarifying.

Since he was asking for a concise thesis, I thought Kyle Bass' 13 page presentation would qualify.

He recently said GM was still a large long position.

 ;)
Title: Re: GM - General Motors
Post by: xazp on October 31, 2014, 02:09:17 PM
GM produces about as many cars as VW and Toyota - those three constantly are at the top of the world-wide sales bracket. 
But, GM is roughly half as profitable as VW and Toyota.  The upside is for GM's profit margins to double to what VW/TM enjoy today, which would also probably double or more their stock price. 

Almost everyone focuses on the U.S. and China, where GM makes most of its profits.  But that is not where the upside comes from - "everywhere else" (Europe, South America, Asia ex-China) is losing a lot of money. Toyota is profitable everywhere it sells cars. 

In order for that to happen, GM needs to think like a single global organization.  They have to remove factories from expensive areas, and they have to close factories and shut down brands in areas where they are underperforming.  Then they need to efficiently re-use R&D costs in other areas, and unleash their vast economies of scale.  Right now, GM operates like they are many separate little companies across the globe, not sharing engineering or parts, and thus never really getting economies of scale like others do.  Frankly GM seems to be the stupid kid in class because ... why they're trying to get economies of scale in 2014 instead of ... oh 2060, I don't know.  But right now is when they've seen the religion, so you should see company-wide margins improve as they standardize and use those economies of scale. 






- Post-restructure, the industry/GM is actually decent to good
- Low breakeven relative to SARR, which means hard to ever have negative net income
- Model rationalization means less models -> more capex per model -> better models -> stable to gaining market share
- Long run way for high SAAR (most debatable)
- Cheap from an EV/EBITDA perspective

GM is one of the few things that I am very close to buying.
Title: Re: GM - General Motors
Post by: 50centdollars on October 31, 2014, 08:42:41 PM
Fifth Estate had an episode tonight on the GM ignition switch recall. It was interesting.

http://www.cbc.ca/fifth/episodes/2014-2015/gm-recall-the-switch-from-hell
Title: Re: GM - General Motors
Post by: tylerdurden on November 04, 2014, 09:16:53 AM
I think this is where they want to go eventually but turnarounds take time, especially if you are trying to fix business in Europe, where the regulations are more rigid. It is not easy to close factories kill brands etc. in Europe but GM seems to be on the right rack for now. Their objective is to be profitable in Europe by 16 and transition to more global production platforms through time as articulated in their latest investor meeting. I am not sure whether this time it will be any different for GM in Europe though. Last time they made any profits there was long time a go.   


In order for that to happen, GM needs to think like a single global organization.  They have to remove factories from expensive areas, and they have to close factories and shut down brands in areas where they are underperforming.  Then they need to efficiently re-use R&D costs in other areas, and unleash their vast economies of scale.  Right now, GM operates like they are many separate little companies across the globe, not sharing engineering or parts, and thus never really getting economies of scale like others do.  Frankly GM seems to be the stupid kid in class because ... why they're trying to get economies of scale in 2014 instead of ... oh 2060, I don't know.  But right now is when they've seen the religion, so you should see company-wide margins improve as they standardize and use those economies of scale. 

Title: Re: GM - General Motors
Post by: xazp on November 07, 2014, 06:12:15 PM
They've been working on Europe for years, and I think they're all set up to be slightly profitable by the end of next year.

If you back out restructuring and f/x charges, Europe lost $100M last quarter - which is small comparable to the billions they used to lose. 

They're in the process of removing Chevy from Europe.  Seems to me ex-Chevy, they're already profitable. 



I think this is where they want to go eventually but turnarounds take time, especially if you are trying to fix business in Europe, where the regulations are more rigid. It is not easy to close factories kill brands etc. in Europe but GM seems to be on the right rack for now. Their objective is to be profitable in Europe by 16 and transition to more global production platforms through time as articulated in their latest investor meeting. I am not sure whether this time it will be any different for GM in Europe though. Last time they made any profits there was long time a go.   


In order for that to happen, GM needs to think like a single global organization.  They have to remove factories from expensive areas, and they have to close factories and shut down brands in areas where they are underperforming.  Then they need to efficiently re-use R&D costs in other areas, and unleash their vast economies of scale.  Right now, GM operates like they are many separate little companies across the globe, not sharing engineering or parts, and thus never really getting economies of scale like others do.  Frankly GM seems to be the stupid kid in class because ... why they're trying to get economies of scale in 2014 instead of ... oh 2060, I don't know.  But right now is when they've seen the religion, so you should see company-wide margins improve as they standardize and use those economies of scale. 

Title: Re: GM - General Motors
Post by: tylerdurden on November 10, 2014, 03:03:59 PM
When you think that the ignition switch recall issues will die down slowly, you get hit by another bad news:

http://online.wsj.com/articles/gm-ordered-new-switches-long-before-recall-1415584224?mod=WSJ_hp_LEFTWhatsNewsCollection

I certainly hope 2015 will be a better year for this stock...
Title: Re: GM - General Motors
Post by: wisdom on November 12, 2014, 01:46:00 PM
http://www.usatoday.com/story/money/cars/2014/11/12/cadillac-ats-cts-poor-sales-shift-cut-factory-layoffs/18921949/
Title: Re: GM - General Motors
Post by: xazp on November 12, 2014, 04:29:18 PM
This is good news.  Old GM would keep production flat, and discount to sell the cars.  New GM seems to be removing production, and keeping margins. 

If every car maker behaves this way, the industry will be a lot more profitable and create higher multiples. 

http://www.usatoday.com/story/money/cars/2014/11/12/cadillac-ats-cts-poor-sales-shift-cut-factory-layoffs/18921949/
Title: Re: GM - General Motors
Post by: Avyalake on November 14, 2014, 11:44:18 AM
Hayman capital doubled down with GM calls?
https://www.sec.gov/Archives/edgar/data/1420192/000095012314011874/xslForm13F_X01/form13fInfoTable.xml
Title: Re: GM - General Motors
Post by: johnpane on November 14, 2014, 12:46:13 PM
I wonder if this is an error in reporting or interpretation? 32,000 calls = options on 3,200,000 shares.

"During the period ended  September 30 , Bass increased his holdings in  General Motors  by more than 50 percent to 8.46 million shares, including 3.2 million calls options, from about 5.6 million shares, including 32,000 call options as of  June 30." (Source: Benzinga.com)
Title: Re: GM - General Motors
Post by: tylerdurden on November 14, 2014, 04:03:31 PM
I don't think so. When you compare his latest 13F with previous period, you'll see the huge increase in calls. David Tepper also increased its investment alongside Berkshire. I did not see any new investments in GM among the value investors but at least the believers showed some conviction. I'll take that...
Title: Re: GM - General Motors
Post by: xazp on November 14, 2014, 06:23:00 PM
Today's price is below the lowest in Q3, so you can under price Berkshire, Tepper, etc. 

I don't think so. When you compare his latest 13F with previous period, you'll see the huge increase in calls. David Tepper also increased its investment alongside Berkshire. I did not see any new investments in GM among the value investors but at least the believers showed some conviction. I'll take that...
Title: Re: GM - General Motors
Post by: tylerdurden on November 14, 2014, 07:52:24 PM
Today's price is below the lowest in Q3, so you can under price Berkshire, Tepper, etc. 

I don't think so. When you compare his latest 13F with previous period, you'll see the huge increase in calls. David Tepper also increased its investment alongside Berkshire. I did not see any new investments in GM among the value investors but at least the believers showed some conviction. I'll take that...

I am already invested in GM and waiting for brighter days  :) but for interested folks it might be good price to enter at the moment
Title: Re: GM - General Motors
Post by: fareastwarriors on November 18, 2014, 10:07:11 PM
GM Rising Sales Vie With Recall Woes as Stock Stays Cheap

http://www.bloomberg.com/news/2014-11-19/gm-rising-sales-vie-with-recall-woes-as-stock-stays-cheap.html (http://www.bloomberg.com/news/2014-11-19/gm-rising-sales-vie-with-recall-woes-as-stock-stays-cheap.html)
Title: Re: GM - General Motors
Post by: rishig on November 20, 2014, 06:53:08 PM
Redefing the Cadillac brand:
http://seekingalpha.com/article/2700405?source=ansh $GM
Title: Re: GM - General Motors
Post by: leadingusforward on November 27, 2014, 04:25:33 AM
Eric -

Thanks for taking so much time to explain your GM investment rationale.  Why not use shorting to protect your downside vs. puts?
Title: Re: GM - General Motors
Post by: Arden on December 02, 2014, 06:36:52 AM
Meiroy, your link leads to this very page.
Title: Re: GM - General Motors
Post by: ERICOPOLY on December 02, 2014, 07:02:38 AM
Eric -

Thanks for taking so much time to explain your GM investment rationale.  Why not use shorting to protect your downside vs. puts?


Use GM to protect the downside from shorting?
Use shorting to protect the downside of GM?

Depends on point of view.

I like puts on the name I hold because it's guaranteed to work and the cost of the hedge is well understood.  Plus, shorting uses up my margin whereas puts increase it.
Title: Re: GM - General Motors
Post by: Gopinath on December 02, 2014, 09:18:37 AM
I believe the dividend payments are adjusted towards(downwards) the exercise price of the warrants just like in the bank warrants? Can anyone confirm?
Title: Re: GM - General Motors
Post by: rpadebet on December 02, 2014, 09:34:08 AM
I believe the dividend payments are adjusted towards(downwards) the exercise price of the warrants just like in the bank warrants? Can anyone confirm?

Not sure if GM warrants have same dividend protection. Warrant holders might be left holding the bag if business does well and capital allocation goes to regular dividend payments. I may be wrong or maybe thinking of something else.
Title: Re: GM - General Motors
Post by: racemize on December 02, 2014, 10:30:53 AM
I believe the dividend payments are adjusted towards(downwards) the exercise price of the warrants just like in the bank warrants? Can anyone confirm?

No regular dividend protection on GM warrants.
Title: Re: GM - General Motors
Post by: rishig on December 02, 2014, 04:34:20 PM
I believe the dividend payments are adjusted towards(downwards) the exercise price of the warrants just like in the bank warrants? Can anyone confirm?

No regular dividend protection on GM warrants.

May be I am reading this incorrectly, but the 8-A shows that there is dividend adjustment
http://www.sec.gov/Archives/edgar/data/1467858/000119312511103292/d8a12b.htm

If we make a dividend or other distribution to all holders of our common stock of shares of (i) our capital stock (other than our common stock), (ii) evidences of our indebtedness, (iii) rights or warrants to purchase our securities or assets, or (iv) property or cash (excluding ordinary cash dividends and excluding any dividend, distribution or issuance covered by the two bullets above), then the exercise price will be adjusted based on the following formula:

EP1 = EP0 x ((SP0 – FMV) / SP0)

where:

EP0 = the exercise price in effect at the close of business on the record date;
EP1 = the exercise price in effect immediately after the record date;
SP0 = the Current Market Price (as defined above) as of the record date; and
FMV = the fair market value (as determined in good faith by our Board of Directors), on the record date for such dividend or distribution, expressed as an amount per share of outstanding common stock.
Title: Re: GM - General Motors
Post by: ERICOPOLY on December 02, 2014, 04:37:06 PM
I believe the dividend payments are adjusted towards(downwards) the exercise price of the warrants just like in the bank warrants? Can anyone confirm?

No regular dividend protection on GM warrants.

May be I am reading this incorrectly, but the 8-A shows that there is dividend adjustment
http://www.sec.gov/Archives/edgar/data/1467858/000119312511103292/d8a12b.htm

If we make a dividend or other distribution to all holders of our common stock of shares of (i) our capital stock (other than our common stock), (ii) evidences of our indebtedness, (iii) rights or warrants to purchase our securities or assets, or (iv) property or cash (excluding ordinary cash dividends and excluding any dividend, distribution or issuance covered by the two bullets above), then the exercise price will be adjusted based on the following formula:

EP1 = EP0 x ((SP0 – FMV) / SP0)

where:

EP0 = the exercise price in effect at the close of business on the record date;
EP1 = the exercise price in effect immediately after the record date;
SP0 = the Current Market Price (as defined above) as of the record date; and
FMV = the fair market value (as determined in good faith by our Board of Directors), on the record date for such dividend or distribution, expressed as an amount per share of outstanding common stock.

Specifically excluding "ordinary cash dividends".
Title: Re: GM - General Motors
Post by: rsmehta on December 03, 2014, 05:48:06 PM
GM USA YTD sales(thru November): 2.660M, 4% increase from 2013 on volume, ATP have been going up too.

GM china YTD sales(thru November): 3.182 MM, 10.1% increase from 2013
--------------------------------------

     A relatively clean year in USA/China for 2015 will yield an EPS of $5+.

     Shutting down Chevy in Europe and increasing sales from Opel/Vauxhall will hopefully have GM Europe be break-even(or close to it) for the 2015.

---------------------------------------

     It's amazing how the GM sales just keep growing YoY even with all this negative press! It's hard not to get excited about 2015 prospects, especially being a warrant holder.
Title: Re: GM - General Motors
Post by: merkhet on December 04, 2014, 07:55:34 AM
My back-of-the-envelope calculation has GNMA doing about $11 billion pre-tax in 2015.

If GME gets break even and GMIO/GMSA + GM Financial/Corporate net one another out, then you're looking at more than $5 per share of EPS and roughy $7 per share of owners earnings -- put a 12.2x multiple (industry average P/E) on either of those numbers and GM is a home-run.

And that multiple is probably a bit low -- we have close to 10 million units of pent-up auto demand, which indicates that we are nowhere near the end of the replacement supercycle.
Title: Re: GM - General Motors
Post by: compounding on December 04, 2014, 08:49:57 AM
My back-of-the-envelope calculation has GNMA doing about $11 billion pre-tax in 2015.

If GME gets break even and GMIO/GMSA + GM Financial/Corporate net one another out, then you're looking at more than $5 per share of EPS and roughy $7 per share of owners earnings -- put a 12.2x multiple (industry average P/E) on either of those numbers and GM is a home-run.

And that multiple is probably a bit low -- we have close to 10 million units of pent-up auto demand, which indicates that we are nowhere near the end of the replacement supercycle.

GM Financial made $0.5 billion in H1 and have very low penetration compared to what is normal for a captive financing arm: http://www.autonews.com/article/20141201/FINANCE_AND_INSURANCE/312019959/gm-financial-ceo-sees-big-growth-ahead?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+autonews%2FFinanceAndInsurance+%28Automotive+News+Finance+and+Insurance+Feed%29

GM China seems to be chugging along, albeit growing at a slower pace. Maybe I misunderstood, but to me it seems very conservative to assume that GM excluding GMNA will break even?

Also, if you will, what are your assumptions for $11 billion pretax from GMNA?

Btw, if your assumptions about eps, owner earnings and multiple are anywhere close to correct, the C-warrants will be a 10-bagger.
Title: Re: GM - General Motors
Post by: merkhet on December 04, 2014, 09:53:12 AM
My back-of-the-envelope calculation has GNMA doing about $11 billion pre-tax in 2015.

If GME gets break even and GMIO/GMSA + GM Financial/Corporate net one another out, then you're looking at more than $5 per share of EPS and roughy $7 per share of owners earnings -- put a 12.2x multiple (industry average P/E) on either of those numbers and GM is a home-run.

And that multiple is probably a bit low -- we have close to 10 million units of pent-up auto demand, which indicates that we are nowhere near the end of the replacement supercycle.

GM Financial made $0.5 billion in H1 and have very low penetration compared to what is normal for a captive financing arm: http://www.autonews.com/article/20141201/FINANCE_AND_INSURANCE/312019959/gm-financial-ceo-sees-big-growth-ahead?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+autonews%2FFinanceAndInsurance+%28Automotive+News+Finance+and+Insurance+Feed%29

GM China seems to be chugging along, albeit growing at a slower pace. Maybe I misunderstood, but to me it seems very conservative to assume that GM excluding GMNA will break even?

Also, if you will, what are your assumptions for $11 billion pretax from GMNA?

Btw, if your assumptions about eps, owner earnings and multiple are anywhere close to correct, the C-warrants will be a 10-bagger.

Yes, I'm trying to be conservative on the other segments of GM.

I expect that GMNA will do around $103 billion in sales this year, and they'll be able to do about $110 billion in sales in 2015 w/ an operating margin of 10%.

I'd be wary of the C-warrants, since they expire December 2015. That's a little too much of a white-knuckle ride for me. :)
Title: Re: GM - General Motors
Post by: vinod1 on December 04, 2014, 09:57:36 AM
My back-of-the-envelope calculation has GNMA doing about $11 billion pre-tax in 2015.

If GME gets break even and GMIO/GMSA + GM Financial/Corporate net one another out, then you're looking at more than $5 per share of EPS and roughy $7 per share of owners earnings -- put a 12.2x multiple (industry average P/E) on either of those numbers and GM is a home-run.

And that multiple is probably a bit low -- we have close to 10 million units of pent-up auto demand, which indicates that we are nowhere near the end of the replacement supercycle.

I hope you turn out to be right! But it is way toooo optimistic.

GM is the quintessential cyclical stock - even more so from a cash flow perspective. Management target of 10% EBIT for NA, I think is more of a cyclical peak. The cycle average is going to be much less. So market is unlikely to put a 12x multiple on peak cyclical earnings.

It is also too aggressive to put a multiple on cash earnings which are only temporarily high due to DTA's.

Almost all the companies are ramping up capacity in NA. That is usually a sign of approaching peak in terms of profitability. But this is just a guess.

Have you considered 318 million warrants in your share count?

Vinod
Title: Re: GM - General Motors
Post by: merkhet on December 04, 2014, 10:33:00 AM
I stole this from Plan Maestro's twitter account, so I can't take any credit for it. (Attached)

With about 12 million units that should have been sold from '09 to '13, and two years that took out around 2 million units from that reserve, we should still have about 10 million units left to go.

I'd be hard pressed to call this a cycle peak -- and the industry is already at a 12.2x multiple, so I don't quite get why you think the market wouldn't give GM such a multiple. (Ford is at 10.5x and Fiat is a 13.5x)

I'm using the diluted share count from the most recent 10-Q, which doesn't count the 46 million C warrants since they're not yet in-the-money -- moreover, while I think the cash earnings are temporarily high because of the DTAs, my guess is that the company will spend some of its free cash flow repurchasing stock, so that $5 EPS will probably approximate normalized after-tax EPS anyway.
Title: Re: GM - General Motors
Post by: vinod1 on December 04, 2014, 12:41:26 PM
1. All I am saying is that for GM, a 10% EBIT margin is likely to be peak profitability at the top of the cycle. They are unlikely to maintain or average that level of profitability throughout the cycle.  So market is not going to put a high multiple when that peak profitability is reached. GM still has 4 brands just in NA, Ford has two worldwide. So Ford is likely to have slightly higher profitability than GM just from branding expense advantage.

2. I hear you regarding the replacement cycle. But, I am not sure if at least some of that is lost forever, cars lasting longer, consumer deleveraging and hence less propensity to go for the 3rd car. Anyway, GM makes money in only two segments, Trucks in NA, equity investment income from Chinese JV. So as housing recovers, I would expect GM profitability to increase as well.

3. The share count is a bit misleading because GAAP requires the company to use Treasury stock method to account for the dilution. When GM stock price is low, this results in very low dilution. If you assume a much higher price the dilution increases. I assumed a price of around $45 or so and diluted share count comes to about 1.85 billion.

Vinod
Title: Re: GM - General Motors
Post by: merkhet on December 04, 2014, 12:54:28 PM
I don't think you can look at (1) and (2) separately. The profitability of GM is going to be related to the amount of pent-up demand + the amount of capacity they have -- which, last I checked, was pretty low given the demand because of closed plants over the last five or six years. That, of course, is why the companies are ramping up their capacity.

Though I would agree that, in previous cycles, General Motors (and, in fact, most of the car manufacturers) have had a horrible track record of maintaining profitability, etc. However, I am not sure that their past record will be as relevant going forward.

I hear you on the Treasury stock method, though I suspect 1.85 billion is over-counting it.
Title: Re: GM - General Motors
Post by: vinod1 on December 04, 2014, 01:33:46 PM
I agree 1 & 2 are related.

GM, if I remember correctly, is already at near 100% capacity so are others in NA. As they all ramp up capacity, what does it do to pricing? All of them are in a product refresh cycle. So can all of them win?

Many of the profitability problems have been fixed – healthcare obligations for retirees have been largely eliminated, US and Non-US pension obligations reduced to a manageable level, manufacturing facilities and dealerships rationalized, number of brands reduced in half to four, and negotiated wage reductions and labor cost flexibility with UAW. None of these however take away the fact that this is a cyclical industry with a very leveraged cash flow cycle. Take a look at the changes in Accounts Payables and Accounts Receivables over the last couple of decades and this dynamic becomes very clear. At the slightest reduction in sales, these guys can burn $5 to $10 billion cash in a hurry. Once this cycle starts, they try to stop the cash burn with increase in incentives and resulting hit to profitability.

I know all of the auto makers have very large cash cushions, but I do not think they can help themselves once they see a few billion dollars of cash burn. Unless you have an owner operator, it is difficult to get away from this dynamic. Look at all their presentations, the market share data figure prominently in all of them. Going forward I expect much higher profitability, but expect the cyclicality to remain and management behavior to be closer to the past.

I am long GM, so I am rooting for your scenario to play out.

Vinod
Title: Re: GM - General Motors
Post by: merkhet on December 04, 2014, 02:18:23 PM
I agree on the mindset being difficult to switch off -- we will see this time around whether their recent brush with death will cause the automakers to change their ways. (I think Marchionne & Elkann are a notable exception to the market share mentality you mentioned, btw.)

I appreciate the push back. It helps keep us all intellectually honest. :)
Title: Re: GM - General Motors
Post by: vinod1 on December 04, 2014, 03:43:56 PM
I agree on the mindset being difficult to switch off -- we will see this time around whether their recent brush with death will cause the automakers to change their ways. (I think Marchionne & Elkann are a notable exception to the market share mentality you mentioned, btw.)

I appreciate the push back. It helps keep us all intellectually honest. :)

I look at investments with "glass half empty" hat on so it nice to look at the bright side once in a while :)

I have invested in Fiat for the same reason. But that is so leveraged, it is almost like an equity stub.

Vinod
Title: Re: GM - General Motors
Post by: compounding on December 05, 2014, 02:13:59 AM
I agree that $110 billion and 10% EBIT-margin is more optimistic than I would use as a base case scenario, on the other hand I think the estimates for the other segments were way too conservative. But tailwinds for SUV/pickups (consumer preference and housing recovery) will likely aid GM, so you could probably argue that the probability for the aforementioned scenario to play out should be revised upwards as long as it continues that way.

I have a few questions, Vinod, do you have any other evidence than historical margins for estimating margins through the cycle?

And I guess to you both, who is adding new capacity in the US except for Volkswagen? Or are you counting the new plants in Mexico? Or leveraging existing facilities in he US?
Title: Re: GM - General Motors
Post by: wbr on December 05, 2014, 08:06:47 AM
I think a lot of people view cycles as something nice and smooth like a picture of a sound wave, but in reality cyclical indutries are characterized by booms and busts and between those extremes there is huge grey area. Many remember the recent bust in 08/09, extrapolate this into the future and expect frequent busts as soon as they see record sales just like they expect another crash when the stock market makes new all time highs.

Ironically, if busts were so frequent there wouldn't be any big busts. Managements would be hesitant to use leverage and increase capacity too much, investors would be hesitant to invest in car companies at even slightly elevated stock prices. This would make downturns a lot less severe. And when downturns are a lot less severe, people become careless. They think this time it's different. And eventually some of those companies will go into an unexpected recession with too much leverage and capacity and explode.

At the same time this big "purge" has a positive effect on the future performance of the survivors and those who emerge bankruptcy. Balance sheets are cleaned up, sector stock prices are low, there is pent up demand and less capacity. Executives tread carefully, they prefere to preserve "a fortress balance sheet" instead of buying back stock.

Since it is not clear how long cycles will ultimately be and how they will look like, the best bet is to invest after a big bust because of the factors mentioned above. The companies have a very good chance of doing well and the stock prices might do even better because people will forget what can happen. In those intermediate years (which can be a long time) the companies can grow and expand capacity, because demand is robust.

I guess the bottom line is: Just because Americans are buying record amounts of cars doesn't mean that the next bust is around the corner. Investors and management teams are still very careful and the pent up demand has not gone away. On top of that stocks of Ford or GM haven't moved anywhere during 18 months of new record sales. When the language of management changes and they start talking about massive share buybacks and a lot of new capacity and meanwhile the avg car's age is approaching lows I would wanna be as far away as I could, but right now it seems like a good place to be in market that does not offer a lot of bargains.
Title: Re: GM - General Motors
Post by: merkhet on December 05, 2014, 08:18:40 AM
I agree that $110 billion and 10% EBIT-margin is more optimistic than I would use as a base case scenario, on the other hand I think the estimates for the other segments were way too conservative. But tailwinds for SUV/pickups (consumer preference and housing recovery) will likely aid GM, so you could probably argue that the probability for the aforementioned scenario to play out should be revised upwards as long as it continues that way.

I have a few questions, Vinod, do you have any other evidence than historical margins for estimating margins through the cycle?

And I guess to you both, who is adding new capacity in the US except for Volkswagen? Or are you counting the new plants in Mexico? Or leveraging existing facilities in he US?

I'm counting adding capacity at existing plants.

Title: Re: GM - General Motors
Post by: plato1976 on December 05, 2014, 08:48:01 AM
why is owner's earning $2 more?

My back-of-the-envelope calculation has GNMA doing about $11 billion pre-tax in 2015.

If GME gets break even and GMIO/GMSA + GM Financial/Corporate net one another out, then you're looking at more than $5 per share of EPS and roughy $7 per share of owners earnings -- put a 12.2x multiple (industry average P/E) on either of those numbers and GM is a home-run.

And that multiple is probably a bit low -- we have close to 10 million units of pent-up auto demand, which indicates that we are nowhere near the end of the replacement supercycle.
Title: Re: GM - General Motors
Post by: merkhet on December 05, 2014, 08:59:50 AM
why is owner's earning $2 more?

My back-of-the-envelope calculation has GNMA doing about $11 billion pre-tax in 2015.

If GME gets break even and GMIO/GMSA + GM Financial/Corporate net one another out, then you're looking at more than $5 per share of EPS and roughy $7 per share of owners earnings -- put a 12.2x multiple (industry average P/E) on either of those numbers and GM is a home-run.

And that multiple is probably a bit low -- we have close to 10 million units of pent-up auto demand, which indicates that we are nowhere near the end of the replacement supercycle.

Their D&A is $8 billion or thereabouts, and I think their maintenance cap-ex requirements are significantly less than that.
Title: Re: GM - General Motors
Post by: compounding on December 05, 2014, 12:02:15 PM
Great post wbr.

Capex was $8 billion in 2012 and $7.5 billion in 2013 according to the annual reports. They mentioned at their investor day that they expect capex to be ~5% of revenue in a run-rate basis according to someone (can't remember who I'm afraid) earlier in is thread, which would be in line with he last two years.
Title: Re: GM - General Motors
Post by: merkhet on December 05, 2014, 01:13:25 PM
Great post wbr.

Capex was $8 billion in 2012 and $7.5 billion in 2013 according to the annual reports. They mentioned at their investor day that they expect capex to be ~5% of revenue in a run-rate basis according to someone (can't remember who I'm afraid) earlier in is thread, which would be in line with he last two years.

So I'm differentiating from the run-rate and the maintenance cap-ex. The former almost certainly prices in growth cap-ex while the latter does not, and I think the run-rate you're referencing is probably inclusive of growth cap-ex.

In any case, if you take the % of revenue as cap-ex over the last decade for Ford, you get 4% of revenues, and I suspect that you have a bit of growth cap-ex in that average as well.

2009 3.86%
2010 3.17%
2011 3.15%

Those are the lowest % for cap-ex during the last decade for Ford. There's probably no growth-cap ex in those numbers.

My guess is that maintenance cap-ex for GM is closer to $5 billion than $8 billion.
Title: Re: GM - General Motors
Post by: Mephistopheles on December 05, 2014, 02:06:07 PM
Is it possible to short the C warrants, and if so can anyone look up the borrowing cost? With my broker (Merrill Edge) you can't short non-marginable securities.

They are trading for $.87, expire on 12/31/15, and have an exercise price of $42.31. Meanwhile the ask for the January 2016 $42 strike call option was last quoted at $.84. It should be selling for at least $.31 more than the warrants, or $1.18, not to mention the extra two weeks of time value and the value of deferring your taxes for an extra year by closing your position in 2016 rather than 2015 like you would have to for the warrants.

I've never shorted before but this seems like a good arbitrage opportunity depending on the cost of borrowing the securities. The difference between what the ask price is and what it should be is $.34. If it were to jump to the proper price, that would be a difference of 40.5%. If it is possible to borrow, I imagine it wouldn't cost that much, though I have no clue.

Would love to hear all your thoughts on this.

Edit: Silly me, I didn't think that they shouldn't be trading at a $.31 difference, because they are way out of the money.
Title: Re: GM - General Motors
Post by: cmlber on December 05, 2014, 07:02:21 PM
why is owner's earning $2 more?

My back-of-the-envelope calculation has GNMA doing about $11 billion pre-tax in 2015.

If GME gets break even and GMIO/GMSA + GM Financial/Corporate net one another out, then you're looking at more than $5 per share of EPS and roughy $7 per share of owners earnings -- put a 12.2x multiple (industry average P/E) on either of those numbers and GM is a home-run.

And that multiple is probably a bit low -- we have close to 10 million units of pent-up auto demand, which indicates that we are nowhere near the end of the replacement supercycle.

Their D&A is $8 billion or thereabouts, and I think their maintenance cap-ex requirements are significantly less than that.

Merkhet, I would be careful not to use the D&A line without adjusting it to come up with your owner earnings.  GM includes impairment charges in it's D&A line and management margin targets back out all of the impairment charges, which have been significant.  So if you are using managements margin targets to figure out EBITDA, I wouldn't use an $8 billion D&A number and assume owner earnings are significantly higher than gaap earnings.  Capex should be running a good amount higher than true "D&A" for the next several years, but since a lot of that is clearly growth capex, it's probably a wash.
Title: Re: GM - General Motors
Post by: vinod1 on December 05, 2014, 07:34:52 PM
I agree that $110 billion and 10% EBIT-margin is more optimistic than I would use as a base case scenario, on the other hand I think the estimates for the other segments were way too conservative. But tailwinds for SUV/pickups (consumer preference and housing recovery) will likely aid GM, so you could probably argue that the probability for the aforementioned scenario to play out should be revised upwards as long as it continues that way.

I have a few questions, Vinod, do you have any other evidence than historical margins for estimating margins through the cycle?

And I guess to you both, who is adding new capacity in the US except for Volkswagen? Or are you counting the new plants in Mexico? Or leveraging existing facilities in he US?

We are not really using historical margins in the sense of last 20-30 years averages. I am basing the margins on what GM has achieved in the last 3 years and what management say their "mid decade" targets are.

NA auto industry moved from a poorly run charity to a decent but not great business. This is not an industry that is going to churn out 20% ROE year in year out. Auto companies are forced to take risks with engine technology, batteries, safety, light weight materials, autonomous driving, etc to keep up with competition or meet regulatory requirements (EPA milage standards). The risk is borne by the auto companies, and if they succeed in one particular technology they get to reap the benefit for only a few years before others catch up. If the tech investments fail, well the company is left holding the bag. The benefits accrue to the customer. There is simply no major competitive advantages for the companies in this industry. This is just one part of the story.

Auto companies have a positive cash flow during good years, as the dealers pay upfront when they take delivery but auto companies pay quite a bit late for their suppliers. This looks pretty good during an up cycle. When sales stagnate a bit or go down this cycle reverses and companies burn cash - they can easily burn cash equal to 5% of sales. This is the dynamic I am referring to when I mention looking at the last 20 - 30 years Accounts Payables and Account Receivables. This is also why I cringe every time I see EV calculations that subtract all the cash. This works for Walmart or Costco which are pretty non-cyclical, but for auto companies, it just does not make sense as they need this cash as much as they need steel.

I am bringing up all this just to point out that when management says they have a target of 10% EBIT margins, these are not margins that could be sustained. They are talking about peak margins when everything goes right. As WBR mentioned and I agree pretty much with him on what he says about the cycles. They way I estimate through the cycle margins is to assume say a 7 year  business cycle, through in a couple of years of peak margins, a couple of years of middling margins and a year or two of low margins. This is almost certain to be wrong, but I cannot think of any other way.

When talking about capacity I am talking about all of NA. All three NA companies are ramping up. That might be good sign for the immediate future but not if you look out even a couple of years ahead.

Vinod

Title: Re: GM - General Motors
Post by: vinod1 on December 05, 2014, 07:44:12 PM
Great post wbr.

Capex was $8 billion in 2012 and $7.5 billion in 2013 according to the annual reports. They mentioned at their investor day that they expect capex to be ~5% of revenue in a run-rate basis according to someone (can't remember who I'm afraid) earlier in is thread, which would be in line with he last two years.

So I'm differentiating from the run-rate and the maintenance cap-ex. The former almost certainly prices in growth cap-ex while the latter does not, and I think the run-rate you're referencing is probably inclusive of growth cap-ex.

In any case, if you take the % of revenue as cap-ex over the last decade for Ford, you get 4% of revenues, and I suspect that you have a bit of growth cap-ex in that average as well.

2009 3.86%
2010 3.17%
2011 3.15%

Those are the lowest % for cap-ex during the last decade for Ford. There's probably no growth-cap ex in those numbers.

My guess is that maintenance cap-ex for GM is closer to $5 billion than $8 billion.

What is growth capex for auto companies? What are you excluding?

To me pretty much all they spend - except brand new additional capacity - is maintainance capex. Battery tech? Autonomous driving? Aluminium body? Model refresh? Moving to a standard platforms? They need all these investments to stay in place - else they fall behind the others. This to me is maintainance capex.

Vinod
Title: Re: GM - General Motors
Post by: merkhet on December 05, 2014, 07:52:23 PM
Merkhet, I would be careful not to use the D&A line without adjusting it to come up with your owner earnings.  GM includes impairment charges in it's D&A line and management margin targets back out all of the impairment charges, which have been significant.  So if you are using managements margin targets to figure out EBITDA, I wouldn't use an $8 billion D&A number and assume owner earnings are significantly higher than gaap earnings.  Capex should be running a good amount higher than true "D&A" for the next several years, but since a lot of that is clearly growth capex, it's probably a wash.

Can you show me this? I don't recall this, but my memory could just be faulty.

What is growth capex for auto companies? What are you excluding?

To me pretty much all they spend - except brand new additional capacity - is maintainance capex. Battery tech? Autonomous driving? Aluminium body? Model refresh? Moving to a standard platforms? They need all these investments to stay in place - else they fall behind the others. This to me is maintainance capex.

Vinod

Some cap-ex goes towards increasing market share. Some cap-ex does not. The former is growth cap-ex.
Title: Re: GM - General Motors
Post by: cmlber on December 05, 2014, 08:17:22 PM
Merkhet, I would be careful not to use the D&A line without adjusting it to come up with your owner earnings.  GM includes impairment charges in it's D&A line and management margin targets back out all of the impairment charges, which have been significant.  So if you are using managements margin targets to figure out EBITDA, I wouldn't use an $8 billion D&A number and assume owner earnings are significantly higher than gaap earnings.  Capex should be running a good amount higher than true "D&A" for the next several years, but since a lot of that is clearly growth capex, it's probably a wash.

Can you show me this? I don't recall this, but my memory could just be faulty.


Well every time management talks about margins, whether it's current or target margins, they use "adjusted" EBIT right?  The adjustments are backing out impairments, you can see that in the reconciliations that they do at the end of the slide decks quarterly.  The assumption in doing that is that these impairments are one time.

If you look at the bottom of page 37 of the 2013 annual report, it says

"Depreciation, amortization and impairments included goodwill impairments of $0.5 billion, $27.1 billion and $1.3 billion and impairment charges of property and intangible assets of $1.4 billion, $5.5 billion and $0.1 billion in the year ended December 31, 2013, 2012 and 2011." 

So $1.9 billion of the $8 billion number shouldn't really be called "D&A" in your owner earnings calculation.
Title: Re: GM - General Motors
Post by: merkhet on December 05, 2014, 08:43:19 PM
Ah, yes. Thanks.

You're right that the walk-back of in each of the four earnings presentations for the adjusted EBIT adds up to $1.9 billion, so the $5 of EPS will approximate owner's earnings. Though there's still the small matter of the fact that they're not paying cash taxes temporarily, so that should probably goose owner's earnings as well.
Title: Re: GM - General Motors
Post by: txlaw on December 06, 2014, 07:24:32 AM
Auto companies have a positive cash flow during good years, as the dealers pay upfront when they take delivery but auto companies pay quite a bit late for their suppliers. This looks pretty good during an up cycle. When sales stagnate a bit or go down this cycle reverses and companies burn cash - they can easily burn cash equal to 5% of sales. This is the dynamic I am referring to when I mention looking at the last 20 - 30 years Accounts Payables and Account Receivables. This is also why I cringe every time I see EV calculations that subtract all the cash. This works for Walmart or Costco which are pretty non-cyclical, but for auto companies, it just does not make sense as they need this cash as much as they need steel.

I am bringing up all this just to point out that when management says they have a target of 10% EBIT margins, these are not margins that could be sustained. They are talking about peak margins when everything goes right. As WBR mentioned and I agree pretty much with him on what he says about the cycles. They way I estimate through the cycle margins is to assume say a 7 year  business cycle, through in a couple of years of peak margins, a couple of years of middling margins and a year or two of low margins. This is almost certain to be wrong, but I cannot think of any other way.

Management has said that their 10% margin target for NA is supposed to be both a mid-decade target and a mid-cycle target.  I agree, though, that one ought to use far more conservative numbers when doing the valuation and be pleasantly surprised if they get there and sustain the margin. 

My views are similar when considering Sergio's targets at FCA -- great aspirational targets but be conservative and pleasantly surprised if it happens.

As to capex, I believe Akerson once said that they are trying to have full-cycle capital spending of about $8 billion a year -- hence the need for a fortress balance sheet.  (If someone can point to the source, that would be much appreciated; I can't find where I got that from.)  So I don't think maintenance capex should be viewed as that much different from depreciation and amortization in this case.
Title: Re: GM - General Motors
Post by: cmlber on December 06, 2014, 07:26:24 AM
Ah, yes. Thanks.

You're right that the walk-back of in each of the four earnings presentations for the adjusted EBIT adds up to $1.9 billion, so the $5 of EPS will approximate owner's earnings. Though there's still the small matter of the fact that they're not paying cash taxes temporarily, so that should probably goose owner's earnings as well.

No problem.  They plan on investing $14 billion from 2014-2018 in China, which works out to $2.8 billion per year.  I assume this is pretty much all growth capex (going from 3.5m units of capacity to 5.4m units of capacity).  I'm not sure if the JV partner splits this figure or not, but I think assuming D&A is true maintenance capex is a safe bet given that China investment.

I wouldn't add the lack of cash taxes to owner earnings, since putting a multiple on that number assumes it is sustainable.  I just reduce the enterprise value by the NPV of tax assets and use a fully taxed owner earnings number.
Title: Re: GM - General Motors
Post by: merkhet on December 06, 2014, 08:03:11 AM
Yes, I mean owner's earnings in terms of cash in your pocket and not a number you can slap a multiple on, since the lack of cash taxes runs out when their DTA does. Hopefully, they put that cash tax "bonus" to good use buying back some stock -- after all, they have $28 billion of cash, might have $11 billion of operating income, and only spend about $2 billion on dividends and $8 billion on cap-ex (growth & maintenance).

txlaw, I remember the same Akerson statement that you do, but I cannot, for the life of me, find a direct quote on it. The closest I found was the following -- http://www.autonews.com/article/20131126/OEM/131129895/gm’s-$27-billion-cash-hoard-seen-tempting-activists

Quote
At the same time, Akerson already has developed a strategy that calls for spending $8 billion annually on capital expenditures. GM also had $33.7 billion in unfunded pension and other retiree costs at the end of September, according to slides posted to the company’s website in October.

“If we have a fortress balance sheet, we will be able to invest as and when we need to through the cycle,” Dan Ammann, GM’s chief financial officer, said during a conference in June.

“We will not be in a position where this company was several years ago where, when the business turned down, things got tight.”

I interpret this to mean that the $8 billion serves both a growth cap-ex and maintenance cap-ex purpose.
Title: Re: GM - General Motors
Post by: merkhet on December 06, 2014, 08:13:10 AM
Another possibility is that we are both remembering the wrong Dan as Daniel Ammann has mentioned the $8 billion number multiple times as well.

http://www.bloomberg.com/news/2012-02-16/gm-earns-record-9-19-billion-net-income-while-opel-loses-money.html

Quote
“For 2012, we expect the global industry to continue to rebound and we anticipate being able to grow the top-line,” Akerson said on a conference call today.

The automaker said it plans to spend $8 billion on capital expenditures this year as it invests in new products, an increase over last year’s $6.2 billion.

“What we’re doing is really building back up from some very depressed capital spending levels in the 2008 and 2009 time frame,” Ammann said. “There’s a little bit of catch up going on.”

Though in another interview, he states that the $8 billion might be a normalized number.

http://ww2.cfo.com/profiles/2013/02/in-the-fast-lane-at-gm/

Quote
In a normal year, says Ammann, GM wants to spend around $15 billion on the future — $8 billion in capital expenditures and “another $7 billion or $8 billion” on engineering expense. But between 2007 and 2009, the capital number “hit the trough,” he says, falling to $3 billion or $4 billion. “And the cost of that is not just the fact that you don’t have new product in the market, but also that you spent a ton of money engineering things that never came to market. We estimated that we were wasting about a billion dollars a year on investing in projects that would ultimately be canceled.”

I suppose even if $8 billion is the right number for capital expenditures going forward, you'd have to normalize the operations in GME/IO/SA and Financial, so it's probably, at the very least, a wash.
Title: Re: GM - General Motors
Post by: txlaw on December 06, 2014, 08:49:14 AM
To the extent that $8 billion is the normalized or "steady state" number throughout a cycle for GM, I think we have to treat it entirely as maintenance capex associated with a "natural" growth rate.  Because it sounds to me like close to $8 billion gets spent even when volumes and revenue is on a down trend.

But it does seem like there is a bit of confusion as to what the capital spending policy actually is.
Title: Re: GM - General Motors
Post by: plato1976 on December 06, 2014, 08:57:23 AM
So the story is clear with a normalized FCF of $5 per share
With price at $33 it's a 6.6x without considering the extra cash

To the extent that $8 billion is the normalized or "steady state" number throughout a cycle for GM, I think we have to treat it entirely as maintenance capex associated with a "natural" growth rate.  Because it sounds to me like close to $8 billion gets spent even when volumes and revenue is on a down trend.

But it does seem like there is a bit of confusion as to what the capital spending policy actually is.
Title: Re: GM - General Motors
Post by: txlaw on December 06, 2014, 09:01:00 AM
So the story is clear with a normalized FCF of $5 per share
With price at $33 it's a 6.6x without considering the extra cash

To the extent that $8 billion is the normalized or "steady state" number throughout a cycle for GM, I think we have to treat it entirely as maintenance capex associated with a "natural" growth rate.  Because it sounds to me like close to $8 billion gets spent even when volumes and revenue is on a down trend.

But it does seem like there is a bit of confusion as to what the capital spending policy actually is.

Yeah, I personally think that when you think about GM very conservatively, it's still ridiculously cheap. 
Title: Re: GM - General Motors
Post by: Mephistopheles on December 06, 2014, 09:02:21 AM
So the story is clear with a normalized FCF of $5 per share
With price at $33 it's a 6.6x without considering the extra cash

To the extent that $8 billion is the normalized or "steady state" number throughout a cycle for GM, I think we have to treat it entirely as maintenance capex associated with a "natural" growth rate.  Because it sounds to me like close to $8 billion gets spent even when volumes and revenue is on a down trend.

But it does seem like there is a bit of confusion as to what the capital spending policy actually is.

And of course if rates move up then we earn more on that cash and the pension shrinks.
Title: Re: GM - General Motors
Post by: cmlber on December 06, 2014, 09:20:21 AM
To the extent that $8 billion is the normalized or "steady state" number throughout a cycle for GM, I think we have to treat it entirely as maintenance capex associated with a "natural" growth rate.  Because it sounds to me like close to $8 billion gets spent even when volumes and revenue is on a down trend.

But it does seem like there is a bit of confusion as to what the capital spending policy actually is.

I don't think all of the $8b he refers to as "normal" is maintenance capex.  GM's projection is for global auto demand to grow from ~80m units to ~130m units through 2030.  So part of GMs "normal" year will be capturing some of that annual demand growth through capacity expansions in China and emerging markets. 
Title: Re: GM - General Motors
Post by: txlaw on December 06, 2014, 10:45:59 AM
To the extent that $8 billion is the normalized or "steady state" number throughout a cycle for GM, I think we have to treat it entirely as maintenance capex associated with a "natural" growth rate.  Because it sounds to me like close to $8 billion gets spent even when volumes and revenue is on a down trend.

But it does seem like there is a bit of confusion as to what the capital spending policy actually is.

I don't think all of the $8b he refers to as "normal" is maintenance capex.  GM's projection is for global auto demand to grow from ~80m units to ~130m units through 2030.  So part of GMs "normal" year will be capturing some of that annual demand growth through capacity expansions in China and emerging markets.

Right, that's kind of why I talked about associating that capex with a "natural" growth rate.  Capital spending that generates new sales in emerging markets might be required to offset sales reduction in the developed markets. 

For example, GM could lose market share in the US, and if the size of that market finally plateaus or even shrinks (think disruptions, such as car sharing, self driving cars, increased public transport, etc.), they would need to spend money elsewhere to maintain sales and profits.

We don't know how things will turn out, so best to be conservative because of the nature of the industry.
Title: Re: GM - General Motors
Post by: SwedishValue on December 08, 2014, 05:53:33 AM
Disclaimer: This was my first day of serious GM research ever.

I have a question regarding the growth of the Finance division. I can see that GM talks about increasing leverage in their finance unit as earning assets increase. However, isn't it likely that GM will have to finance part of its growth in the Finance division through capital injections from the parent?

If that would be the case, it should be welcome news for the holders of the A/B/C Warrant, as this would decrease the likelihood of significantly raised ordinary cash dividends.

Also, has anyone seen a good overview of the profitability and scope of the financing units of other car companies, or is my best bet to look into all companies individually?
Title: Re: GM - General Motors
Post by: fareastwarriors on December 08, 2014, 10:07:28 AM
UAW, Detroit Prep for Talks

Big Bonuses Will Be in Mix When Union, Auto Makers Negotiate


http://www.wsj.com/articles/uaw-detroit-prep-for-talks-1418002628 (http://www.wsj.com/articles/uaw-detroit-prep-for-talks-1418002628)
Title: Re: GM - General Motors
Post by: moody202 on December 10, 2014, 02:42:00 AM
Have you guys read this interview on Barron's? Essentially saying no government data is to be trusted. If true, this really concerns me about GM.
Title: Re: GM - General Motors
Post by: merkhet on December 10, 2014, 07:28:13 AM
Have you guys read this interview on Barron's? Essentially saying no government data is to be trusted. If true, this really concerns be about GM.

What does this have to do with GM? I'm confused.
Title: Re: GM - General Motors
Post by: moody202 on December 10, 2014, 07:35:13 AM
What does this have to do with GM? I'm confused.

If China's economy take a big hit as the interview suggests, won't it be a major issue for GM's profits? Car sales won't continue at the current pace in China if the economy takes a hit.
Title: Re: GM - General Motors
Post by: DCG on December 10, 2014, 07:44:53 AM
Do people in Asia actually buy GM cars?
Title: Re: GM - General Motors
Post by: plato1976 on December 10, 2014, 09:02:18 AM
GM and VW are doing really well in China...

Do people in Asia actually buy GM cars?
Title: Re: GM - General Motors
Post by: merkhet on December 10, 2014, 10:29:12 AM
What does this have to do with GM? I'm confused.

If China's economy take a big hit as the interview suggests, won't it be a major issue for GM's profits? Car sales won't continue at the current pace in China if the economy takes a hit.

China has been slowing down for a while, and you can see that in the 3Q financials, but NA is still growing like gangbusters, so I'm not terribly worried.
Title: Re: GM - General Motors
Post by: tylerdurden on December 10, 2014, 12:04:58 PM
I think if China will crash at some point as that article from Barron's was suggesting, we'll have much bigger problems than GM only.
Title: Re: GM - General Motors
Post by: xazp on December 14, 2014, 08:24:49 AM
Do people in Asia actually buy GM cars?

Not sure if serious, GM sells more cars in China than in the U.S., and has for some time. 

Through November, China sales = 3.2 million, U.S. sales = 2.6 million.
Title: Re: GM - tax loss selling
Post by: Homestead31 on December 15, 2014, 09:38:41 AM
GM getting beat up over the last few sessions...  given that the company should be a beneficiary of cheaper oil (cheaper gas leads consumers to buy more SUVs and pickups which are higher margin) I have to think that some of this selling pressure is non-economic tax loss selling.  if this continues into year end i think GM is set to be a huge winner in 2015 as sales benefit from cheaper gas and as the recall news fades into the background.
Title: Re: GM - tax loss selling
Post by: Picasso on December 15, 2014, 10:00:52 AM
GM getting beat up over the last few sessions...  given that the company should be a beneficiary of cheaper oil (cheaper gas leads consumers to buy more SUVs and pickups which are higher margin) I have to think that some of this selling pressure is non-economic tax loss selling.  if this continues into year end i think GM is set to be a huge winner in 2015 as sales benefit from cheaper gas and as the recall news fades into the background.

My thinking as well.  It almost seems too easy though....
Title: Re: GM - tax loss selling
Post by: gokou3 on December 15, 2014, 11:20:12 AM
GM getting beat up over the last few sessions...  given that the company should be a beneficiary of cheaper oil (cheaper gas leads consumers to buy more SUVs and pickups which are higher margin) I have to think that some of this selling pressure is non-economic tax loss selling.  if this continues into year end i think GM is set to be a huge winner in 2015 as sales benefit from cheaper gas and as the recall news fades into the background.

My thinking as well.  It almost seems too easy though....

Can it be argued that because of the low oil prices, drilling activities in the US will be tapered which will reduce sales of  pickup trucks, the most profitable segments?

Title: Re: GM - General Motors
Post by: karthikpm on December 15, 2014, 02:23:08 PM
Since energy is where most of the new employment has been, a decrease in oil prices could worsen employment / sentiment as much as the low cost makes for a stimulus . Hard to know if the auto segment will benefit if oil gets crushed
Title: Re: GM - General Motors
Post by: philly value on December 15, 2014, 06:27:45 PM
Since energy is where most of the new employment has been, a decrease in oil prices could worsen employment / sentiment as much as the low cost makes for a stimulus . Hard to know if the auto segment will benefit if oil gets crushed

My guess is that the reduction in spending from the loss in oil activity will outweigh the effect lower gas prices will have on general demand. As much as consumers may have a short memory, we've lived through a major cycle in oil/gas prices over the past decade. I think most people will appreciate the relief from lower prices but will not assume that prices will be lower long-term.
Title: Re: GM - General Motors
Post by: Mephistopheles on December 19, 2014, 12:50:08 AM
I've been digging into GM Financial to try and gauge the subprime risk. Overall, things seem fine. The % of subprime loans has increased quite a bit over the last few years, but that's because subprime lending disappeared in 08/09. Delinquencies are on par with historical measures. The one concern I have is that loan terms have lengthened substantially, with the average term now at 71 months.

I noticed that much of the loans are securitized, with GM Financial servicing them, and that these are fully consolidated in GM's balance sheet. So their exposure isn't as much as it looks. I'm trying to find out GM's equity and debt exposure to these but can't seem to find the information. I looked into the SEC filings for the trusts that house the ABS, with no luck. Anyone know where I can find this info?
Title: Re: GM - General Motors
Post by: moody202 on December 26, 2014, 03:30:05 AM
I'm thinking of buying GM stock and puts to protect my downside. What puts would the board recommend I sell to raise money for the GM puts? All I am trying to do here is to make the downside more diversified so hopefully the fall is these stocks is less than GM if the market and GM were to go down.

Title: Re: GM - General Motors
Post by: gjangal on December 26, 2014, 07:57:49 PM
I'm thinking of buying GM stock and puts to protect my downside. What puts would the board recommend I sell to raise money for the GM puts? All I am trying to do here is to make the downside more diversified so hopefully the fall is these stocks is less than GM if the market and GM were to go down.



At 30$ it has a 4% dividend yield, that could potentially be a floor to the stock price. Out of the money puts below this price could be a good bet IMO

I am long this one via warrants. My thesis/speculation is that US SAAR expected to be flat around 16.5mn for next year. China JV should bring in about $1.8- $2bn in net profit. They can easily make around 5.xx bn in net profit in a normal environment . This is even without any improvements in Europe ( GM has actually gained a tiny bit of market share in Europe this year). At a 12 P.E it's around 42$. They have also accrued for recall related costs this year. Hopefully not much next year,
Title: Re: GM - General Motors
Post by: bobozou on December 27, 2014, 04:00:42 PM
I've been digging into GM Financial to try and gauge the subprime risk. Overall, things seem fine. The % of subprime loans has increased quite a bit over the last few years, but that's because subprime lending disappeared in 08/09. Delinquencies are on par with historical measures. The one concern I have is that loan terms have lengthened substantially, with the average term now at 71 months.

I noticed that much of the loans are securitized, with GM Financial servicing them, and that these are fully consolidated in GM's balance sheet. So their exposure isn't as much as it looks. I'm trying to find out GM's equity and debt exposure to these but can't seem to find the information. I looked into the SEC filings for the trusts that house the ABS, with no luck. Anyone know where I can find this info?

Not certain, but GM Financial is the 'old Americredit' right?  If so, the current securitizations might be under the old name

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&company=americredit&owner=exclude&match=&start=40&count=40&hidefilings=0 (http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&company=americredit&owner=exclude&match=&start=40&count=40&hidefilings=0)
Title: Re: GM - General Motors
Post by: pabraifan on December 28, 2014, 05:38:48 PM
I've been digging into GM Financial to try and gauge the subprime risk. Overall, things seem fine. The % of subprime loans has increased quite a bit over the last few years, but that's because subprime lending disappeared in 08/09. Delinquencies are on par with historical measures. The one concern I have is that loan terms have lengthened substantially, with the average term now at 71 months.

I noticed that much of the loans are securitized, with GM Financial servicing them, and that these are fully consolidated in GM's balance sheet. So their exposure isn't as much as it looks. I'm trying to find out GM's equity and debt exposure to these but can't seem to find the information. I looked into the SEC filings for the trusts that house the ABS, with no luck. Anyone know where I can find this info?

GM Financial SEC filing: http://www.gmfinancial.com/investors-information/financial-information/sec-filings.aspx

hope that helps
james
Title: Re: GM - General Motors
Post by: moody202 on December 29, 2014, 04:35:52 AM
Toyota trades at around 10x PE, why would you put a 12x PE on GM?

I'm thinking of buying GM stock and puts to protect my downside. What puts would the board recommend I sell to raise money for the GM puts? All I am trying to do here is to make the downside more diversified so hopefully the fall is these stocks is less than GM if the market and GM were to go down.



At 30$ it has a 4% dividend yield, that could potentially be a floor to the stock price. Out of the money puts below this price could be a good bet IMO

I am long this one via warrants. My thesis/speculation is that US SAAR expected to be flat around 16.5mn for next year. China JV should bring in about $1.8- $2bn in net profit. They can easily make around 5.xx bn in net profit in a normal environment . This is even without any improvements in Europe ( GM has actually gained a tiny bit of market share in Europe this year). At a 12 P.E it's around 42$. They have also accrued for recall related costs this year. Hopefully not much next year,
Title: Re: GM - General Motors
Post by: RadMan24 on December 29, 2014, 05:32:39 PM
Toyota trades at around 10x PE, why would you put a 12x PE on GM?

I'm thinking of buying GM stock and puts to protect my downside. What puts would the board recommend I sell to raise money for the GM puts? All I am trying to do here is to make the downside more diversified so hopefully the fall is these stocks is less than GM if the market and GM were to go down.



At 30$ it has a 4% dividend yield, that could potentially be a floor to the stock price. Out of the money puts below this price could be a good bet IMO

I am long this one via warrants. My thesis/speculation is that US SAAR expected to be flat around 16.5mn for next year. China JV should bring in about $1.8- $2bn in net profit. They can easily make around 5.xx bn in net profit in a normal environment . This is even without any improvements in Europe ( GM has actually gained a tiny bit of market share in Europe this year). At a 12 P.E it's around 42$. They have also accrued for recall related costs this year. Hopefully not much next year,

Currency fluctuations with the Yen/US Dollar? 
Title: Re: GM - General Motors
Post by: AJDelphi on January 06, 2015, 07:55:25 AM
December sales numbers look good!

http://www.gm.com/company/investors/latest-news/news_detail_page.content_pages_news_us_en_2015_jan_gmsales.~content~gmcom~home~company~investors~latest-news.html
Title: Re: GM - General Motors
Post by: compounding on January 14, 2015, 06:58:31 AM
Disclaimer: This was my first day of serious GM research ever.

I have a question regarding the growth of the Finance division. I can see that GM talks about increasing leverage in their finance unit as earning assets increase. However, isn't it likely that GM will have to finance part of its growth in the Finance division through capital injections from the parent?

If that would be the case, it should be welcome news for the holders of the A/B/C Warrant, as this would decrease the likelihood of significantly raised ordinary cash dividends.

Also, has anyone seen a good overview of the profitability and scope of the financing units of other car companies, or is my best bet to look into all companies individually?

This was addressed during today's GM presentation. They do not expect to be required to transfer capital from the automotive division to the financing division.

Some overlap from their presentation from October, but here's the link to the webcast and slides: http://www.gm.com/company/investors/announcements-events/event_detail_page.event_5179138.~content~gmcom~home~company~investors~announcements-events.html

I also attached an industry report from KPMG regarding the general question on captive finance that I haven't yet read, but might be useful.
Title: Re: GM - General Motors
Post by: CorpRaider on February 04, 2015, 04:54:08 AM
Seemingly nice earnings report, up ~3% in pre-market.  http://finance.yahoo.com/news/gm-reports-much-higher-expected-123053389.html
Title: Re: GM - General Motors
Post by: hyten1 on February 04, 2015, 05:58:02 AM
damn dividend raise, wish they did stock buy back, considering the amount of warrant i own vs the common
Title: Re: GM - General Motors
Post by: wbr on February 04, 2015, 11:25:53 AM
I only own warrants. My margin loan interest rate would be 3.16% and after tax I would receive $0.95 per share after this dividend increase.

Given these metrics I give up about $0.37 per share per year. Ofc if your financing cost and your taxes are lower it could be significantly more attractive to lever up the common.

For me it's still ok and even though a higher dividend yield theoretically doesn't make a company more valuable, people like to chase yield and a steady dividend policy makes the stock more attractive to institutional investors.
Title: Re: GM - General Motors
Post by: Avyalake on February 05, 2015, 11:20:21 PM
New GM? Friendly management and happy workers.
http://mobile.nytimes.com/2015/02/05/business/gm-reports-2-8-billion-profit-in-2014.html?referrer=

Will this help with UAW contracts up for renewal this year?
Title: Re: GM - General Motors
Post by: CorpRaider on February 10, 2015, 06:11:30 AM
Story out this morning indicating that hedgies pushing for board seat and $8 bil. buyback.  Harry Wilson is going to be their nominee.  Seemingly excellent pick; I suspect harder for mgmt. to decline return of capital based on need for "fortress balance sheet" when the guy who brought the company out of bankruptcy is lobbying for it. 
Title: Re: GM - General Motors
Post by: merkhet on February 10, 2015, 09:00:34 AM
Thanks CorpRaider.

http://www.cnbc.com/id/102376522

Should be very interesting to have Wilson on the board.
Title: Re: GM - General Motors
Post by: CorpRaider on February 10, 2015, 09:15:40 AM
Yeah, sorry I took down the link to the story.  I thought people might want to get it from their preferred source.  I am excited to potentially have him as a board rep.  He's already adding value, from my perspective, if he makes management go through a more sophisticated analysis of allocating capital to buybacks versus dividends.
Title: Re: GM - General Motors
Post by: merkhet on February 10, 2015, 09:29:01 AM
I was wondering about that missing link. :)
Title: Re: GM - General Motors
Post by: fareastwarriors on February 10, 2015, 09:33:38 AM
Thanks CorpRaider.

http://www.cnbc.com/id/102376522

Should be very interesting to have Wilson on the board.

a bit more details in this article.

http://www.wsj.com/articles/gm-shareholder-seeks-spot-on-board-1423577927?mod=WSJ_hp_LEFTTopStories (http://www.wsj.com/articles/gm-shareholder-seeks-spot-on-board-1423577927?mod=WSJ_hp_LEFTTopStories)

....

GM said Mr. Wilson represents the Taconic Parties, Appaloosa Parties, HG Vora Parties and the Hayman Parties—together owning 34.4 million shares, or about 2.1% of GM’s stock. (thought these guys owned more but w/e)
 

....


Mr. Wilson’s proposal to repurchase $8 billion of stock in a year would put GM at the low end of its $20 billion to $25 billion liquidity target, the analyst said.
Title: Re: GM - General Motors
Post by: fareastwarriors on February 12, 2015, 01:57:29 PM
GM Frets Buyback Would Freeze Credit Rating

Auto Maker Prodded to Repurchase $8 Billion in Shares by Activists


http://www.wsj.com/articles/gm-frets-buyback-would-freeze-credit-rating-1423769167?mod=WSJ_hppMIDDLENexttoWhatsNewsSecond (http://www.wsj.com/articles/gm-frets-buyback-would-freeze-credit-rating-1423769167?mod=WSJ_hppMIDDLENexttoWhatsNewsSecond)
Title: Re: GM - General Motors
Post by: merkhet on February 13, 2015, 08:00:40 AM
Ackman had a brief comment on General Motors yesterdayy:

http://www.valuewalk.com/2015/02/bill-ackman-harbor-conference/2/

Quote
RUHLE:  Before we go, do you have a view, Harry Wilson’s name has been in the news, Appaloosa and Kyle Bass trying to get Harry in the mix to push GM in terms of share buybacks.

Do you have a view on this, because there’s been a lot of grumbling?

ACKMAN:  So I think he is a — I’ve met him, Harry.  I think he’s very capable.  He clearly knows a lot about GM, because he was involved in the restructuring.

You know, the — the thing that’s — I’m not a big — I don’t like a thesis predicated on just capital return.  So my assumption is that Harry has more up his sleeve than just returning capital to shareholders.
Title: Re: GM - General Motors
Post by: gfp on February 13, 2015, 02:12:12 PM
Looks like Bass sold almost all his GM?

http://www.dataroma.com/m/holdings.php?m=hc
Title: Re: GM - General Motors
Post by: hardincap on February 13, 2015, 02:18:18 PM
Yes, pretty embarrassing for him to have bought in at the peak, and sold out just before the rally over the past month
Title: Re: GM - General Motors
Post by: Picasso on February 13, 2015, 02:19:30 PM
And then buy up a bunch of OCN before it got chopped in half.
Title: Re: GM - General Motors
Post by: 100 Shares on February 13, 2015, 02:25:17 PM
I believe Kyle Bass's firm is part of the hedge funds pushing GM to buy back shares, he might have sold his stake in the common stock and reinvested in the warrants which wouldn't show up in the 13F.

Update: I stand corrected, it would be on the 13F.
Title: Re: GM - General Motors
Post by: usdtor05 on February 13, 2015, 02:39:06 PM
monish reports the warrants. Not sure of the rules around this to be candid.
Title: Re: GM - General Motors
Post by: wbr on February 13, 2015, 02:39:42 PM
They would actually show up in the 13F. For example it has been known for a long time that Pabrai owns a lot og GM warrants.

Bass might have exited the position in Q4 2014 and then bought it back in 2015 when he talked with other fund managers?
Title: Re: GM - General Motors
Post by: tylerdurden on February 13, 2015, 04:15:56 PM
He still had some shares as of dec 31 so through those shares he became part of the investor group perhaps. I saw the total number of shares they represent but didn't see any breakdown. It would be quite unusual for a value investor to sell almost all of his position and then repurchase in a month or so... Anyways, very surprising. Tepper did not make any significant changes in his GM shares....
Title: Re: GM - General Motors
Post by: stahleyp on February 14, 2015, 06:02:31 PM
Looks like Bass sold almost all his GM?

http://www.dataroma.com/m/holdings.php?m=hc

Someone correct me if I'm wrong here, but isn't Bass' only claim to fame was betting on mortgage meltdown?
Title: Re: GM - General Motors
Post by: tylerdurden on February 14, 2015, 08:49:59 PM
It seems Hayman entered into some return swaps on GM shares; that's why his 13F does not show his real exposure anymore. See below link which shows the details of GM ownership for the investor group looking for the $8b share repo:

http://www.sec.gov/Archives/edgar/data/1467858/000146785815000042/ex992noticetogeneralmoto.htm
Title: Re: GM - General Motors
Post by: mani2304 on February 15, 2015, 08:00:51 PM
GM auto recall
http://www.autoblog.com/2015/02/15/gm-chevy-malibu-pontiac-g6-power-steering-recall/
Title: Re: GM - General Motors
Post by: fareastwarriors on February 17, 2015, 12:55:37 PM
At GM, Internet Ordering Required a Massive Overhaul

Auto maker spent years building internal systems expertise to allow customers to shop online


http://www.wsj.com/articles/gm-built-internal-skills-to-manage-internet-sales-push-1424200731?mod=WSJ_hpp_MIDDLENexttoWhatsNewsForth (http://www.wsj.com/articles/gm-built-internal-skills-to-manage-internet-sales-push-1424200731?mod=WSJ_hpp_MIDDLENexttoWhatsNewsForth)
Title: Re: GM - General Motors
Post by: Mephistopheles on March 02, 2015, 02:13:12 PM
Buffett mentioned this morning that credit standards are starting to loosen in subprime auto. Wells Fargo has recently put a cap on the subprime % of total auto loans it is willing to underwrite - at 10%.

http://www.nytimes.com/2015/03/02/business/dealbook/wells-fargo-puts-a-ceiling-on-subprime-auto-loans.html?ref=dealbook&_r=0

Although GM Financial is expanding into prime auto lending, a vast majority of its loans are made to subprime borrowers. I've been tracking its U.S. ABS trusts every month, and the number of delinquencies have been creeping up, for both 30-60 and 60+ days, although not quite as high as levels pre crash.

I haven't gone through GM Financial's '14 10-k yet, but I've been a bit concerned about this for some time. What does everyone think of this?
Title: Re: GM - General Motors
Post by: jawn619 on March 02, 2015, 06:26:51 PM
Buffett mentioned this morning that credit standards are starting to loosen in subprime auto. Wells Fargo has recently put a cap on the subprime % of total auto loans it is willing to underwrite - at 10%.

http://www.nytimes.com/2015/03/02/business/dealbook/wells-fargo-puts-a-ceiling-on-subprime-auto-loans.html?ref=dealbook&_r=0

Although GM Financial is expanding into prime auto lending, a vast majority of its loans are made to subprime borrowers. I've been tracking its U.S. ABS trusts every month, and the number of delinquencies have been creeping up, for both 30-60 and 60+ days, although not quite as high as levels pre crash.

I haven't gone through GM Financial's '14 10-k yet, but I've been a bit concerned about this for some time. What does everyone think of this?

It is concerning but GM financial isn't a large part of it's revenues. $4B compared to $150B of auto sales
Title: Re: GM - General Motors
Post by: Lowlight on March 02, 2015, 06:56:41 PM
Buffett mentioned this morning that credit standards are starting to loosen in subprime auto. Wells Fargo has recently put a cap on the subprime % of total auto loans it is willing to underwrite - at 10%.

http://www.nytimes.com/2015/03/02/business/dealbook/wells-fargo-puts-a-ceiling-on-subprime-auto-loans.html?ref=dealbook&_r=0

Although GM Financial is expanding into prime auto lending, a vast majority of its loans are made to subprime borrowers. I've been tracking its U.S. ABS trusts every month, and the number of delinquencies have been creeping up, for both 30-60 and 60+ days, although not quite as high as levels pre crash.

I haven't gone through GM Financial's '14 10-k yet, but I've been a bit concerned about this for some time. What does everyone think of this?

It is concerning but GM financial isn't a large part of it's revenues. $4B compared to $150B of auto sales

I haven't dug into it enough to speak with any conviction here, but I would say the concern shouldn't be with the size of the revenues generated from GM financial, but the size of their asset base and specifically the subprime auto assets.  I know that during the downturn when banks repossessed GM trucks and SUVs they took massive write-downs as loan amortizations had not yet caught up with the significant loss of value that occurred through depreciation (GM was hit the hardest due to their reliance on higher priced, low gas mileage vehicles).  You can bet that this would happen again if there was a significant downturn in the auto industry.  Adding supply of high-ticket SUVs and trucks onto the market will definitely hinder GM's ability to sell against used inventory.  Whether the subprime lending spree over the last few years, and/or the lower for longer lending environment  itself will wreak havoc on the auto industry is to be seen.  I believe there is definitely room for concern here.  Auto paper has traded at ridiculously low levels over the past few years despite the fact that auto loan terms have been extended without a down payment requirement.  This isn't to say I believe there is currently substantial risk to GM equity holders, but I do think a lot about whether the current lending conditions in the auto market are sustainable at higher interest rates.  The bank regulators are starting to warn about the subprime auto risks.  They have been warning about other risks that haven't come to pass yet (leveraged loans and SNCs for one) but, at least these days, when the regulators start to issue guidance, it usually means there is something going on in the market that should make us double check our assumptions.
Title: Re: GM - General Motors
Post by: Mephistopheles on March 03, 2015, 10:26:26 AM
Buffett mentioned this morning that credit standards are starting to loosen in subprime auto. Wells Fargo has recently put a cap on the subprime % of total auto loans it is willing to underwrite - at 10%.

http://www.nytimes.com/2015/03/02/business/dealbook/wells-fargo-puts-a-ceiling-on-subprime-auto-loans.html?ref=dealbook&_r=0

Although GM Financial is expanding into prime auto lending, a vast majority of its loans are made to subprime borrowers. I've been tracking its U.S. ABS trusts every month, and the number of delinquencies have been creeping up, for both 30-60 and 60+ days, although not quite as high as levels pre crash.

I haven't gone through GM Financial's '14 10-k yet, but I've been a bit concerned about this for some time. What does everyone think of this?

It is concerning but GM financial isn't a large part of it's revenues. $4B compared to $150B of auto sales

Yes but there are $25 billion of auto loans on the book, and $8 billion of dealership loans.
Title: Re: GM - General Motors
Post by: vinod1 on March 03, 2015, 11:23:41 AM
Buffett mentioned this morning that credit standards are starting to loosen in subprime auto. Wells Fargo has recently put a cap on the subprime % of total auto loans it is willing to underwrite - at 10%.

http://www.nytimes.com/2015/03/02/business/dealbook/wells-fargo-puts-a-ceiling-on-subprime-auto-loans.html?ref=dealbook&_r=0

Although GM Financial is expanding into prime auto lending, a vast majority of its loans are made to subprime borrowers. I've been tracking its U.S. ABS trusts every month, and the number of delinquencies have been creeping up, for both 30-60 and 60+ days, although not quite as high as levels pre crash.

I haven't gone through GM Financial's '14 10-k yet, but I've been a bit concerned about this for some time. What does everyone think of this?

It is concerning but GM financial isn't a large part of it's revenues. $4B compared to $150B of auto sales

Yes but there are $25 billion of auto loans on the book, and $8 billion of dealership loans.

Assume pretty draconian loss numbers of something like 20% default rate and 50% loss severity. Even then it is not going to make or break GM investment thesis. To me this would not be one of the main risks to be worried about with GM.

Vinod
Title: Re: GM - General Motors
Post by: Mephistopheles on March 03, 2015, 09:45:18 PM
Buffett mentioned this morning that credit standards are starting to loosen in subprime auto. Wells Fargo has recently put a cap on the subprime % of total auto loans it is willing to underwrite - at 10%.

http://www.nytimes.com/2015/03/02/business/dealbook/wells-fargo-puts-a-ceiling-on-subprime-auto-loans.html?ref=dealbook&_r=0

Although GM Financial is expanding into prime auto lending, a vast majority of its loans are made to subprime borrowers. I've been tracking its U.S. ABS trusts every month, and the number of delinquencies have been creeping up, for both 30-60 and 60+ days, although not quite as high as levels pre crash.

I haven't gone through GM Financial's '14 10-k yet, but I've been a bit concerned about this for some time. What does everyone think of this?

It is concerning but GM financial isn't a large part of it's revenues. $4B compared to $150B of auto sales

Yes but there are $25 billion of auto loans on the book, and $8 billion of dealership loans.

Assume pretty draconian loss numbers of something like 20% default rate and 50% loss severity. Even then it is not going to make or break GM investment thesis. To me this would not be one of the main risks to be worried about with GM.

Vinod

Thanks Vinod, that put it into perspective for me.

And it's even less than that because much of those number is in fully consolidated securities in which GM doesn't have 100% ownership.
Title: Re: GM - General Motors
Post by: compounding on March 09, 2015, 04:58:10 AM
GM Announces Disciplined Capital Allocation Framework

- Reinvesting in the business to drive 20 Percent or higher ROIC
- Targets cash balance of $20 billion, while maintaining investment-grade balance sheet
- Plans to return all available free cash flow to shareholders
- Authorizes initial $5 billion share repurchase program beginning immediately; reaffirms strong and growing dividend policy

[...]

GM’s capital allocation framework encompasses three core principles:

High-Return Investment in the Business – GM previously stated it expects capital expenditures in 2015 of $9 billion to invest in future growth, including a more aggressive vehicle launch cadence in the coming years. GM will reinvest in its business with the objective of driving 20 percent or higher return on invested capital (ROIC) through investments in world-class vehicles and leading technology. The company plans to disclose its ROIC performance each quarter beginning with its first quarter 2015 report.  The company expects this disciplined capital deployment will strengthen and grow GM’s brands and drive improved financial performance and will result in capital spending in the range of 5–5.5 percent of its annual revenue in the future.

Maintain an Investment-Grade Balance Sheet – GM intends to maintain an investment-grade balance sheet, including a target cash balance of $20 billion. GM believes maintaining an investment-grade balance sheet is critical to support long-term growth and increased earnings at GM Financial, which is a catalyst for improved automotive sales and profitability.

Return Capital to Shareholders – Beyond reinvesting in the business and maintaining an investment grade balance sheet, the company expects to return all available free cash flow to shareholders. Starting in January 2016, GM will develop its annual capital return plans and communicate them to the market during the first quarter of each year.
In 2014, the company established an executive compensation program that aligns management incentives with ROIC and total shareholder return. GM said it is committed to providing greater clarity around its compensation program and will continue to evaluate the program to ensure that strong linkage.

http://www.gm.com/company/investors/latest-news/news_detail_page.content_pages_news_us_en_2015_mar_0309-allocation-framework.~content~gmcom~home~company~investors.html
Title: Re: GM - General Motors
Post by: merkhet on March 09, 2015, 05:41:49 AM
WSJ is reporting that Wilson is dropping his bid for a board seat.
Title: Re: GM - General Motors
Post by: compounding on March 09, 2015, 05:46:56 AM
WSJ is reporting that Wilson is dropping his bid for a board seat.

So is GM  :)

Here you go: http://www.gm.com/company/investors/latest-news/news_detail_page.content_pages_news_us_en_2015_mar_0309-investment-group.~content~gmcom~home~company~investors.html
Title: Re: GM - General Motors
Post by: merkhet on March 09, 2015, 05:49:41 AM
Was that in the press release? If so, I missed it.

EDIT: Ah, thanks. It was in the next press release down. :)
Title: Re: GM - General Motors
Post by: compounding on March 09, 2015, 06:26:12 AM
Was that in the press release? If so, I missed it.

EDIT: Ah, thanks. It was in the next press release down. :)

No problem.

The slides from today's presentation may also be worth your time for you guys that are interested in either GM or the auto industry at large. They were attached in the first press release as "Chart-set".
Title: Re: GM - General Motors
Post by: vinod1 on March 09, 2015, 07:46:45 AM
Was that in the press release? If so, I missed it.

EDIT: Ah, thanks. It was in the next press release down. :)

No problem.

The slides from today's presentation may also be worth your time for you guys that are interested in either GM or the auto industry at large. They were attached in the first press release as "Chart-set".

Thanks for pointing out the presentation.

I am impressed with this pretty significant change in management attitude towards capital allocation and management compensation. I did not expect this when I invested in GM.

Vinod

Title: Re: GM - General Motors
Post by: cubsfan on March 09, 2015, 08:49:49 AM
Maybe all those conversations between Buffett and Mary Barra paid off!
Title: Re: GM - General Motors
Post by: racemize on March 09, 2015, 09:04:29 AM
Actually, in recent interviews, Buffett didn't seem too keen on buybacks at GM.  Or at least, he said there were reasons why they would want the cash around instead of doing a buyback.
Title: Re: GM - General Motors
Post by: PJM on March 09, 2015, 07:35:18 PM
Was that in the press release? If so, I missed it.

EDIT: Ah, thanks. It was in the next press release down. :)

No problem.

The slides from today's presentation may also be worth your time for you guys that are interested in either GM or the auto industry at large. They were attached in the first press release as "Chart-set".

Thanks for pointing out the presentation.

I am impressed with this pretty significant change in management attitude towards capital allocation and management compensation. I did not expect this when I invested in GM.

Vinod

Folks - Maybe a very silly question but can anyone explain what are "Average automative net income assets" and why is it deducted for calculating ROIC average net assets?

Thanks in advance.
Title: Re: GM - General Motors
Post by: fareastwarriors on March 27, 2015, 11:09:55 AM
Ford, Mercedes-Benz Set Up Shop in Silicon Valley

New nexus of car industry emerges as Apple, Uber and Google push automotive ambitions

http://www.wsj.com/articles/ford-mercedes-set-up-shop-in-silicon-valley-1427475558?mod=WSJ_article_EditorsPicks_0 (http://www.wsj.com/articles/ford-mercedes-set-up-shop-in-silicon-valley-1427475558?mod=WSJ_article_EditorsPicks_0)
Title: Re: GM - General Motors
Post by: CorpRaider on March 27, 2015, 11:59:35 AM
I should really sell out of these warrants, take my gains and thank my lucky stars.  I just hate this business.  Not only do you have non-rational, quasi state-sponsored entities, complete with manipulated currencies, dumping product, to go along with unions, organized labor and politicians trying to feed their little piggy bellies at the trough; massive capital intensity....you've got, TSLA, and now GOOG and AAPL, coming in to try and take over the industry, not to mention all the zip cars and ubers and sharing services trying to free the millenials from the yoke of automobile ownership.  I need a drink.   :o   hehe. 
Title: Re: GM - General Motors
Post by: compounding on March 27, 2015, 12:32:34 PM
I should really sell out of these warrants, take my gains and thank my lucky stars.  I just hate this business.  Not only do you have non-rational, quasi state-sponsored entities, complete with manipulated currencies, dumping product, to go along with unions, organized labor and politicians trying to feed their little piggy bellies at the trough; massive capital intensity....you've got, TSLA, and now GOOG and AAPL, coming in to try and take over the industry, not to mention all the zip cars and ubers and sharing services trying to free the millenials from the yoke of automobile ownership.  I need a drink.   :o   hehe.

But it's only a few times EBITDA!  ;)

To ease your mind a bit (you might need that drink anyway), you may enjoy reading up on "the chicken tax" and profit margins for pickup trucks. Also, GOOG doesn't seem interested at all in manufacturing, and I wouldn't be surprised if the same goes for AAPL. As for the unions/organised labour, the good thing about being a global carmaker in a world with diminishing barriers for trade is that wages can be arbitraged.
Title: Re: GM - General Motors
Post by: racemize on March 28, 2015, 06:26:24 AM
Damodaran on the GM buyback (and not too pretty comments on GM or autos).

http://aswathdamodaran.blogspot.com/2015/03/the-gm-buyback-beyond-hysteria.html
Title: Re: GM - General Motors
Post by: fareastwarriors on April 02, 2015, 10:45:34 AM
G.M. Bets Big on a Resurgent Cadillac

http://www.nytimes.com/2015/04/03/business/gm-bets-big-on-cadillac-ct6.html?hp&action=click&pgtype=Homepage&module=photo-spot-region&region=top-news&WT.nav=top-news&_r=0 (http://www.nytimes.com/2015/04/03/business/gm-bets-big-on-cadillac-ct6.html?hp&action=click&pgtype=Homepage&module=photo-spot-region&region=top-news&WT.nav=top-news&_r=0)
Title: Re: GM - General Motors
Post by: nikhil25 on April 03, 2015, 06:40:20 AM
How a former Audi guy plans to spend $12B reviving Caddy
http://bloom.bg/1GHQO9y
Title: Re: GM - General Motors
Post by: CorpRaider on April 03, 2015, 06:55:38 AM
Damodaran on the GM buyback (and not too pretty comments on GM or autos).

http://aswathdamodaran.blogspot.com/2015/03/the-gm-buyback-beyond-hysteria.html

Thanks for sharing that.
Title: Re: GM - General Motors
Post by: merkhet on April 15, 2015, 02:33:26 PM
Quote
A federal judge ruled Wednesday General Motors Co. can keep its bankruptcy shield, which allows it to block potentially billions of dollars in legal claims by hundreds of customers seeking damages over a defective ignition switch.

http://www.wsj.com/articles/judge-rules-gm-can-keep-its-bankruptcy-shield-1429133128
Title: Re: GM - General Motors
Post by: fareastwarriors on April 22, 2015, 09:16:28 AM
From Greenlight/Einhorn:

Quote
We decided to take another drive in General Motors (GM) and repurchased a fresh stake at
$34.62 per share. We had held GM for about three years before selling it in early 2014,
when we were disappointed with management’s earnings guidance. 2015 should be a better
year for GM: the company is a year closer to eliminating its losses in Europe; low gas
prices should stimulate demand for its highly profitable SUV and light truck product lines;
raw material costs are low; and we believe that the worst of the product recalls is behind
them. Finally, GM has acknowledged it might not need quite so much cash lying around
earning zero interest, and it will begin to buy back shares shortly. While GM also trades at
less than 8x 2015 consensus estimates of $4.63 per share, we believe there is an excellent
chance that GM can beat those expectations. GM shares closed the quarter at $37.50.

http://www.valuewalk.com/wp-content/uploads/2015/04/Qlet2015-01.unlocked-1.pdf (http://www.valuewalk.com/wp-content/uploads/2015/04/Qlet2015-01.unlocked-1.pdf)
Title: Re: GM - General Motors
Post by: rsmehta on April 23, 2015, 06:44:25 PM
Thoughts on today's conference call???

    I'm trying to get excited, but management is so blah in their guidance.

    I really hope that their revamped lineup in over the next 2 years does well. Seems like the only way this can really pop.
Title: Re: GM - General Motors
Post by: merkhet on April 23, 2015, 08:09:15 PM
They bought back well over $750 million in shares since March 9. I don't know when the blackout period started, but that's a pretty strong buyback. They also indicated that they might go over the $5 billion initial allotment for buybacks depending on their ability to fund their projects and keep a $20 billion cushion.
Title: Re: GM - General Motors
Post by: rico1181 on April 24, 2015, 05:55:43 AM
Management has recently started reporting the ROIC metric, which is calculated incorrectly in my view. I am not sure if one should include the deferred tax asset in the ROIC calculation. A more useful metric would be return on net tangible assets or return on capital employed. Any thoughts?
Title: Re: GM - General Motors
Post by: tylerdurden on April 24, 2015, 07:51:09 AM
They had to keep some cars longer because of the recall repairs so when they send them to the auctions the pricing was lower and created a negative $400 million impact. One analyst estimated this as 17 cents impact and w/o this factor which should be less in Q2 and hopefully disappear in 2H, Q1 US margin was 10.4%. To me, as long as gas prices stay low tailwinds are really strong. We'll also begin to see the impact of repurchases on weighted average share count in coming quarters so I don't think  there is any reason to be negative. Perhaps it is better the Q1 came in below estimates so they can buy more shares with lower price...
Title: Re: GM - General Motors
Post by: merkhet on April 24, 2015, 07:58:05 AM
I'm loving the weakness in the share price. We just need it to stay low through the blackout window so that management can keep buying back shares at these prices.
Title: Re: GM - General Motors
Post by: tylerdurden on April 24, 2015, 08:12:39 AM
I'm loving the weakness in the share price. We just need it to stay low through the blackout window so that management can keep buying back shares at these prices.

I love it too. It seems the stock price will be lower for a while so they should be able to benefit from the lower price.
Title: Re: GM - General Motors
Post by: muscleman on April 24, 2015, 09:20:24 AM
I wonder why are the activists of GM pushing for more buybacks instead of merging with FCAU and having Sergio to be the CEO of GM? That would probably end up much better than a simple share repurchase.

With that said, what valuation do you assign to GM?
Title: Re: GM - General Motors
Post by: tylerdurden on April 24, 2015, 12:58:01 PM
I wonder why are the activists of GM pushing for more buybacks instead of merging with FCAU and having Sergio to be the CEO of GM? That would probably end up much better than a simple share repurchase.

With that said, what valuation do you assign to GM?

I assign $50 based on $5 EPS in 2016.

Why do you think merging with FCAU and having Sergio as the CEO would create value for GM shareholders? I don't think GM needs a complicated merger; they just need to execute their plan and I don't see any reason for not giving Mary Barra a chance...
Title: Re: GM - General Motors
Post by: constructive on April 24, 2015, 01:04:36 PM
I wonder why are the activists of GM pushing for more buybacks instead of merging with FCAU and having Sergio to be the CEO of GM? That would probably end up much better than a simple share repurchase.

Even though US antitrust review has become quite lenient over the past few decades, GM merging with Chrysler would probably not pass.
Title: Re: GM - General Motors
Post by: snow pea on April 24, 2015, 01:10:56 PM
I wasn't under the impression Sergio is in it for the long haul.  I don't have a link, but I seem to recall he indicated he would see through the 5-year plan but wouldn't commit to being there longer.  Indeed, to some degree I wonder if the FCAU consolidation talk isn't (as a second, third, or fourth level consideration; I don't doubt the primary reason(s) of improving competitive standing etc. is totally valid and the driving factor) also a potential ticket out for him.  Maybe I'm wrong; I hope so, I'm very impressed by him.
Title: Re: GM - General Motors
Post by: Mephistopheles on May 06, 2015, 01:01:50 PM
GM continues to drop. The original $5 billion for the buyback is now 9% of the market cap. Let's hope they're really taking advantage here.

Bought more warrants today.
Title: Re: GM - General Motors
Post by: merkhet on May 06, 2015, 01:10:53 PM
I believe that they blew through $750 million in about 2 weeks in March, and the blackout window lifted a few days after they reported on April 23rd, so my guess is that they've been taking significant advantage during this period.
Title: Re: GM - General Motors
Post by: merkhet on May 11, 2015, 06:48:47 PM
http://www.wsj.com/articles/uaw-car-makers-weigh-new-class-of-hires-1431301465
Title: Re: GM - General Motors
Post by: Eye4Valu on May 12, 2015, 07:48:02 PM
I have not gone through this thread yet, but am curious about the GM warrants. Can anyone provide some quick thoughts?
Title: Re: GM - General Motors
Post by: Mephistopheles on May 12, 2015, 08:43:58 PM
I have not gone through this thread yet, but am curious about the GM warrants. Can anyone provide some quick thoughts?

Sure. They have a time value of about $.55 + the dividend which is currently $1.44. So that's roughly a cost of 5%. Expiration is in October 2019.

If you look past the costs of recalls and restructuring, and assume that they can bring Europe and South America to break even, GM will easily earn $4 EPS next year. They are aggressively buying back $5 billion of their stock, which was roughly 8-9% of market cap when it was announced. Catalysts include continued strength in the U.S. auto market, which still hasn't picked up all the slack from the crisis as others have mentioned; more profitable vehicles such as trucks, SUVs, and crossovers are increasing their share of the mix mainly due to lower gas prices. They're losing money everywhere except North America and China. Getting to $0 of profits in these places seems like low hanging fruit given the management's increased focus on efficiency and profitability, even at a loss of market share. They pulled Chevy from Europe, for example. The company also has $20-30 billion in deferred tax assets on the balance sheet and doesn't have to contribute to its pension plan for 3 or 4 more years I believe. This will boost cash flow even more than earnings.

Risks include further dollar strengthening. Also, NA is inching towards 10% EBIT margins which may start to turn the other way if the cycle reverses. The $9 billion capex budget bothers me. They said they can earn 20% ROIC but that seems like a high target. Maybe someone else can shed light on this.

Overall, the warrants at 5% seem like a good risk reward at this price.
Title: Re: GM - General Motors
Post by: vinod1 on May 13, 2015, 07:50:18 AM
I have not gone through this thread yet, but am curious about the GM warrants. Can anyone provide some quick thoughts?

Sure. They have a time value of about $.55 + the dividend which is currently $1.44. So that's roughly a cost of 5%. Expiration is in October 2019.

If you look past the costs of recalls and restructuring, and assume that they can bring Europe and South America to break even, GM will easily earn $4 EPS next year. They are aggressively buying back $5 billion of their stock, which was roughly 8-9% of market cap when it was announced. Catalysts include continued strength in the U.S. auto market, which still hasn't picked up all the slack from the crisis as others have mentioned; more profitable vehicles such as trucks, SUVs, and crossovers are increasing their share of the mix mainly due to lower gas prices. They're losing money everywhere except North America and China. Getting to $0 of profits in these places seems like low hanging fruit given the management's increased focus on efficiency and profitability, even at a loss of market share. They pulled Chevy from Europe, for example. The company also has $20-30 billion in deferred tax assets on the balance sheet and doesn't have to contribute to its pension plan for 3 or 4 more years I believe. This will boost cash flow even more than earnings.

Risks include further dollar strengthening. Also, NA is inching towards 10% EBIT margins which may start to turn the other way if the cycle reverses. The $9 billion capex budget bothers me. They said they can earn 20% ROIC but that seems like a high target. Maybe someone else can shed light on this.

Overall, the warrants at 5% seem like a good risk reward at this price.

Good points! I largely agree with your thoughts.

On warrants though, the cost is closer to 9%, as you are only borrowing around $17. So they seem pretty expensive and with any dividend increase they are going to be a lot more expensive.

Vinod
Title: Re: GM - General Motors
Post by: Mephistopheles on May 13, 2015, 09:12:04 AM
I have not gone through this thread yet, but am curious about the GM warrants. Can anyone provide some quick thoughts?

Sure. They have a time value of about $.55 + the dividend which is currently $1.44. So that's roughly a cost of 5%. Expiration is in October 2019.

If you look past the costs of recalls and restructuring, and assume that they can bring Europe and South America to break even, GM will easily earn $4 EPS next year. They are aggressively buying back $5 billion of their stock, which was roughly 8-9% of market cap when it was announced. Catalysts include continued strength in the U.S. auto market, which still hasn't picked up all the slack from the crisis as others have mentioned; more profitable vehicles such as trucks, SUVs, and crossovers are increasing their share of the mix mainly due to lower gas prices. They're losing money everywhere except North America and China. Getting to $0 of profits in these places seems like low hanging fruit given the management's increased focus on efficiency and profitability, even at a loss of market share. They pulled Chevy from Europe, for example. The company also has $20-30 billion in deferred tax assets on the balance sheet and doesn't have to contribute to its pension plan for 3 or 4 more years I believe. This will boost cash flow even more than earnings.

Risks include further dollar strengthening. Also, NA is inching towards 10% EBIT margins which may start to turn the other way if the cycle reverses. The $9 billion capex budget bothers me. They said they can earn 20% ROIC but that seems like a high target. Maybe someone else can shed light on this.

Overall, the warrants at 5% seem like a good risk reward at this price.

Good points! I largely agree with your thoughts.

On warrants though, the cost is closer to 9%, as you are only borrowing around $17. So they seem pretty expensive and with any dividend increase they are going to be a lot more expensive.

Vinod

Oops, you're right. Thanks for pointing that out. The cost is 9%, but the stock has to move up about 5% annually. Maybe an options rolling strategy is more profitable as per Eric's suggestion, which I'll need to look into.
Title: Re: GM - General Motors
Post by: jrallen81 on May 14, 2015, 11:35:20 AM
I imagine the answer is no given the short horizon, but can anyone make a case for the "C" warrants? Obviously a very high risk proposition, should be sized accordingly.
Title: Re: GM - General Motors
Post by: Mephistopheles on May 15, 2015, 05:53:17 PM
I imagine the answer is no given the short horizon, but can anyone make a case for the "C" warrants? Obviously a very high risk proposition, should be sized accordingly.

The $42 January 2016 calls are a better deal at $.43 vs. the C warrants which are $.70 and expire two weeks early and have a strike of $42.31.

Not sure why there is such a huge discrepancy between the two. Does anyone have a broker which allows to short the C warrants? Mine does not.

Shorting the warrants and going long the $42 calls might be a good bet. As long as the cost of borrowing them is .70-.43, so $.27 or less, which would be 68% annualized, then there is no chance of losing money.
Title: Re: GM - General Motors
Post by: sswan11 on May 22, 2015, 09:43:15 PM
Report: Criminal actions found in GM ignition switch case, USA Today

http://www.usatoday.com/story/money/cars/2015/05/22/gm-ignition-switches-criminal/27822305/
Title: Re: GM - General Motors
Post by: Mephistopheles on May 24, 2015, 02:58:04 PM
I have not gone through this thread yet, but am curious about the GM warrants. Can anyone provide some quick thoughts?

Sure. They have a time value of about $.55 + the dividend which is currently $1.44. So that's roughly a cost of 5%. Expiration is in October 2019.

If you look past the costs of recalls and restructuring, and assume that they can bring Europe and South America to break even, GM will easily earn $4 EPS next year. They are aggressively buying back $5 billion of their stock, which was roughly 8-9% of market cap when it was announced. Catalysts include continued strength in the U.S. auto market, which still hasn't picked up all the slack from the crisis as others have mentioned; more profitable vehicles such as trucks, SUVs, and crossovers are increasing their share of the mix mainly due to lower gas prices. They're losing money everywhere except North America and China. Getting to $0 of profits in these places seems like low hanging fruit given the management's increased focus on efficiency and profitability, even at a loss of market share. They pulled Chevy from Europe, for example. The company also has $20-30 billion in deferred tax assets on the balance sheet and doesn't have to contribute to its pension plan for 3 or 4 more years I believe. This will boost cash flow even more than earnings.

Risks include further dollar strengthening. Also, NA is inching towards 10% EBIT margins which may start to turn the other way if the cycle reverses. The $9 billion capex budget bothers me. They said they can earn 20% ROIC but that seems like a high target. Maybe someone else can shed light on this.

Overall, the warrants at 5% seem like a good risk reward at this price.

Good points! I largely agree with your thoughts.

On warrants though, the cost is closer to 9%, as you are only borrowing around $17. So they seem pretty expensive and with any dividend increase they are going to be a lot more expensive.

Vinod

Should we be thinking about the dividends differently than the time value when considering cost of leverage?

A dividend yield serves as somewhat of a floor for the stock price as people are more attracted to it. Also, higher dividends generally mean the company is in good shape which also means a higher stock price. Conversely, a company having serious issues may cut the dividend which would bring down the cost (of course in this scenario the intrinsic value of the option suffers as well).

Would love to hear your or anyone else's thoughts on this matter.
Title: Re: GM - General Motors
Post by: CorpRaider on May 25, 2015, 08:31:54 AM
A couple of relevant stories, which most have probably already read. 

Jack Hough of Barron's sez GM is cheap:

http://online.barrons.com/articles/gm-stock-is-40-undervalued-1432294295


Sergio wants to hook up:

http://www.nytimes.com/2015/05/24/business/detroits-chief-instigator.html?_r=0
Title: Re: GM - General Motors
Post by: saltybit on May 25, 2015, 02:03:53 PM
Aswath Damodaran talking about the auto industry:
http://aswathdamodaran.blogspot.com/2015/05/no-light-at-end-of-tunnel-investing-in.html
Title: Re: GM - General Motors
Post by: vinod1 on May 25, 2015, 02:04:53 PM
I have not gone through this thread yet, but am curious about the GM warrants. Can anyone provide some quick thoughts?

Sure. They have a time value of about $.55 + the dividend which is currently $1.44. So that's roughly a cost of 5%. Expiration is in October 2019.

If you look past the costs of recalls and restructuring, and assume that they can bring Europe and South America to break even, GM will easily earn $4 EPS next year. They are aggressively buying back $5 billion of their stock, which was roughly 8-9% of market cap when it was announced. Catalysts include continued strength in the U.S. auto market, which still hasn't picked up all the slack from the crisis as others have mentioned; more profitable vehicles such as trucks, SUVs, and crossovers are increasing their share of the mix mainly due to lower gas prices. They're losing money everywhere except North America and China. Getting to $0 of profits in these places seems like low hanging fruit given the management's increased focus on efficiency and profitability, even at a loss of market share. They pulled Chevy from Europe, for example. The company also has $20-30 billion in deferred tax assets on the balance sheet and doesn't have to contribute to its pension plan for 3 or 4 more years I believe. This will boost cash flow even more than earnings.

Risks include further dollar strengthening. Also, NA is inching towards 10% EBIT margins which may start to turn the other way if the cycle reverses. The $9 billion capex budget bothers me. They said they can earn 20% ROIC but that seems like a high target. Maybe someone else can shed light on this.

Overall, the warrants at 5% seem like a good risk reward at this price.

Good points! I largely agree with your thoughts.

On warrants though, the cost is closer to 9%, as you are only borrowing around $17. So they seem pretty expensive and with any dividend increase they are going to be a lot more expensive.

Vinod

Should we be thinking about the dividends differently than the time value when considering cost of leverage?

A dividend yield serves as somewhat of a floor for the stock price as people are more attracted to it. Also, higher dividends generally mean the company is in good shape which also means a higher stock price. Conversely, a company having serious issues may cut the dividend which would bring down the cost (of course in this scenario the intrinsic value of the option suffers as well).

Would love to hear your or anyone else's thoughts on this matter.

The things you mention provide either psychological benefits or provide signalling. I have trouble seeing them as having a separate value beyond the operational performance of GM.

Vinod
Title: Re: GM - General Motors
Post by: dutchman on June 03, 2015, 10:51:04 AM
Is anyone familiar with gmm.u which trades in Toronto-tse.?
Does it trade in Canadian or us dollars?   Seems to track the us price closely, and im confused!   i would like to buy in Canadian.
Title: Re: GM - General Motors
Post by: jawn619 on June 08, 2015, 04:58:39 PM
CEO Sergio Marchionne said to be working with activists to convince General Motors of merger.
Title: Re: GM - General Motors
Post by: CorpRaider on June 08, 2015, 06:49:29 PM
Said be ti be seeking to work with activists (or any other large gm shareholders), but reportedly hac thus far received "the heisman."  I'm avoiding the risks of such a proposed course of action.  Gm doesnt need it.  Pass.
Title: Re: GM - General Motors
Post by: saltybit on June 22, 2015, 09:26:44 AM
http://www.ft.com/intl/cms/s/0/95078a10-1699-11e5-9883-00144feabdc0.html#axzz3doBfNTS7

General Motors activist shareholders go cold on Fiat tie-up
Title: Re: GM - General Motors
Post by: merkhet on June 22, 2015, 09:32:46 AM
The interesting thing here is that GM should be a big beneficiary either way the Fiat thing plays out. If Fiat finds a way to make an offer to GM, they'll likely have to offer a premium, so GM shareholders win. Alternatively, in order to make such an offer not palatable to GM shareholders, management has to deliver in the form of better operating results and/or better capital allocation (maybe an increased buyback) and, once again, GM shareholders win.

Thanks Marchionne. :)
Title: Re: GM - General Motors
Post by: txlaw on June 22, 2015, 09:42:41 AM
The interesting thing here is that GM should be a big beneficiary either way the Fiat thing plays out. If Fiat finds a way to make an offer to GM, they'll likely have to offer a premium, so GM shareholders win. Alternatively, in order to make such an offer not palatable to GM shareholders, management has to deliver in the form of better operating results and/or better capital allocation (maybe an increased buyback) and, once again, GM shareholders win.

Thanks Marchionne. :)

I kind of get the feeling that this is all smoke and mirrors, and Marchionne is really angling for someone else to get involved with FCA.  VW would be a great fit, for example.  Maybe Marchionne can convince Piech, who just left the board, to stir up some trouble.

Regardless, I agree that this is good for GM shareholders. ;D
Title: Re: GM - General Motors
Post by: fareastwarriors on June 22, 2015, 10:00:33 AM
General Motors activist shareholders go cold on Fiat tie-up

http://www.ft.com/intl/cms/s/0/95078a10-1699-11e5-9883-00144feabdc0.html#axzz3doLlopTa (http://www.ft.com/intl/cms/s/0/95078a10-1699-11e5-9883-00144feabdc0.html#axzz3doLlopTa)
Title: Re: GM - General Motors
Post by: merkhet on June 22, 2015, 10:41:45 AM
The interesting thing here is that GM should be a big beneficiary either way the Fiat thing plays out. If Fiat finds a way to make an offer to GM, they'll likely have to offer a premium, so GM shareholders win. Alternatively, in order to make such an offer not palatable to GM shareholders, management has to deliver in the form of better operating results and/or better capital allocation (maybe an increased buyback) and, once again, GM shareholders win.

Thanks Marchionne. :)

I kind of get the feeling that this is all smoke and mirrors, and Marchionne is really angling for someone else to get involved with FCA.  VW would be a great fit, for example.  Maybe Marchionne can convince Piech, who just left the board, to stir up some trouble.

Regardless, I agree that this is good for GM shareholders. ;D

That might be true, but GM doesn't know that. :)
Title: Re: GM - General Motors
Post by: Sportgamma on June 22, 2015, 10:45:31 AM
The interesting thing here is that GM should be a big beneficiary either way the Fiat thing plays out. If Fiat finds a way to make an offer to GM, they'll likely have to offer a premium, so GM shareholders win. Alternatively, in order to make such an offer not palatable to GM shareholders, management has to deliver in the form of better operating results and/or better capital allocation (maybe an increased buyback) and, once again, GM shareholders win.

Thanks Marchionne. :)

I kind of get the feeling that this is all smoke and mirrors, and Marchionne is really angling for someone else to get involved with FCA.  VW would be a great fit, for example.  Maybe Marchionne can convince Piech, who just left the board, to stir up some trouble.

Regardless, I agree that this is good for GM shareholders. ;D

I´m getting that warm tingly feeling of conformation bias from txlaw´s comment
Title: Re: GM - General Motors
Post by: brker_guy on June 29, 2015, 11:27:52 AM
I should put this on the TSLA thread, but since this is about the Chevy Bolt and EVs, I thought I put the links here:

http://time.com/money/3940042/nissan-leaf-chevy-bolt-tesla-driving-range/?xid=yahoo_money

http://insideevs.com/may-2015-plug-electric-vehicle-sales-report-card/
Title: Re: GM - General Motors
Post by: merkhet on June 30, 2015, 07:38:27 AM
If General Motors has stuck to its $375 million of buyback per week pace that it had in March prior to the blackout period for earnings, then, by now, they should have bought back close to $3.75 billion in shares (if not more).

I hope they were in the market yesterday, but I think they're in the blackout period again.
Title: Re: GM - General Motors
Post by: tylerdurden on June 30, 2015, 02:09:41 PM
If General Motors has stuck to its $375 million of buyback per week pace that it had in March prior to the blackout period for earnings, then, by now, they should have bought back close to $3.75 billion in shares (if not more).

I hope they were in the market yesterday, but I think they're in the blackout period again.

Blackout should start with the end of quarter, no? I hope you are right. Goldman downgrade didn't really make much sense to me. They are out of their patience i guess after having GM on their conviction buy and buy lists that long...Anyways I don't pay too much attention to analysts of course but it moved the stock price recently though... Hope GM took advantage.
Title: Re: GM - General Motors
Post by: bigspydee on June 30, 2015, 05:08:31 PM
Question, when do 2018 leap call options open up for GM? Currently i only see Jan 20 2017 options under leaps. I already own GM-B warrants.
Title: Re: GM - General Motors
Post by: rico1181 on July 09, 2015, 11:50:50 AM
Does anyone have a good handle on the financial impact of the latest recalls (Hummer)? It seems like the market is overly concerned. Not sure if justifies an EV/EBITDA multiple of ~2.0x. Any thoughts?
Title: Re: GM - General Motors
Post by: TwoCitiesCapital on July 09, 2015, 01:47:09 PM
Does anyone have a good handle on the financial impact of the latest recalls (Hummer)? It seems like the market is overly concerned. Not sure if justifies an EV/EBITDA multiple of ~2.0x. Any thoughts?

I think the market's biggest concern, along with a general dislike of GM that has existed since the IPO, is the impact of the chinese slowdown since GM has a large amount of business there.
Title: Re: GM - General Motors
Post by: JPerez on July 09, 2015, 03:20:15 PM
The strange thing is that their chinese partners stock price, SAIC motors, has not drop much. It has a capitalization of 40 billion and gm partnerships seem to be 60% of the volume. Gm Chinese operations could be worth between 20-25 billion.
Gm capitalization has drop 8 billion in the last month so you that is a 30-40% drop on the value of the Chinese operations if that is the main concern.
On the other hand at this prices it has a 50 billion capitalization as a SOTP story you can value the Chinese partnerships at 20 B, gm financial 5 B, net cash 13 B, repurchases 4-5 B.
That is 43 B. The rest of gm including north america, Europe, south america and Row operations are value at 7 B. Of course there are the pension liabilities to take into account but it does not need any extra cash infusion for the next 4-5 years.
The hummer recall can not be material in the scale of a company the size of gm
Title: Re: GM - General Motors
Post by: Mephistopheles on July 09, 2015, 03:41:17 PM
I think Buffett should make a bid for GM, it has all the qualities he likes: great price, solid American brand, can help soak up capital going forward, management that seems to be focused on profitability, can be synergestic with their dealership business, a position that is already in Berkshire's portfolio, a product Buffett uses and enjoys, and a woman CEO.

What's not to like?
Title: Re: GM - General Motors
Post by: jawn619 on July 09, 2015, 05:16:17 PM
I think Buffett should make a bid for GM, it has all the qualities he likes: great price, solid American brand, can help soak up capital going forward, management that seems to be focused on profitability, can be synergestic with their dealership business, a position that is already in Berkshire's portfolio, a product Buffett uses and enjoys, and a woman CEO.

What's not to like?

Lack of free cash flow, commodity product, not very profitable.
Title: Re: GM - General Motors
Post by: Spekulatius on July 09, 2015, 06:15:10 PM
I think Buffett should make a bid for GM, it has all the qualities he likes: great price, solid American brand, can help soak up capital going forward, management that seems to be focused on profitability, can be synergestic with their dealership business, a position that is already in Berkshire's portfolio, a product Buffett uses and enjoys, and a woman CEO.

What's not to like?
He bought Berkshire and learned his lesson. Better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Title: Re: GM - General Motors
Post by: 50centdollars on July 09, 2015, 06:34:32 PM
I think Buffett should make a bid for GM, it has all the qualities he likes: great price, solid American brand, can help soak up capital going forward, management that seems to be focused on profitability, can be synergestic with their dealership business, a position that is already in Berkshire's portfolio, a product Buffett uses and enjoys, and a woman CEO.

What's not to like?
He bought Berkshire and learned his lesson. Better to buy a wonderful company at a fair price than a fair company at a wonderful price.

I don't think GM is a great business long term. Company is doing well now but the culture of GM has been terrible for decades. I don't know if the culture has changed but I wouldn't bet on it with union workers.
Title: Re: GM - General Motors
Post by: randomep on July 09, 2015, 07:03:44 PM
I think Buffett should make a bid for GM, it has all the qualities he likes: great price, solid American brand, can help soak up capital going forward, management that seems to be focused on profitability, can be synergestic with their dealership business, a position that is already in Berkshire's portfolio, a product Buffett uses and enjoys, and a woman CEO.

What's not to like?

Lack of free cash flow, commodity product, not very profitable.

terrible ROIC
Title: Re: GM - General Motors
Post by: compounding on July 10, 2015, 05:13:20 AM
The strange thing is that their chinese partners stock price, SAIC motors, has not drop much. It has a capitalization of 40 billion and gm partnerships seem to be 60% of the volume. Gm Chinese operations could be worth between 20-25 billion.
Gm capitalization has drop 8 billion in the last month so you that is a 30-40% drop on the value of the Chinese operations if that is the main concern.
On the other hand at this prices it has a 50 billion capitalization as a SOTP story you can value the Chinese partnerships at 20 B, gm financial 5 B, net cash 13 B, repurchases 4-5 B.
That is 43 B. The rest of gm including north america, Europe, south america and Row operations are value at 7 B. Of course there are the pension liabilities to take into account but it does not need any extra cash infusion for the next 4-5 years.
The hummer recall can not be material in the scale of a company the size of gm

Interesting on SAIC. I think GM Financial is worth more than $5b, it had $6bn tangible net worth at the end of Q1 and is very profitable and growing. Also the deferred tax assets are worth quite a bit, especially if things turn around in Europe...

The valuation of GM baffles me, I hope they are buying back stock like crazy. Will be interesting to see what the activists have planned if stock performance doesn't improve over the next few quarters.
Title: Re: GM - General Motors
Post by: Aberhound on July 10, 2015, 09:00:09 AM
I watched a google driverless car video and read some of the recent articles. Is there an analogy here with Geico vs. traditional insurance companies selling through an agent network? Driverless cars will likely be by subscription similar to the existing car sharing services like Car 2 Go. So GM and the like would have to abandon their existing model of selling large volumes of different models to effectively compete. They can't and won't. Since the car sharing increases usage of cars ten fold (very roughly 5% to 50%) the capital efficiency is so much greater cars sold to individuals cannot compete and the number of cars sold will drop up to ten fold for that segment of the market. Further, IT companies like Google have huge advantages because the sharing side requires their type of skills building efficient software based sharing systems. Google also gets to cross subsidize with their revenues from passengers using computers and smartphones as they are driven around. I personally look forward to going to a 1 car from a 3 car family and then be driven around while I work and read with a car appearing anywhere I need one within a minute or two summoned by smartphone and at a cost of hundreds instead of thousands per month. This trend is so much in accordance with Agenda 21 dense cities, sustainability and lower carbon use I don't see how any politician could oppose it. It should also stimulate all the other competing uses for cash now wasted on excess cars which sit around un utilized most of the time.

Who else thinks this suggests a long google short GM and Ford trade?
Title: Re: GM - General Motors
Post by: rkbabang on July 10, 2015, 10:31:58 AM
I watched a google driverless car video and read some of the recent articles. Is there an analogy here with Geico vs. traditional insurance companies selling through an agent network? Driverless cars will likely be by subscription similar to the existing car sharing services like Car 2 Go. So GM and the like would have to abandon their existing model of selling large volumes of different models to effectively compete. They can't and won't. Since the car sharing increases usage of cars ten fold (very roughly 5% to 50%) the capital efficiency is so much greater cars sold to individuals cannot compete and the number of cars sold will drop up to ten fold for that segment of the market. Further, IT companies like Google have huge advantages because the sharing side requires their type of skills building efficient software based sharing systems. Google also gets to cross subsidize with their revenues from passengers using computers and smartphones as they are driven around. I personally look forward to going to a 1 car from a 3 car family and then be driven around while I work and read with a car appearing anywhere I need one within a minute or two summoned by smartphone and at a cost of hundreds instead of thousands per month. This trend is so much in accordance with Agenda 21 dense cities, sustainability and lower carbon use I don't see how any politician could oppose it. It should also stimulate all the other competing uses for cash now wasted on excess cars which sit around un utilized most of the time.

Who else thinks this suggests a long google short GM and Ford trade?


Everything you said above is going to happen.  The question is "when?".   Don't underestimate governments' ability to act insane under pressure from interest groups who benefit from the status quo.  Look at Uber in France (or many American cities for that matter), or look at the hard time some states are giving Telsa, because of it simply wants to sell directly to consumers without the state protected middlemen.  GM/Ford/Toyota will not give up without a fight, and since they can not compete freely using the voluntary means, they will focus on the political means (legitimized violence) and they have the clout/money to do so.    I wouldn't be surprised if the government keeps self driving vehicles off the streets for a decade or longer after they otherwise would have taken over the market.  The same goes with flying drones.  There is no reason why autonomous drones couldn't carry people eventually as well as goods, this terrifies many people in a lot of industries and that is one of the real reasons Amazon is having a hard time with the politics of making autonomous deliveries.    Roads? Where we're going we don't need roads ....
Title: Re: GM - General Motors
Post by: tylerdurden on July 10, 2015, 11:02:16 AM
In that long term we'll all live in Mars and since teleportation will be the easy option for travel who needs any sorts of cars anyways. J/k I agree with the "when" question. There are all sorts of issues with driverless cars like who'll be responsible if there is an accident etc. i don't think i can see that far for a long google short auto companies play. i'd stick to 3-5 years timframe for my investment horizon...

In terms of GM, there is huge anti sentiment for the stock. It started with Goldman downgrade and now China. Only fix is solid earnings... I personally think with Europe gradually getting better they should weather any problems in china. Low gas will continue to be tailwind for sometime and they should increase efficiency with limited no of new platforms and lower input prices. Execution time for the management since time is running out on their targets...
Title: Re: GM - General Motors
Post by: krazeenyc on July 10, 2015, 11:20:02 AM
I'm hoping for driverless tech sooner rather than later hopefully within 10 years -- fingers crossed. I don't imagine Google/Apple will get involved in the business of actually manufacturing cars -- that would be a major step down in terms of quality of business for them. I would expect them to partner with existing car companies to get their technologies into cars.
Title: Re: GM - General Motors
Post by: tylerdurden on July 10, 2015, 11:48:17 AM
I'm hoping for driverless tech sooner rather than later hopefully within 10 years -- fingers crossed. I don't imagine Google/Apple will get involved in the business of actually manufacturing cars -- that would be a major step down in terms of quality of business for them. I would expect them to partner with existing car companies to get their technologies into cars.

10 years sounds reasonable. I don't think apple/google would be involved in auto manufacturing either and even in terms of who will eat whose lunch it is all up in the air to me as well. Auto comps are also not stupid. They are trying to be involved by being present in silicon valley etc. Actually there would be a case that autos copy the software/technology from googles of the world and incorporate that into their cars as the end game. Who knows...
Title: Re: GM - General Motors
Post by: ZenaidaMacroura on July 10, 2015, 01:03:52 PM
I'm hoping for driverless tech sooner rather than later hopefully within 10 years -- fingers crossed. I don't imagine Google/Apple will get involved in the business of actually manufacturing cars -- that would be a major step down in terms of quality of business for them. I would expect them to partner with existing car companies to get their technologies into cars.

10 years sounds reasonable. I don't think apple/google would be involved in auto manufacturing either and even in terms of who will eat whose lunch it is all up in the air to me as well. Auto comps are also not stupid. They are trying to be involved by being present in silicon valley etc. Actually there would be a case that autos copy the software/technology from googles of the world and incorporate that into their cars as the end game. Who knows...
Tesla is probably the driverless manufacture of choice -but given Musk's distrust of AI expect them to be equipped with a self destruct failsafe  ;D
Title: Re: GM - General Motors
Post by: LowIQinvestor on July 16, 2015, 12:14:50 PM
I can't help but start to get bullish on GM when i see silly headlines & logic like this!:

"General Motors: Cheap Valuation, Sizable Dividend ‘Largely Irrelevant’"

http://blogs.barrons.com/stockstowatchtoday/2015/07/16/general-motors-cheap-valuation-sizable-dividend-largely-irrelevant/?mod=yahoobarrons&ru=yahoo
Title: Re: GM - General Motors
Post by: valuedontlie on July 16, 2015, 01:01:29 PM
I can't help but start to get bullish on GM when i see silly headlines & logic like this!:

"General Motors: Cheap Valuation, Sizable Dividend ‘Largely Irrelevant’"

http://blogs.barrons.com/stockstowatchtoday/2015/07/16/general-motors-cheap-valuation-sizable-dividend-largely-irrelevant/?mod=yahoobarrons&ru=yahoo

I tend to agree. The pessimism seems to be building with China headlines. I came across an article trying to pin the selloff:

"The weakness, attributable to general market malaise, fears over slower growth in China and uncertainty over the sustainability of near-record U.S. auto sales"

I scanned the Barclay's downgrade today and found the analysis somewhat laughable. Maintaining above consensus EPS but downgrading shares? It actually reinforced the fact that returning foreign ops (ex-China) to breakeven will be far more impactful than a decline in China JV income.

Title: Re: GM - General Motors
Post by: merkhet on July 16, 2015, 01:02:34 PM
I am dying to see how many shares GM has been able to buy back in the last quarter.
Title: Re: GM - General Motors
Post by: TwoCitiesCapital on July 16, 2015, 01:04:25 PM
I can't help but start to get bullish on GM when i see silly headlines & logic like this!:

"General Motors: Cheap Valuation, Sizable Dividend ‘Largely Irrelevant’"

http://blogs.barrons.com/stockstowatchtoday/2015/07/16/general-motors-cheap-valuation-sizable-dividend-largely-irrelevant/?mod=yahoobarrons&ru=yahoo

I tend to agree. The pessimism seems to be building with China headlines. I came across an article trying to pin the selloff:

"The weakness, attributable to general market malaise, fears over slower growth in China and uncertainty over the sustainability of near-record U.S. auto sales"

I scanned the Barclay's downgrade today and found the analysis somewhat laughable. Maintaining above consensus EPS but downgrading shares? It actually reinforced the fact that returning foreign ops (ex-China) to breakeven will be far more impactful than a decline in China JV income.

Would you guys say the car industry as a whole is undervalued?

I mean, I already own shares in Fiat and in HYUD (and Kia via HYUD). GM certainly looks cheap, but I'm hesitant to add another auto manufacturer in a known-cyclical industry several years into a sales upswing...it seems like many of the operators in the industry are "cheap" so what is making it that way? Is it simply a bunch of idiosyncratic factors holding down the valuations of each individual company or are we over-estimating the value to be found in some, or all, of them?
Title: Re: GM - General Motors
Post by: valuedontlie on July 16, 2015, 01:30:48 PM
I can't help but start to get bullish on GM when i see silly headlines & logic like this!:

"General Motors: Cheap Valuation, Sizable Dividend ‘Largely Irrelevant’"

http://blogs.barrons.com/stockstowatchtoday/2015/07/16/general-motors-cheap-valuation-sizable-dividend-largely-irrelevant/?mod=yahoobarrons&ru=yahoo

I tend to agree. The pessimism seems to be building with China headlines. I came across an article trying to pin the selloff:

"The weakness, attributable to general market malaise, fears over slower growth in China and uncertainty over the sustainability of near-record U.S. auto sales"

I scanned the Barclay's downgrade today and found the analysis somewhat laughable. Maintaining above consensus EPS but downgrading shares? It actually reinforced the fact that returning foreign ops (ex-China) to breakeven will be far more impactful than a decline in China JV income.

Would you guys say the car industry as a whole is undervalued?

I mean, I already own shares in Fiat and in HYUD (and Kia via HYUD). GM certainly looks cheap, but I'm hesitant to add another auto manufacturer in a known-cyclical industry several years into a sales upswing...it seems like many of the operators in the industry are "cheap" so what is making it that way? Is it simply a bunch of idiosyncratic factors holding down the valuations of each individual company or are we over-estimating the value to be found in some, or all, of them?

The best values (GM and Fiat in my opinion) seem to have some execution aspect to their story. There are more than a handful of global auto players that don't seem as "cheap" such as Toyota, Honda, Nissan, Suzuki, Mitsubishi, etc.
Title: Re: GM - General Motors
Post by: gokou3 on July 16, 2015, 01:33:58 PM
OK, so I am not the only one who thinks GM is cheap at $30.xx.  If my memory serves, GM got $2B of dividends from its China JV last year.  A meaningful sum but even if it gets halved due to sales weakness, the reduced overall earning yield is still very high. 

Not to mention European sales are picking up.  I think we can see European sales trends following the US (i.e. large negative shock in car sales during financial crisis, cars got old and trends reverse)
http://seekingalpha.com/news/2632235-opel-june-european-car-registrations-plus-7_6-percent

Tipped into GM-WTB today.  :)

Title: Re: GM - General Motors
Post by: tylerdurden on July 17, 2015, 09:10:19 AM
I agree with the general sentiment here. Barclays quote from the analyst was a shocker to me as well. If the valuation is not the driver of your recommendation, what is it then? Unbelievable to me, seeing him to admit that openly... Anyways, china obviously scared the ...t out of some analysts including GS and Barclays and some investors of course. China seems slowing that's correct but I would not project just one month data to a much longer period of time. Even when the stock market was booming this year, the auto sales was challenged there so I don't think that's even related to the stock market meltdown. It's  normal to see fluctuations in any industry/region to me. China should still continue to grow solidly in my view with all those people that need cars to get cheap/safe transporation on a daily basis. On top of that, don't think oil/gas prices are going up anytime soon which is a global tailwind for autos. EU seems recovering. Raw materials going down. GM is supposed to get more efficient with less number of platforms that will be used for manufacturing. As you can tell, I still believe, GM can handle a china slowdown fine. To Merkhet's point, I hope they will even get more aggressive w/ buybacks, as long as they keep enough liquidity for ops and coming legal fines for the recall. If that happens these analyst might regret that they downgraded GM on "irrelevant factors such as valuation" :-)
Title: Re: GM - General Motors
Post by: RadMan24 on July 17, 2015, 06:13:10 PM
Raw materials are very cheap, thanks to China. But GM is trying to reinvest and take back its previous prowess it once had. The company has a great CEO to get the job done, and there are risks in the auto industry, but that's why they have such a huge cash pile. China domestic auto makers have been doing a lot better this year, as prices decline and take back share from foreign makers. But long-term, China will be a very profitable business for GM.

If Europe bounces back, that removes $1-$2 billion a year in losses out of the income statement, and the U.S. auto industry has been at so called "near record levels" for some time, but its not like everyone in rich or middle class neighborhoods own a brand spanking new car, the economy is bouncing back and people are replacing their junk beaters. If people didn't maintain or keep up with their vehicles during the last recession..of course those vehicles are going to get expensive with repairs and buying a new or used car is just way more economical and affordable. Analysts can worry all they like about when the next down turn happens, I just think they all believe it will be like 08 and 09 again, they seem to have labeled the "trough" of the industry with "bankruptcy" Sure that can happen, but GM is way more financially sound compared to then and should be able to whether a storm like that.
Title: Re: GM - General Motors
Post by: smd123 on July 17, 2015, 10:33:01 PM
The valuation puzzles me. GM took a charge of $2.5B for recalls last year. Its equity income from China in total was $2B.

If one assumes normalized rate of recalls, GM automotive earns the following (approximately):

Revenues: $150B
Operating Income: $8-9B
Net Income: $6B
Depreciation and CapEx are each ~ $7B
Owner's Earnings ~ $6B, or $3.85 per share

MV: $50B
Automotive Cash: $20B
Automotive Debt: $9B (not considering GM financial here)

Ex of cash, the automotive business is selling at 6 times the cash flow. This is not assigning any value to GM financial yet.

What am I missing?
Title: Re: GM - General Motors
Post by: Jurgis on July 18, 2015, 10:44:37 AM
What am I missing?

I'm not interested in GM at all, so take the following with grain of salt:

GM is a highly cyclical company with pretty much no moat and heavy competition on a 6th year of economic expansion.
You might be paying the low multiple on cycle-top results.

But then others argue that it is indeed very cheap. :)

Good luck
Title: Re: GM - General Motors
Post by: vinod1 on July 18, 2015, 12:58:43 PM
What am I missing?

I'm not interested in GM at all, so take the following with grain of salt:

GM is a highly cyclical company with pretty much no moat and heavy competition on a 6th year of economic expansion.
You might be paying the low multiple on cycle-top results.

But then others argue that it is indeed very cheap. :)

Good luck

+1

They need the $20 billion in cash as much as they need steel to make cars. So you should not be deducting them in your calculation of EV. So not dead cheap, but it is modestly cheap.

I have a small amount in calls.

Vinod
Title: Re: GM - General Motors
Post by: RadMan24 on July 18, 2015, 06:55:18 PM
The valuation puzzles me. GM took a charge of $2.5B for recalls last year. Its equity income from China in total was $2B.

If one assumes normalized rate of recalls, GM automotive earns the following (approximately):

Revenues: $150B
Operating Income: $8-9B
Net Income: $6B
Depreciation and CapEx are each ~ $7B
Owner's Earnings ~ $6B, or $3.85 per share

MV: $50B
Automotive Cash: $20B
Automotive Debt: $9B (not considering GM financial here)

Ex of cash, the automotive business is selling at 6 times the cash flow. This is not assigning any value to GM financial yet.

What am I missing?

GM financial could become very profitable, which would add additional downside protection to the "cyclical" aspect of this industry. Your estimates include Europe losses I'm assuming, but those likely won't continue, but still...nothing wrong with more cautionary projections. It's a matter of taste, Munger firmly believes GM is doomed to fail (all three less they merge and increases their odds of survival). Others think its got some life before then, like Welsch. 
Title: Re: GM - General Motors
Post by: tylerdurden on July 18, 2015, 11:16:04 PM
Cyclical ok but which market, region, country? These are global companies. I don't think anyone can argue that we are in the same cycle in every continent/country at the same time. There is some diversification benefit to these auto companies in terms of their global exposures. I don't think S America or EU is at the same cycle with US for example. China might be still feeding the industry for a very long time to come with millions of people needing safe/reliable cars every year. If you believe China will meltdown drastically there are zillions of other companies/industries who are doomed as well I think. Anyways, my view is that writing off the autos by saying they operate in a highly cyclical, low rate of return industry is too simplistic point of view. I seriously think after going through these bankruptcies the auto cos have better understanding of what works and what not in the long term and that would also show in their long term results as well. If you don't think this way, it is better for you to skip this name of course...
Title: Re: GM - General Motors
Post by: smd123 on July 19, 2015, 08:56:37 AM
The valuation puzzles me. GM took a charge of $2.5B for recalls last year. Its equity income from China in total was $2B.

If one assumes normalized rate of recalls, GM automotive earns the following (approximately):

Revenues: $150B
Operating Income: $8-9B
Net Income: $6B
Depreciation and CapEx are each ~ $7B
Owner's Earnings ~ $6B, or $3.85 per share

MV: $50B
Automotive Cash: $20B
Automotive Debt: $9B (not considering GM financial here)

Ex of cash, the automotive business is selling at 6 times the cash flow. This is not assigning any value to GM financial yet.

What am I missing?

GM financial could become very profitable, which would add additional downside protection to the "cyclical" aspect of this industry. Your estimates include Europe losses I'm assuming, but those likely won't continue, but still...nothing wrong with more cautionary projections.

Yes, in the above scenario*
- $1.2b loss assumed for Europe
- reduced equity income from China ($1.5b instead of $2b)
- not considering any value assigned to GM financial
- not including any benefit due to $34b of deferred tax assets to GM

The question is whether the above provides a sufficient margin of safety.


* one could also add $10-12b of pensions to debt, even though GM has no funding requirements for the next few years. Despite that, the above question stands.
Title: Re: GM - General Motors
Post by: Mephistopheles on July 20, 2015, 07:19:49 PM

- not including any benefit due to $34b of deferred tax assets to GM


The DTA is one of the reasons I own this as well. It's currently more than $20/share of value. Let's give the above mentioned $3.85 a measly 8x multiple, that gets you the current stock price. If you only add the DTA, it's a 67% return. Of course, it doesn't include the time needed to get there, but nevertheless it looks like an incredible value to me.
Title: Re: GM - General Motors
Post by: LowIQinvestor on July 22, 2015, 07:39:32 AM
Can someone point me towards the DTA value in an SEC filing? I'm digging around for it...

Tomorrow should be interesting for GM. I just bought some.
Title: Re: GM - General Motors
Post by: RadMan24 on July 22, 2015, 08:51:55 AM
Page 118 of annual report or note 18 section Deferred Income Tax Assets and Liabilities. just Cont F on Sec's website in the 2014 10-K will bring up the section. You will see a list of deferred tax assets, totalling $34 Billion. $14B of which are NOLs.
Title: Re: GM - General Motors
Post by: LowIQinvestor on July 22, 2015, 09:38:41 AM
Thanks Radman,

I'm about to listen to the Autonation conference call but I think auto demand is still growing:

 "In the second quarter of 2015, AutoNation's retail new vehicle unit sales increased 6% overall and 4% on a same store basis, while retail used vehicle unit sales increased 9% overall and 7% on a same store basis."

-----Domestic revenue grew 9.9% (The Domestic segment is comprised of stores that sell vehicles manufactured by General Motors, Ford, and FCA US (formerly Chrysler))
Title: Re: GM - General Motors
Post by: LowIQinvestor on July 23, 2015, 05:51:27 AM
http://media.gm.com/content/dam/Media/gmcom/investor/2015/jul/GM-2015-Q2-Press-Release.pdf

GM is still cheap!
Title: Re: GM - General Motors
Post by: racemize on July 23, 2015, 05:55:23 AM
Quote
Year-to-date through July 21, GM has returned more than $3.1 billion of cash to
shareholders through share repurchases of $2.1 billion and dividends of $1.1 billion.
Title: Re: GM - General Motors
Post by: merkhet on July 23, 2015, 06:07:10 AM
Quote
Year-to-date through July 21, GM has returned more than $3.1 billion of cash to
shareholders through share repurchases of $2.1 billion and dividends of $1.1 billion.

I'm actually moderately disappointed that they haven't been more aggressive with the buyback. Other than that, though, things look good.
Title: Re: GM - General Motors
Post by: CorpRaider on July 23, 2015, 06:16:34 AM
Yeah they need to "lay the wood" to the buyback once they exit the earnings period, if the price doesn't jump on this report.
Title: Re: GM - General Motors
Post by: tylerdurden on July 23, 2015, 09:10:18 AM
Quote
Year-to-date through July 21, GM has returned more than $3.1 billion of cash to
shareholders through share repurchases of $2.1 billion and dividends of $1.1 billion.

I'm actually moderately disappointed that they haven't been more aggressive with the buyback. Other than that, though, things look good.

It does not frustrate me at all actually. $5B authorization is until end of 2016 so since March 9 buying back 2.1 out of 5 is aggressive enough to me considering that they will pay huge fine for the recalls and negotiating with the UAW for the labor contract at the moment. If everything goes well they might be done with $5B early 2016 and announce additional share repo program. They also said they used a 10b5-1 plan which enabled them to buyback shares during the blackout period until July 28th. I can't personally ask more from them considering all the complexities and unpredictabilities of running a global business like GM. Cash target is $20B according to the new shareholder return framework and Cash was $22.8B as of June 30. That's close enough with some extra cushion for unknowns. They have good balance between being aggressive and responsible.
Title: Re: GM - General Motors
Post by: RadMan24 on July 23, 2015, 09:54:55 AM
Quote
Year-to-date through July 21, GM has returned more than $3.1 billion of cash to
shareholders through share repurchases of $2.1 billion and dividends of $1.1 billion.

I'm actually moderately disappointed that they haven't been more aggressive with the buyback. Other than that, though, things look good.

It does not frustrate me at all actually. $5B authorization is until end of 2016 so since March 9 buying back 2.1 out of 5 is aggressive enough to me considering that they will pay huge fine for the recalls and negotiating with the UAW for the labor contract at the moment. If everything goes well they might be done with $5B early 2016 and announce additional share repo program. They also said they used a 10b5-1 plan which enabled them to buyback shares during the blackout period until July 28th. I can't personally ask more from them considering all the complexities and unpredictabilities of running a global business like GM. Cash target is $20B according to the new shareholder return framework and Cash was $22.8B as of June 30. That's close enough with some extra cushion for unknowns. They have good balance between being aggressive and responsible.

Pretty much spot on with that. Even the 4-5% "pop", the company is still at a compelling valuation, so buybacks should be accretive.
Title: Re: GM - General Motors
Post by: LowIQinvestor on July 23, 2015, 10:56:46 AM
Thought for sure the stock would be up much more than 4%. I just bought more today.

IF GM were valued in line with Ford, it would be between a $36-$40 stock  Longer term I don't see why GM couldn't trade around 11 times 2016 earnings estimates. $55 a share.

Title: Re: GM - General Motors
Post by: gokou3 on July 23, 2015, 11:19:03 AM
Excellent results and guidance.  Very excited to see they achieved EBIT break-even in Europe - EU sales should only improve from here just like US has had in the past few years due to pent-up demand and refreshed line-up.  I would still be watching China closely though.

Just doubled my small position in GM-WTB today.  Got to a half position now, will add again if prices fall back again.

Title: Re: GM - General Motors
Post by: CorpRaider on July 23, 2015, 11:30:50 AM
Agreed, seems real cheap to $40ish. If they start making money in Europe and dollar eases off, woah nelly.
Title: Re: GM - General Motors
Post by: bigspydee on July 23, 2015, 12:33:41 PM
Question, GM bought back 57.6 million shares with 2.1 billion. It should have reduced their outstanding share count from 1.61 billion to 1.55 billion. This would have made their eps to be .70 instead of 0.67 am I missing anything here? Are they counting it as treasury stock ?
Title: Re: GM - General Motors
Post by: alexbossert on July 23, 2015, 01:36:59 PM
GM has 1,583,997,449 shares outstanding as of July 16th 2015, per the 2nd quarter 10Q. In the press release, EPS figures will be given based on average shares outstanding during the period not period end shares outstanding. Lets hope they continue to repurchase as many shares as they can at these prices. At the end of the quarter GM had $22.8 billion in cash, $2.8 billion above their target cash level of $20 billion. If you go out 2-3 years the share count could end up being much lower than today.

Alex
Title: Re: GM - General Motors
Post by: LowIQinvestor on July 24, 2015, 07:09:55 AM
General Motors stock price target raised to $45 from $40 at J.P. Morgan

"Breakout 2Q Provides Strong Evidence GM Is On
Track to Achieve Aggressive 2016 Targets; Reiterate
Overweight & Raise PT"
Title: Re: GM - General Motors
Post by: alexbossert on July 28, 2015, 11:36:57 AM
I wrote an update on GM for my own notes and I thought I'd share it with the board:

At $30 GM has a market cap of $47.5 billion. GM also has net auto cash of $13.6 billion. The US pension is currently underfunded by $10.5 billion (but they have no funding requirements going forward) and that goes to zero if interest rates rise by 96 basis points which would result in an EV of $33.9 billion. But since that hasn’t happened yet, this will be treated as debt. Resulting in an EV of $44.4 billion.

At this price, we are getting a business that is producing FCF of $10.8 billion a year when onetime expenses such as impairment and recall costs are excluded. That comes from taking 2015 1H net income of $2,062M adding back GAAP taxes $1,106M, one-time items of $1,657m, $600m restructuring, and $750m in additional recall expenses. For the year, capex should exceed deprecation by $1,500m.

The enterprise value is $44.4 billion against $10.8 billion in annual FCF.

There are some pretty substantial tailwinds that aren’t being included here. GM Financial is a great business and is still taking market share after GM sold the old GM Financial during the financial crisis. The largest refresh of GM vehicles in their history will almost certainly help pricing, market share and margins in the next few years. GME is continually moving towards breakeven and has made substantial progress (achieving breakeven EBIT adjusted for the first time since 1999 in Q2 2015). Management is calling for GME to hit breakeven for all 2016. GME just achieving breakeven would add $568m to annual earnings.  Furthermore, GM South America has a lot of room for improvement and a return to breakeven would add $716m to annual earnings. And finally the majority of the auto markets around the world are far below trend – Europe, Russia, South America etc. Improvement in these markets would benefit GM substantially. The international opportunities are huge with estimates of worldwide total vehicle sales of 130 million by 2030 vs. 80 million today.

These calculations don’t include a 1% rise in interest rates which would eliminate the pension underfunding in the US.

GM has a market cap of $47.5 billion at a $30 stock price. Cash and securities net of the US pension underfunding and debt is $3.1 billion, resulting in an EV of $44.4 billion. At 10x earnings the finance arm is worth over $10 billion. Thus the auto business is selling for $34.4 billion and has FCF of $9.8 billion per year or 3.5x FCF. I believe GM is worth $60-$70 per share without assuming any benefit to overseas markets improving such as Europe or South America, the pension liability decreasing, the finance arm continuing to improve, continued share buybacks, the significant volume of pent up demand in North America etc.

At a $60 stock price, the class B warrants are worth $42 per share vs. a current market price of $14.50.
Title: Re: GM - General Motors
Post by: RadMan24 on July 28, 2015, 12:20:37 PM
Thanks Alex, I wrote a similar argument on seekingalpha last week, I know there are several on VIC as well with similar themes. http://seekingalpha.com/article/3348755-general-motors-a-compelling-valuation-with-an-even-more-compelling-upside

I will say that the enterprise value is one of debate. For instance, GM plans on keeping $20 billion in cash to withstand a recession, which they assume would last 2 years. Deducting that from the EV in a highly cyclical industry gives you a slightly more "cheaper" valuation that does not give the inevitable downturn justice. Even if you lower the stock price target to around $45...B warrants still offer 90% upside in 4 years. Of course, the common stock offers a strong yield as well and the company is buying back shares.

In calculating the company's EV, I excluded the pension liability, largely due to the company's 14B in NOLs. Either way you value the company, it all comes down to how you view the company's new cost structure, capital allocation, and ability to remain profitable in the next 5 to 10+ years. GM Financial is doing very well and is a huge focus of the company right now. They have done a great job building that business up thus far, and management's goal of doubling financial's income by 2018 looks more and more likely (despite level earnings 14 to 15)
Title: Re: GM - General Motors
Post by: fareastwarriors on July 28, 2015, 01:12:15 PM
General Motors: on the Buffett table

http://www.ft.com/intl/cms/s/3/821cd484-3541-11e5-b05b-b01debd57852.html#axzz3h1Z1GWN5 (http://www.ft.com/intl/cms/s/3/821cd484-3541-11e5-b05b-b01debd57852.html#axzz3h1Z1GWN5)



General Motors might have been better off staying private. And perhaps Warren Buffett is the man to return it to its optimal state, away from the public markets that seem to have misunderstood the automaker. GM was only relisted in late 2010 after a stint in the hands of the US government, which rescued it during the financial crisis. Uncle Sam sold off the last of his stake in late 2013. Yet today even the revitalised GM trades below its IPO price of $33.


Earlier this year, a group of activist investors, frustrated by GM’s share price performance, demanded that the company become more aggressive in returning cash to shareholders. GM ultimately settled with them, agreeing to buy back $5bn in shares, increase its dividend and limit its cash balance to $20bn. But the pledges have done little for its shares. Its enterprise value to cash flow multiple is a modest 3 times.

In its recent second-quarter earnings, GM announced a record North American profit of nearly $3bn and a strong operating margin of 10.5 per cent. The performance was driven by high-margin truck and SUV sales. Ford second-quarter results, announced on Tuesday, echoed the strong North American market. Still, shares for both have lagged behind the US market.

In the wake of the activism earlier this year, Mr Buffett expressed concern about GM kowtowing to hedge funds looking for a short-term pop. Berkshire Hathaway owns about 2.5 per cent of the company.

An outright purchase of GM would allow Mr Buffett to achieve a series of objectives. First, with GM’s market capitalisation of $50bn he could put an immense amount of capital to work. Second, GM would fit with his preference for industrial, capital-intensive businesses such as his railroad and power utility units.

Those bearish on GM point to peaking profits and uncertainty in China. But a valuation discount and an investing horizon lasting decades suggest an opportunity for Mr Buffett.


Title: Re: GM - General Motors
Post by: RadMan24 on July 28, 2015, 05:05:59 PM
General Motors: on the Buffett table

http://www.ft.com/intl/cms/s/3/821cd484-3541-11e5-b05b-b01debd57852.html#axzz3h1Z1GWN5 (http://www.ft.com/intl/cms/s/3/821cd484-3541-11e5-b05b-b01debd57852.html#axzz3h1Z1GWN5)



General Motors might have been better off staying private. And perhaps Warren Buffett is the man to return it to its optimal state, away from the public markets that seem to have misunderstood the automaker. GM was only relisted in late 2010 after a stint in the hands of the US government, which rescued it during the financial crisis. Uncle Sam sold off the last of his stake in late 2013. Yet today even the revitalised GM trades below its IPO price of $33.


Earlier this year, a group of activist investors, frustrated by GM’s share price performance, demanded that the company become more aggressive in returning cash to shareholders. GM ultimately settled with them, agreeing to buy back $5bn in shares, increase its dividend and limit its cash balance to $20bn. But the pledges have done little for its shares. Its enterprise value to cash flow multiple is a modest 3 times.

In its recent second-quarter earnings, GM announced a record North American profit of nearly $3bn and a strong operating margin of 10.5 per cent. The performance was driven by high-margin truck and SUV sales. Ford second-quarter results, announced on Tuesday, echoed the strong North American market. Still, shares for both have lagged behind the US market.

In the wake of the activism earlier this year, Mr Buffett expressed concern about GM kowtowing to hedge funds looking for a short-term pop. Berkshire Hathaway owns about 2.5 per cent of the company.

An outright purchase of GM would allow Mr Buffett to achieve a series of objectives. First, with GM’s market capitalisation of $50bn he could put an immense amount of capital to work. Second, GM would fit with his preference for industrial, capital-intensive businesses such as his railroad and power utility units.

Those bearish on GM point to peaking profits and uncertainty in China. But a valuation discount and an investing horizon lasting decades suggest an opportunity for Mr Buffett.

I'll have to read that article tomorrow in the paper, but I know that Charlie Munger as recently as 2014 said he would never buy GM.  If that somehow changes, it would be extremely interesting to say the least.
Title: Re: GM - General Motors
Post by: gokou3 on July 28, 2015, 05:19:30 PM
General Motors: on the Buffett table

http://www.ft.com/intl/cms/s/3/821cd484-3541-11e5-b05b-b01debd57852.html#axzz3h1Z1GWN5 (http://www.ft.com/intl/cms/s/3/821cd484-3541-11e5-b05b-b01debd57852.html#axzz3h1Z1GWN5)



General Motors might have been better off staying private. And perhaps Warren Buffett is the man to return it to its optimal state, away from the public markets that seem to have misunderstood the automaker. GM was only relisted in late 2010 after a stint in the hands of the US government, which rescued it during the financial crisis. Uncle Sam sold off the last of his stake in late 2013. Yet today even the revitalised GM trades below its IPO price of $33.


Earlier this year, a group of activist investors, frustrated by GM’s share price performance, demanded that the company become more aggressive in returning cash to shareholders. GM ultimately settled with them, agreeing to buy back $5bn in shares, increase its dividend and limit its cash balance to $20bn. But the pledges have done little for its shares. Its enterprise value to cash flow multiple is a modest 3 times.

In its recent second-quarter earnings, GM announced a record North American profit of nearly $3bn and a strong operating margin of 10.5 per cent. The performance was driven by high-margin truck and SUV sales. Ford second-quarter results, announced on Tuesday, echoed the strong North American market. Still, shares for both have lagged behind the US market.

In the wake of the activism earlier this year, Mr Buffett expressed concern about GM kowtowing to hedge funds looking for a short-term pop. Berkshire Hathaway owns about 2.5 per cent of the company.

An outright purchase of GM would allow Mr Buffett to achieve a series of objectives. First, with GM’s market capitalisation of $50bn he could put an immense amount of capital to work. Second, GM would fit with his preference for industrial, capital-intensive businesses such as his railroad and power utility units.

Those bearish on GM point to peaking profits and uncertainty in China. But a valuation discount and an investing horizon lasting decades suggest an opportunity for Mr Buffett.

I'll have to read that article tomorrow in the paper, but I know that Charlie Munger as recently as 2014 said he would never buy GM.  If that somehow changes, it would be extremely interesting to say the least.

A totally speculative article with no substance.  One commentor at the end sums it best:

"I really don't belive Buffett would buy GM. His committment in capital intensive businesses is on highly regulated sectors (utility) or in railroads, which is a oligopolistic, slow innovation and high entry barrier sector. GM doesn't fit at all"

I think it has been discussed in this thread that GM is a Weschler position.  I don't doubt Weschler would increase his position though given the recent price weakness and yet good earning results.  We will know in the next 13F.
Title: Re: GM - General Motors
Post by: peter1234 on July 29, 2015, 12:02:35 AM
"I really don't belive Buffett would buy GM. His committment in capital intensive businesses is on highly regulated sectors (utility) or in railroads, which is a oligopolistic, slow innovation and high entry barrier sector. GM doesn't fit at all"

+1
Title: Re: GM - General Motors
Post by: cmlber on July 29, 2015, 03:39:18 AM
"I really don't belive Buffett would buy GM. His committment in capital intensive businesses is on highly regulated sectors (utility) or in railroads, which is a oligopolistic, slow innovation and high entry barrier sector. GM doesn't fit at all"

+1

I agree, that comment about Buffett loving capital intensive businesses was laughable.  He likes capital intensive businesses that can deploy the capital at a high ROIC, clearly not GM.  With that said, Buffett could create a ton of value with a lot of capital buying GM and FCAU and capturing the $4.5b/yr in synergies Marchionne talked about.  At that point it would be more of a "moat" type business with that scale advantage, and they'd probably earn a respectable ROIC, especially if Sergio agreed to stay on beyond 2018 as CEO.  It's incredibly unlikely, but it's possible... and I would bet Sergio has at least suggested that possibility to Berkshire.
Title: Re: GM - General Motors
Post by: Kiltacular on July 29, 2015, 10:22:20 AM
"I really don't belive Buffett would buy GM. His committment in capital intensive businesses is on highly regulated sectors (utility) or in railroads, which is a oligopolistic, slow innovation and high entry barrier sector. GM doesn't fit at all"

+1

I agree, that comment about Buffett loving capital intensive businesses was laughable.  He likes capital intensive businesses that can deploy the capital at a high ROIC, clearly not GM.  With that said, Buffett could create a ton of value with a lot of capital buying GM and FCAU and capturing the $4.5b/yr in synergies Marchionne talked about.  At that point it would be more of a "moat" type business with that scale advantage, and they'd probably earn a respectable ROIC, especially if Sergio agreed to stay on beyond 2018 as CEO.  It's incredibly unlikely, but it's possible... and I would bet Sergio has at least suggested that possibility to Berkshire.

I don't think he'd want to be involved with the UAW. The headlines are too easy to write during contract negotiations.
Title: Re: GM - General Motors
Post by: Picasso on July 29, 2015, 10:49:47 AM
I think of Buffett's involvement with Salomon Brothers and how stressful it was to handle the potential hit to his reputation.  I just don't see that kind of acquisition happening with GM.

Maybe 3G finds a way to generate big returns in GM (probably not hard) and partners up on a limited basis with Berkshire.  But 3G focuses on quality businesses that shoot off a lot of free cash flow.  So you won't entice 3G to do the dirty work on GM either.

GM looks really tricky to properly value.  You have all these potential upsides such Europe, Latin America, smaller underfunded pension liabilities from rising rates, among others.  But those upsides just never materialize.

The part that I can't understand is the pension liability.  It's practically all offset by the cash GM holds.  Supposedly higher rates will drop that liability but I don't see how.  I mean if they're underfunded during a massive secular bull market where rates went from 15% to under 2%, how are they supposed to generate higher returns than historically if rates go from 2% to 5 or 6%?  Valuations will come down on their equity heavy portfolio so I don't know exactly how that's going to work out.

The people in charge of these pension funds should really be ashamed of themselves.

Title: Re: GM - General Motors
Post by: hyten1 on July 29, 2015, 11:08:48 AM
for me i am always amazed at Toyotas valuation and profitability. GM obviously is not on par with TM (but they are getting better), but this raises the question. Is the auto biz inherently shitty or is TM the exception or both? imagine GM gets anywhere near what TM can do... obviously this is all speculation of course.
Title: Re: GM - General Motors
Post by: TwoCitiesCapital on July 29, 2015, 12:07:17 PM
I think of Buffett's involvement with Salomon Brothers and how stressful it was to handle the potential hit to his reputation.  I just don't see that kind of acquisition happening with GM.

Maybe 3G finds a way to generate big returns in GM (probably not hard) and partners up on a limited basis with Berkshire.  But 3G focuses on quality businesses that shoot off a lot of free cash flow.  So you won't entice 3G to do the dirty work on GM either.

GM looks really tricky to properly value.  You have all these potential upsides such Europe, Latin America, smaller underfunded pension liabilities from rising rates, among others.  But those upsides just never materialize.

The part that I can't understand is the pension liability.  It's practically all offset by the cash GM holds.  Supposedly higher rates will drop that liability but I don't see how.  I mean if they're underfunded during a massive secular bull market where rates went from 15% to under 2%, how are they supposed to generate higher returns than historically if rates go from 2% to 5 or 6%?  Valuations will come down on their equity heavy portfolio so I don't know exactly how that's going to work out.

The people in charge of these pension funds should really be ashamed of themselves.

The massive secular bull market in rates is likely why they're underfunded. As rates drop, they're rate of expected return going forward for all years into the future also drops. Think of it like this:

Bond yields start at 5%. There are two scenarios:

1) Bond bull market:
Yields start off at 5% in the first year and drop to 2.5% that year. Stay at 2.5% for next 49 years. FV of $1 is roughly $5.

2) Bond market stays flat
Yields stay at 5% for the whole 50 year horizon. FV of $1 is roughly $11.50.

In the first scenario you got a very quick 50% gain, which is great! The problem is that all future returns are compounding at 1/2 the return from that point on. In long-term time frames, like pension funds have, you're actually better off if bond prices are falling because it increases the value of the future returns which will compound over the next 50-100.
Title: Re: GM - General Motors
Post by: merkhet on July 29, 2015, 12:24:24 PM
I think of Buffett's involvement with Salomon Brothers and how stressful it was to handle the potential hit to his reputation.  I just don't see that kind of acquisition happening with GM.

Maybe 3G finds a way to generate big returns in GM (probably not hard) and partners up on a limited basis with Berkshire.  But 3G focuses on quality businesses that shoot off a lot of free cash flow.  So you won't entice 3G to do the dirty work on GM either.

GM looks really tricky to properly value.  You have all these potential upsides such Europe, Latin America, smaller underfunded pension liabilities from rising rates, among others.  But those upsides just never materialize.

The part that I can't understand is the pension liability.  It's practically all offset by the cash GM holds.  Supposedly higher rates will drop that liability but I don't see how.  I mean if they're underfunded during a massive secular bull market where rates went from 15% to under 2%, how are they supposed to generate higher returns than historically if rates go from 2% to 5 or 6%?  Valuations will come down on their equity heavy portfolio so I don't know exactly how that's going to work out.

The people in charge of these pension funds should really be ashamed of themselves.

The massive secular bull market in rates is likely why they're underfunded. As rates drop, they're rate of expected return going forward for all years into the future also drops. Think of it like this:

Bond yields start at 5%. There are two scenarios:

1) Bond bull market:
Yields start off at 5% in the first year and drop to 2.5% that year. Stay at 2.5% for next 49 years. FV of $1 is roughly $5.

2) Bond market stays flat
Yields stay at 5% for the whole 50 year horizon. FV of $1 is roughly $11.50.

In the first scenario you got a very quick 50% gain, which is great! The problem is that all future returns are compounding at 1/2 the return from that point on. In long-term time frames, like pension funds have, you're actually better off if bond prices are falling because it increases the value of the future returns which will compound over the next 50-100.

+1, got to it before I could.

The secular bull market helps equities go up but it creates reinvestment problems for the section of their investment allocation that has to go back into bonds.
Title: Re: GM - General Motors
Post by: Picasso on July 29, 2015, 12:58:36 PM
Right, but GM isn't 100% invested in bonds.  In fact they are very heavily skewed into equities with close to no bond exposure.  So we would expect them to start investing in bonds once yields go up right?  Hard to know what the values on that equity portfolio will look like if they start that transition. 

So the question is, the equity market has done perfectly fine and so have most bond indices for a very long time.  Why is there that much of a shortfall still after such a long bull market in every single asset class?  I don't see how a protracted asset valuation reset during a rising rate period suddenly makes their pension a ton of money.  I understand if they held the bonds to maturity a rising yield curve would be great.  But they haven't done this and I see very few that do. 

I think Gundlach had made the comment where Chrysler decided not to buy 12-13% Treasury bonds in the 80's because of the risk.  There is obviously some theory behind portfolio management of these pensions but the logic doesn't make sense to me. 

Perhaps that creates another avenue for private equity with GM.  Apollo has some of their investments take a portion of the pension and invest in their funds.  It created a bit of a competitive advantage with something like AP Alternative with their fixed annuity business.
Title: Re: GM - General Motors
Post by: Picasso on July 29, 2015, 01:05:36 PM
By the way, before I get schooled on modern pension fund management, I just want to say that I understand how the reinvestment gets hurt when rates drop.  But these guys have over 80% of their pension in stocks that directly benefited from lower rates more than any constant 7% bond reinvestment could have provided.  They should be able to lock in a lot of those equity gains into bonds and get a high cash yield on the portfolio.  So the stocks double in value and yields are down a bit, but they can now buy twice as many bonds and the net yield is still higher. 

But they can't even do that.  And I'm expected to believe that when or if rates go up that they can time it well this time around.  I'm a bit skeptical.
Title: Re: GM - General Motors
Post by: Mephistopheles on July 29, 2015, 01:40:16 PM
I have a friend who audits a pension fund of a major company. He was just explaining to me the other day the absurd complexity, diversification, number of parties involved, and layers of fees of these pension funds. It was preposterous.

I may be off by a bit here, but in essence: The company has a pension fund management group, that allocates the money to an external fund management company, that allocates to a private equity fund of fund manager or public equity fund of fund manager, that each respectively allocate to individual PE funds or HF/mutual funds.

Each of these layers have auditors, administration funds, asset management advisers and other committees.

Basically the industry is a great big circle jerk. Everyone makes fees for doing nothing, so everyone is happy. And nobody wants to be caught carrying the hot potato if and when there is an issue with the regulators, so allocating is the best way to prevent it.

I suspect these fees, in addition to the lack of temperament of most investors, group think of investment committees, and probably every other psychological phenomenon known to man are the reason for the under performance.

Edit: Oh and then they all hold regular meetings with 200pg slide shows giving an update of operations. These laughable slide shows consist basically of GDP, Home Prices, Unemployment, and most other useless economic indicators for the purposes of investment.

Social Psychology at its best.
Title: Re: GM - General Motors
Post by: cmlber on July 29, 2015, 03:07:02 PM
By the way, before I get schooled on modern pension fund management, I just want to say that I understand how the reinvestment gets hurt when rates drop.  But these guys have over 80% of their pension in stocks that directly benefited from lower rates more than any constant 7% bond reinvestment could have provided.  They should be able to lock in a lot of those equity gains into bonds and get a high cash yield on the portfolio.  So the stocks double in value and yields are down a bit, but they can now buy twice as many bonds and the net yield is still higher. 

But they can't even do that.  And I'm expected to believe that when or if rates go up that they can time it well this time around.  I'm a bit skeptical.

When rates go up the assumed return on assets goes up, and also the liability comes down (higher discount rate means the payments to retirees for the next 50 years are worth much less in present dollars, i.e. the liability comes down).  GM (and most companies with pensions) includes in the 10-K's a sensitivity analysis showing what would happen to the funded status with an X% move in interest rates, and I'm pretty sure Alex just used that figure to estimate what would happen to the pension with a rise in rates.
Title: Re: GM - General Motors
Post by: JPerez on July 29, 2015, 03:11:39 PM
Right, but GM isn't 100% invested in bonds.  In fact they are very heavily skewed into equities with close to no bond exposure.  So we would expect them to start investing in bonds once yields go up right?  Hard to know what the values on that equity portfolio will look like if they start that transition. 

So the question is, the equity market has done perfectly fine and so have most bond indices for a very long time.  Why is there that much of a shortfall still after such a long bull market in every single asset class?  I don't see how a protracted asset valuation reset during a rising rate period suddenly makes their pension a ton of money.  I understand if they held the bonds to maturity a rising yield curve would be great.  But they haven't done this and I see very few that do. 

I think Gundlach had made the comment where Chrysler decided not to buy 12-13% Treasury bonds in the 80's because of the risk.  There is obviously some theory behind portfolio management of these pensions but the logic doesn't make sense to me. 

Perhaps that creates another avenue for private equity with GM.  Apollo has some of their investments take a portion of the pension and invest in their funds.  It created a bit of a competitive advantage with something like AP Alternative with their fixed annuity business.
According to the 10k for the US pension the split is 16% equities, 60% debt and 24% alternative. I wouldn't call it heavily skewed into equities
Title: Re: GM - General Motors
Post by: Picasso on July 29, 2015, 04:02:39 PM
Right, but GM isn't 100% invested in bonds.  In fact they are very heavily skewed into equities with close to no bond exposure.  So we would expect them to start investing in bonds once yields go up right?  Hard to know what the values on that equity portfolio will look like if they start that transition. 

So the question is, the equity market has done perfectly fine and so have most bond indices for a very long time.  Why is there that much of a shortfall still after such a long bull market in every single asset class?  I don't see how a protracted asset valuation reset during a rising rate period suddenly makes their pension a ton of money.  I understand if they held the bonds to maturity a rising yield curve would be great.  But they haven't done this and I see very few that do. 

I think Gundlach had made the comment where Chrysler decided not to buy 12-13% Treasury bonds in the 80's because of the risk.  There is obviously some theory behind portfolio management of these pensions but the logic doesn't make sense to me. 

Perhaps that creates another avenue for private equity with GM.  Apollo has some of their investments take a portion of the pension and invest in their funds.  It created a bit of a competitive advantage with something like AP Alternative with their fixed annuity business.
According to the 10k for the US pension the split is 16% equities, 60% debt and 24% alternative. I wouldn't call it heavily skewed into equities

You're right, I'm an idiot.  I recall going through the pension a couple years back and thought it was about 80% non fixed-income but I was wrong.

I guess we'll see how that pension looks in a few years.
Title: Re: GM - General Motors
Post by: merkhet on July 29, 2015, 05:52:51 PM
Also, remember that pension liabilities are determined based on "expected returns" rather than "actual returns."

Pension accounting is really Alice in Wonderland...
Title: Re: GM - General Motors
Post by: RadMan24 on July 29, 2015, 08:09:47 PM
Also, remember that pension liabilities are determined based on "expected returns" rather than "actual returns."

Pension accounting is really Alice in Wonderland...

It's a risk, but GM has got time on its side. 60% is fixed income, 16% equities, then the rest are hedge funds, private equity (froth land) and real estate.

GM's returns have hovered around ~11%. Expected returns are ~6.5% Discount rate ~4.5%. Double check my math, but for the most part, with benefits of around $5.5 to $5.2B over the next few years, achieving a return of high single digits would be enough to prevent additional cash inflows and hope that rates begin to "normalize" a little bit to close the funding gap.
Title: Re: GM - General Motors
Post by: Arden on July 29, 2015, 10:40:37 PM
achieving a return of high single digits would be enough to prevent additional cash inflows and hope that rates begin to "normalize" a little bit to close the funding gap.

How could they possibly reach high single digits when rising rates will hurt at least 60% of their portfolio? Did they say the fixed income side is only very short term?
Title: Re: GM - General Motors
Post by: RadMan24 on July 30, 2015, 11:33:05 AM
Yea you're probably right, mid single rates are more likely. Either way, its something as an investor you are going to have to monitor going forward anyway. If returns drop off, expect greater cash contributions. If they remain modest, they'll have additional cash flow. DTA and NOLs will free up some cash to help mitigate these concerns. It's a manageable liability, in my opinion.
Title: Re: GM - General Motors
Post by: Arden on August 11, 2015, 02:52:24 PM
China auto sales fall to 17 Month low despite price cuts

http://bloom.bg/1Mhmoxn



Title: Re: GM - General Motors
Post by: TwoCitiesCapital on August 11, 2015, 08:57:39 PM
China auto sales fall to 17 Month low despite price cuts

http://bloom.bg/1Mhmoxn

Yuan devaluation sure isn't going to help imports....
Title: Re: GM - General Motors
Post by: Mephistopheles on August 15, 2015, 12:31:48 PM
Davids Tepper & Einhorn both increased their stakes significantly this past quarter. Largest equity position for Tepper and 5th largest for Einhorn.
Title: Re: GM - General Motors
Post by: RadMan24 on August 15, 2015, 07:05:28 PM
China auto sales fall to 17 Month low despite price cuts

http://bloom.bg/1Mhmoxn

Interesting then that GM increased profits due to increased sales mix of SUVs and crossovers. Gm's China business is very strong and way different than BMW, Mercedes, and VW who have been forced to lower prices.
Title: Re: GM - General Motors
Post by: Arden on August 16, 2015, 02:03:06 AM
China auto sales fall to 17 Month low despite price cuts

http://bloom.bg/1Mhmoxn

Interesting then that GM increased profits due to increased sales mix of SUVs and crossovers. Gm's China business is very strong and way different than BMW, Mercedes, and VW who have been forced to lower prices.

Are you suggesting GM didn't lower prices while others did? What are you basing this on?
Title: Re: GM - General Motors
Post by: merkhet on August 16, 2015, 06:24:29 AM
Read GM's latest conference call. They talk about changing the mix in China.
Title: Re: GM - General Motors
Post by: RadMan24 on August 16, 2015, 09:00:16 PM
China auto sales fall to 17 Month low despite price cuts

http://bloom.bg/1Mhmoxn

Interesting then that GM increased profits due to increased sales mix of SUVs and crossovers. Gm's China business is very strong and way different than BMW, Mercedes, and VW who have been forced to lower prices.

Are you suggesting GM didn't lower prices while others did? What are you basing this on?

I shouldn't have said "way different," but what I meant is, each company has different exposures to different segments. The true answer can be found by reading the company's 10-Qs, 10-Ks, sales releases, investor presentations, etc. I'm not into the whole CNBC argument on what China sells means for x and y and z. A random Bloomberg article and no specific GM information kinda shows a lack of intent to find the true answer, no offense. But if China is the next worry for GM stock, so be it. The company still spits out $3 in FCF.
Title: Re: GM - General Motors
Post by: dutchman on August 17, 2015, 08:05:12 AM
Guys, trying to decide whether to buy common or the warrants for a taxable account. 
Any advice on which is the better by right now ?  thank you.
Title: Re: GM - General Motors
Post by: tylerdurden on August 17, 2015, 09:49:33 AM
I also believe the China fears are overblown for GM. Of course the slowdown is going to have an impact on them in China too but having a local brand, introducing more popular SUVs and weighing towards smaller cities (Smaller for China only probably; major cities in western standards) and focusing on more efficiency/cost cuts would enable them to manage the slowdown well according to my view. People in major cities are paying huge fees for getting plates so with that type of demand I don't believe the auto sales in China will come to a sudden stop. It's a call for every investor of course but the stock price takes into account all sorts of major failures at the moment and I don't think that's the real picture...
Title: Re: GM - General Motors
Post by: muscleman on August 21, 2015, 07:32:46 AM
http://www.autotrader.com/cars-for-sale/vehicledetails.xhtml;jsessionid=F5EDC20F0F80F3AE814CF5F6057FA38F?LNX=DRMEDFBXDYNAMICRHR&searchRadius=0&listingId=403704993

Guys. We are looking to buy a muscle car. Is this typical for GM dealers to sell new cars so much lower below MSRP?
Title: Re: GM - General Motors
Post by: hyten1 on August 21, 2015, 07:46:40 AM
muscleman part of the reason is because the newly revamp next gen camaro is just around the corner  http://www.autoblog.com/2015/08/21/2016-chevy-camaro-pricing-official/
Title: Re: GM - General Motors
Post by: muscleman on August 21, 2015, 08:07:58 AM
muscleman part of the reason is because the newly revamp next gen camaro is just around the corner  http://www.autoblog.com/2015/08/21/2016-chevy-camaro-pricing-official/

http://www.autotrader.com/cars-for-sale/vehicledetails.xhtml?zip=98004&endYear=2016&modelCode1=MUST&sortBy=derivedpriceASC&showcaseOwnerId=71257&startYear=2015&makeCode1=FORD&searchRadius=25&showcaseListingId=407816483&mmt=%5BFORD%5BMUST%5B%5D%5D%5B%5D%5D&listingId=407085285&Log=0

Is this a muscle car price war? The new Mustang is also priced like this Camero.
Title: Re: GM - General Motors
Post by: fareastwarriors on August 21, 2015, 09:12:57 AM
My brother drives a Camaro (2012) and my friend drives a Mustang 2014. They both love it.
Title: Re: GM - General Motors
Post by: Mephistopheles on August 26, 2015, 08:37:24 AM
China has 113 motor vehicles per capita, up from 24 per capita 10 years ago. The U.S. has a bit over 800 per capita at the moment. I don't think a 1/3 cut in market cap of an already undervalued stock based on "China fears" is warranted, but hey that's just me.
Title: Re: GM - General Motors
Post by: muscleman on August 26, 2015, 08:40:14 AM
My brother drives a Camaro (2012) and my friend drives a Mustang 2014. They both love it.

We just bought a 2015 Mustang Coupe ecoboost with Auto transmission. 27990 MSRP. We got it for 21315 before tax with 6 year 0% interest 0 down payment.
This is the first time we bought a US car. Didn't know it is can be bought at such a discount before.  :) We only owned a number of European and Japanese cars before.
My wife loves it.
Title: Re: GM - General Motors
Post by: LowIQinvestor on August 26, 2015, 09:55:57 AM
Just bought some GM common @ $27.

6 PE on 2015 earnings and 4.9% dividend.

Even assuming a continued disaster in China it is hard to ignore. Cheap oil & low interest rates here to stay.

Anyone know what Berkshire's cost basis is (roughly)?
Title: Re: GM - General Motors
Post by: dutchman on August 26, 2015, 10:34:18 AM
Why arent more of you going gaga over gm ?!!  Isnt this crazy cheap right now ?  :)
Title: Re: GM - General Motors
Post by: bigbluffzinc on August 26, 2015, 10:37:37 AM
I'm fully invested or I'd be adding..
Title: Re: GM - General Motors
Post by: hyten1 on August 26, 2015, 10:38:55 AM
i would go gaga if i didn't already have a full position in GM, instead of going gaga i am going !@#$%

Why arent more of you going gaga over gm ?!!  Isnt this crazy cheap right now ?  :)
Title: Re: GM - General Motors
Post by: Mephistopheles on August 26, 2015, 11:12:07 AM
GM is selling for less than 10 p/e right now.

Oops, I mean 10x China earnings. You're paying less than 10x last year's China earnings...
Title: Re: GM - General Motors
Post by: vinod1 on August 26, 2015, 12:19:41 PM
Added to GM position.

Vinod
Title: Re: GM - General Motors
Post by: rohitc99 on August 26, 2015, 12:37:14 PM
Cash on book = 16.8 Bn (net of debt)
DTA = 35 Bn (means they will not be paying taxes for 2-3 years at a minimum ?)
Pension and OPEB = 28 Bn (assuming interest rates remain at current rates)

GMNA could earn upto 10 bn EBIT. assuming everything else is zero, company is selling for around 4 times cash flow for NA

what am i missing ? is the situation so dire ?
Title: Re: GM - General Motors
Post by: compounding on August 27, 2015, 03:42:26 AM
Cash on book = 16.8 Bn (net of debt)
DTA = 35 Bn (means they will not be paying taxes for 2-3 years at a minimum ?)
Pension and OPEB = 28 Bn (assuming interest rates remain at current rates)

GMNA could earn upto 10 bn EBIT. assuming everything else is zero, company is selling for around 4 times cash flow for NA

what am i missing ? is the situation so dire ?

They pay taxes now, although their cash tax rate is quite low. Regarding utilising the DTAs - they will be able to shield future earnings but it also depends on where they make money. I would imagine that e.g. GM's and FCAU's tax rates will come down if Europe continues to recover.

The pension liability is large but they do not have to make mandatoy contributions for ~five years. If you want to learn more about these issues I can recommend their "Behind the Charts"-presentation from June.

The situation, as far as I can tell, is dire because investors believe that the US market is at a cyclical high, and a few of these companies didn't do too well last time the cycle turned. In addition to that China is slowing down, which has been the big driver of growth for these mega OEMs. So if you believe those two points investing in GM is probably not the best idea since the earnings multiples will not be as low as you think if the E is really 0.5x of what they are reporting now. Also, the capital allocation track record has been far from stellar & they have a habit of incurring a lot of "one time" costs that erode profitability.

However, if you think that some of these issues are overblown or fixable, you might, as you point out, find the current price attractive.
Title: Re: GM - General Motors
Post by: Homestead31 on August 27, 2015, 05:23:25 AM
domestic fleet age is still 10 or 11 years, and Peter Lynch pointed out in one of his books 20 years ago, up cycles in autos last longer than anyone expects. 

I would also argue that investors need to re-think the range of appropriate multiples that are applied to auto cos - especially those who were able to clean up their cost structure through the BK process like GM.  This is obviously a cyclical industry, but GM is way better able to handle the down side of a cycle now then they were pre BK.  if memory serves pre BK they needed domestic vehicle sales around the ~14 million range to be profitable.  Now they estimate they can stay profitable with sales as low as 10M.  10M is right around the recession low level of sales.  if the company can stay profitable through all but the worst down turns, it deserves a higher multiple. 
Title: Re: GM - General Motors
Post by: Liberty on August 27, 2015, 06:32:06 AM
I'm a tourist in autos, but I hear about the age of the fleet a lot. That is getting old, but do you guys take into account that modern care are more durable than cars from a few decades ago?

I expect the age of the fleet to go down, but I wouldn't expect it to go down to what it was back when everything broke on your car past 5 years...
Title: Re: GM - General Motors
Post by: sswan11 on August 27, 2015, 08:19:43 AM
Not that I in any way agree with this:

ELL GENERAL MOTORS ON CHINA RISK: MORGAN STANLEY
S&P Capital IQ
2015-08-24
SELL GENERAL MOTORS ON CHINA RISK: MORGAN STANLEY Investors who are closely following their positions that have exposure to China shouldn't overlook the auto industry, according to a new report by Morgan Stanley analysts. Analyst Adam Jonas commented in a note on Monday that General Motors Company (NYSE: GM)'s earnings and cash flows are both "highly dependent" on China. In fact, earnings from the company's Chinese equity affiliates accounted for more than 32 percent of its net income for 2013 and 2014 combined and roughly half of its automotive cash flow. "Outside of Germany, you'll struggle to find another original equipment manufacturer with greater exposure to China than GM," Jonas argued in his note. Jonas said GM's exposure to China has worked "very much" in its favor in the past and represented a "steady and reliable" source of earnings growth and cash flow support. At its peak, GM's China operations was valued at $8 per GM share, but this is now changing. In recent months, GM has seen its sales slow "considerably" (-4.8 percent year-to-date) while overall sedan sales (in which GM has "outsized" exposure) have seen six consecutive months of decline. With that said, Jonas is now making changes to his medium- and long-term forecasts for GM's growth in China. The analyst is now assuming a forward one-year average total China passenger vehicle growth of 4 percent while GM will see 2 percent growth. This implies a 300 basis point loss of share over the next 10 years to a "still-healthy" level of 13.5 percent. Jonas is also assuming a drop in GM margins from a previously forecasted 11.7 percent pre-tax margin to 5.0 percent in 10 years. As such, the resulting 10-year growth rate forecast for GM in China now stands at negative 5.6 percent. Bottom line, the China slowdown is "not just a GM issue" and affects all auto makers. "Longer term, investors must consider the impact of China moving from a demand story to a supply story and the implications of exporting deflation to the rest of the world in the form of capacity and component supply," Jonas concluded. "These may be issues of earnings multiple rather than near-term earnings itself, but can equally impact near-term share performance." Morgan Stanley resumed coverage of General Motors with an Underweight rating and $27 price target.
Title: Re: GM - General Motors
Post by: Homestead31 on August 28, 2015, 07:33:36 AM
The MS analyst has a remarkable record of changing his forecasts to justify the current price of the stock. 

In my opinion - and I think most of us here at COBF would agree - regardless of what company you are talking about, that is the exact opposite approach that one should take when considering the real value of a company.
Title: Re: GM - General Motors
Post by: Homestead31 on August 30, 2015, 04:39:32 PM
Op-ed from the New York Times 2 days ago clowning the Morgan Stanley auto analyst:

http://www.nytimes.com/2015/08/29/opinion/joe-nocera-the-tesla-cheerleader.html?_r=0

article is mostly about how this guy is obsessed w/ Tesla, despite no earnings etc.  as was discussed previously on this tread in regards to GM, he seems to not care about earnings for some reason when he comes up with stock calls.

a good quote, "Just like the Internet stocks of yore, Tesla has its own Wall Street cheerleader: Adam Jonas, Morgan Stanley’s auto analyst. Jonas could not be less interested in mundane factors like earnings per share; indeed, he has had to lower his 2015 earnings estimates several times; he now predicts the company will lose $2.70 a share. But never mind: In the future that he envisions, Tesla will be the most important car company on earth."
Title: Re: GM - General Motors
Post by: Liberty on August 30, 2015, 07:31:55 PM
I like how the journalist thinks that losing money this year and being the most important car company in the world down the road are somehow mutually exclusive.

Tesla is building the biggest battery factory on Earth (which will significantly slash its battery costs), ramping up production at about 50%/year, working on two unreleased models (Model X, Model 3 -- but they also said they want to do a F150-like electric pickup truck down the road), building a worldwide network of superchargers and company-owned stores, writing software for self-driving cars (and possibly a robot-car Uber-like service down the road), launching Tesla Energy which sells stationary battery storage to consumers and utilities, and working on who knows what other secret projects. If they weren't losing money, I'd be surprised. Cut all that investment in future growth, and things would look financially different now (better), but they would also look different (worse) in 5-10 years...

In any case, it depends how you define "important", but Tesla is arguably already the most important car company in the world when it comes to technology and products (nobody else that I can think of has captured everyone's attention and influences the direction of the whole industry down the road).
Title: Re: GM - General Motors
Post by: rpadebet on August 31, 2015, 08:44:15 AM
I like how the journalist thinks that losing money this year and being the most important car company in the world down the road are somehow mutually exclusive.

Tesla is building the biggest battery factory on Earth (which will significantly slash its battery costs), ramping up production at about 50%/year, working on two unreleased models (Model X, Model 3 -- but they also said they want to do a F150-like electric pickup truck down the road), building a worldwide network of superchargers and company-owned stores, writing software for self-driving cars (and possibly a robot-car Uber-like service down the road), launching Tesla Energy which sells stationary battery storage to consumers and utilities, and working on who knows what other secret projects. If they weren't losing money, I'd be surprised. Cut all that investment in future growth, and things would look financially different now (better), but they would also look different (worse) in 5-10 years...

In any case, it depends how you define "important", but Tesla is arguably already the most important car company in the world when it comes to technology and products (nobody else that I can think of has captured everyone's attention and influences the direction of the whole industry down the road).

+1

It personally took me a while to understand this and value this attribute in my investments. A company which can reinvest for you at high ROIC's but has bad reported earnings in the present is more valuable than a company that can't reinvest and pays out the cash flows.
Title: Re: GM - General Motors
Post by: hyten1 on August 31, 2015, 10:08:19 AM
Geely profits surge 26% in first half on strong domestic sales
http://www.autonewschina.com/en/article.asp?id=13713

Great Wall first-half profit rises 19% on robust SUV demand
http://www.autonewschina.com/en/article.asp?id=13713


Title: Re: GM - General Motors
Post by: RadMan24 on August 31, 2015, 10:33:49 AM
I like how the journalist thinks that losing money this year and being the most important car company in the world down the road are somehow mutually exclusive.

Tesla is building the biggest battery factory on Earth (which will significantly slash its battery costs), ramping up production at about 50%/year, working on two unreleased models (Model X, Model 3 -- but they also said they want to do a F150-like electric pickup truck down the road), building a worldwide network of superchargers and company-owned stores, writing software for self-driving cars (and possibly a robot-car Uber-like service down the road), launching Tesla Energy which sells stationary battery storage to consumers and utilities, and working on who knows what other secret projects. If they weren't losing money, I'd be surprised. Cut all that investment in future growth, and things would look financially different now (better), but they would also look different (worse) in 5-10 years...

In any case, it depends how you define "important", but Tesla is arguably already the most important car company in the world when it comes to technology and products (nobody else that I can think of has captured everyone's attention and influences the direction of the whole industry down the road).

Take your Tesla conversation elsewhere! BYD in China has done just as much and earned a profit in the process. GM earns $3 a share in FCF. Tesla has captured the attention and influence of mass competition. That's something to be proud of. Elon Musk is a great CEO. Buying Tesla is buying Elon Musk, not electric cars! I wish him luck, he's got one hell of an uphill battle :)
Title: Re: GM - General Motors
Post by: bigspydee on September 16, 2015, 04:20:25 PM
http://mobile.reuters.com/article/USLegal/idUSL1N11M2QY20150916

Bittersweet news, but major headwind out of the way.
Title: Re: GM - General Motors
Post by: racemize on September 16, 2015, 04:52:04 PM
http://mobile.reuters.com/article/USLegal/idUSL1N11M2QY20150916

Bittersweet news, but major headwind out of the way.

anyone have what their reserve was for this?
Title: Re: GM - General Motors
Post by: vinod1 on September 16, 2015, 06:27:26 PM
http://mobile.reuters.com/article/USLegal/idUSL1N11M2QY20150916

Bittersweet news, but major headwind out of the way.

anyone have what their reserve was for this?

They did not reserve for this as they are not able to estimate a range for the probable cost. They did reserve for customer compensation ($315 million) for this issue but that would not cover criminal settlement.

See Note 17 in 10-K for a bit more info.

Vinod
Title: Re: GM - General Motors
Post by: racemize on September 16, 2015, 08:19:46 PM
ouch.
Title: Re: GM - General Motors
Post by: LowIQinvestor on September 22, 2015, 06:09:19 AM
Anyone have valuation work on GM's Onstar unit? I've heard Onstar had revs around $1.8B annually and 30-35% operating margins.

There was some talk about the future capabilities of Onstar during Citi 2015 Global Technology Conference :
http://seekingalpha.com/article/3496996-general-motors-gm-management-on-citi-2015-global-technology-conference-transcript

Topics such as OnStar, 4G, LTE as over-the-air upgrade and car sharing technology were discussed.

Looking to maybe buy more GM today on the VW debacle...

Title: Re: GM - General Motors
Post by: hyten1 on September 24, 2015, 05:37:09 AM
chevy cruze vs vw, diesel emissions

http://www.thetruthaboutcars.com/2015/09/tech-dive-chevy-cruze-stays-clean/

Title: Re: GM - General Motors
Post by: muscleman on September 24, 2015, 07:29:17 AM
chevy cruze vs vw, diesel emissions

http://www.thetruthaboutcars.com/2015/09/tech-dive-chevy-cruze-stays-clean/

I wonder if they have tested the Cruze 2.0L before claiming it is clean. It sounds the author of the article was just guessing since Cruze made a bunch of hardware changes, it may be clean.
Title: Re: GM - General Motors
Post by: LowIQinvestor on October 01, 2015, 09:14:42 AM
**GM Sees FY16 EPS $5-$5.50

So even at the low end of guidance for 2016, GM trades for a 6 PE and will grow earnings at least 10% YOY.

GM Posts Sixth Consecutive Jump in Retail Market Share

Thu, Oct 1 2015
Chevrolet retail sales up 19 percent
Best September for Chevrolet Malibu retail sales in 10 years
Chevrolet crossovers up 49 percent; pickups up 22 percent
GMC crossovers up 20 percent; pickups up 32 percent
Best September for Buick since 2006
Buick crossovers up 21 percent; Regal up 27 percent
Cadillac SRX up 85 percent
Commercial deliveries up for 23rd consecutive month

http://www.gm.com/article.content_pages_news_us_en_2015_oct_1001-gmsales.html




Title: Re: GM - General Motors
Post by: Mephistopheles on October 01, 2015, 12:03:28 PM
Where do you see the guidance? I can't find it.
Title: Re: GM - General Motors
Post by: LowIQinvestor on October 01, 2015, 01:52:48 PM
Click on "Chart Set"
See slide 121

http://www.gm.com/company/investors/announcements-events/event_detail_page.event_5194074.~content~gmcom~home~company~investors~announcements-events.html

20%+             ROIC
$4.50             EPS in 2015
$5.00- $5.50 EPS in 2016
Title: Re: GM - General Motors
Post by: Picasso on October 01, 2015, 02:20:59 PM
How do others view their calculation of ROIC? 
Title: Re: GM - General Motors
Post by: Mephistopheles on October 01, 2015, 02:43:52 PM
Click on "Chart Set"
See slide 121

http://www.gm.com/company/investors/announcements-events/event_detail_page.event_5194074.~content~gmcom~home~company~investors~announcements-events.html

20%+             ROIC
$4.50             EPS in 2015
$5.00- $5.50 EPS in 2016

Thank you
Title: Re: GM - General Motors
Post by: gokou3 on October 01, 2015, 05:05:07 PM
How do others view their calculation of ROIC?

The attached screenshot shows an example ROIC calculation from a June 2015 presentation.  The adjustments made for pension and DTA don't seem to make sense to me.  For example, if interest rate rises and they no longer have a pension deficit, the ROIC would suddenly shoot up.  Or after a few years when they have used up their DTA, their ROIC will go down...

Title: Re: GM - General Motors
Post by: Picasso on October 01, 2015, 05:18:45 PM
That was sort of my thinking too.  It gives a really volatile measure of ROIC and if we remove the deferred tax asset in a few years, ROIC is probably going to be mediocre.  Also not sure why or how they're using the adjusted EBIT.  Wouldn't you look at operating cash after tax as the best measure of return and then just remove the deferred tax asset to get an idea of a stabilized ROIC?
Title: Re: GM - General Motors
Post by: vinod1 on October 01, 2015, 05:35:37 PM
The problem is not with their calculation, it is just that the balance sheet is not a good representation of the economics of the company. The adjustments they do make sense. Pension obligations are similar to debt and needed to be added back. DTA is not an operating asset and needed to be removed.

- Their equity got wiped out during bankruptcy and New GM does not really reflect the equity that is needed to reproduce the company. So equity is understated. So their starting point itself is problematic.
- They generate $2 billion in net income from chinese JV on equity of about $8 billion. This is a gross misrepresentation of the economics of the business there.

So I really do not give much consideration for their ROIC metric.

Vinod
Title: Re: GM - General Motors
Post by: RadMan24 on October 01, 2015, 09:31:00 PM
It's okay, basically they meet their incentive goals operating around 8-10% margins, which is obviously not that bad. It also keeps them conservative on capacity and from overextending balance sheet. In my opinion.
Title: Re: GM - General Motors
Post by: compounding on October 03, 2015, 02:09:53 PM
Some notes from the Global Business Conference Call presentations

Mary Barra

   * Focusing on the customer relationship beyond the car.
   * Knows they are in a cyclical business - need to maximise efficiencies.
   * Growth from emerging markets + Cadillac.
   * Eight consecutive quarters of yoy GMNA margin expansion.
   * Returned over $4.5B to shareholders through dividends and repurchases through first 9 months of 2015.
   * $5B global investment in Chevrolet.
   * Goals for 2016 on track: NA EBIT-adjusted margin ~10%, Europe profitable, sustain strong China margins.


Dan Ammann

   * Past five years about restructuring - next five years about growth and future of mobility.
   * Decisions made to improve ROIC: exit Chevy Europe, Thailand, Indonesia, Russia, Brazil, Australia, South Africa, downsized Opel capacity.
   * Partnerships to drive efficiencies that have saved $2-3B: SAIC (China), Honda (fuel cells), Isuzu (global cooperation, trucks?), Nissan (small commercial van), PSA (joint purchasing in Europe), Ford (9/10-speed automatic transmissions), Navistar (medium duty truck), Renault (medium/large commercial van for Europe).
   * Partnership works best when each partner brings something to the table. Execution is easier said than done. Will pursue other partnerships in the future where both parties bring something to the table.
   * Have traded volume for sustainability/margins/higher ROIC. Expect this to continue in the years to come.
   * The total global industry will continue to grow at roughly the rate of GDP for a long time. The growth geographical composition will change from developed markets/China to other "growth markets". A significant portion of the global population is yet to own its first car.
   * Growth market simplification & scale: expectations in growth markets have risen, so the old model of introducing legacy models in new markets isn' going to cut it. Co-developing a new vehicle program with SAIC. Today they are doing over 1 million units from 7 architectures - in the future the want to do over 2 million units from 1 architecture to achieve a low cost model.
   * Luxury & Full-size trucks are 14% of global industry volume but ~60% of global industry profit. Will continue to grow and invest in these segments.
   * Aftersales revenues have been growing despite the GM car park shrinking the last few years. Aftersales is a 30-40% margin business. Aftersales = accessories, service retention at dealerships.
   * GMF: 5 years since acquisition of AmeriCredit. Have invested $5B total from the motor company. Will be earning $2B/year in pretax earnings in short order. Benefits to motor company from increased retention etc.
   * Customer relationship beyond the car: 7 million connected cars on the roads today + GMF etc are key enablers for future service offerings like autonomous, sharing etc.


Mike Abelson

   * The owner-driver business model in the automotive industry hasn't changed in the past 100 years - believe this will change. Fundamentally the change is caused by connectivity.
   * Onstar: launched 19 years ago. Added remote link in 2010 - in 2013 >23m interactions, in 2014 >40m interactions, in 2015 >50 in H1. >1m 4G LTE enable vehicles on the road - sold more 4G LTE vehicles in 3 days in June than the rest of the industry combined in H1 2015. Only OEM with available on 3 continents. GM has >500 patents in this area.
   * Using vehicle data for diagnostics (like GE in jet engines).
   * GM advantages: breadth and scope of portfolio, extensive dealer network, support system with many years of experience and data.
   * Programs in urban mobility: Google pilot in 2014, SJTU EN-V 2.0, Warren tech center sharing since middle of 2014 ~same capabilities as Google (any Onstar vehicle after 2011 is able to use the tech), Opel CarUnity (car sharing peer-2-peer app, started in June, 7500 users 1700 cars from Frankfurt area), Let's drive NYC (pilot program since June, car-sharing model partnered with Stonehenge and Icon Parking, 3 hours included in the rent).
   * Wiill be launching a city-wide car sharing program in a US city in Q1 2016.


Mark Reuss

   * Last year they talked about: architecture consolidation, engine consolidation, reducing capital spending, reducing material cost, funding future of transportation and mobility.
   * Focused on mass reduction. Improves vehicle efficiency and performance and paves way for new technology. In total GM will save $2B in material cost this year. Malibu weight reduced by 300 pounds but at the same time made it longer and wider, with same safety. Also increased variable profit/unit by $1500 in the US. Same story with other models like Volt, Cruze, Camaro.
   * With lighter weighting you get more efficient vehicles with improved performance. More aluminium. This is happening across all brands and price points. Front body structure on Cadillac went from 25 parts to 2 - reduces complexity, mass and tooling investment.
   * GM active safety features today: traffic sign memory, following distance indicator, high beam assist, forward collusion alert, full speed range adaptive cruise control, rear automatic braking, front automatic braking, rear cross traffic alert, advanced parking assist, lane change alert, lane keep assist, surround vision.
   * GM active safety features tomorrow: rear camera mirror, night vision, low speed front automatic braking, front pedestrian braking, curb view camera.
   * Plan to carry out partnerships with non-automotive companies. For example Mobileye.
   * Alternative propulsion: multifaceted approach - both battery electric vehicles and fuel cell electric vehicles. Both have non-automotive applications that represent growth opportunities.
   * Electric vehicles: need to improve infrastructure and charge times which will reduce range anxiety. Lower cost per mile than hydrogen or gas. GM leads the industry in battery cell cost.
   * Fuel cell: faster fill up, longer range ... but need to build out infrastructure. Long-term contract for a vehicle for the military. Cooperation crucial for development. Lot of work to be done on the storage system. Together with Honda GM has the strongest patent portfolio in the industry.
   * eBike concept debut early next year.
   * Global product freshness: % of refreshed vehicles will be higher in each of the five next years than it is today.


Q&A

   * They don't know which model they will go for in mobility, trying different ones. Agrees a lot of revenues will be incremental.
   * Profit contribution from aftermarket is measured in billions of dollars, not hundreds of millions.
   * GMF will be financed by retained earnings.
   * ROIC from China over 50%


Johan de Nysschen

   * Luxury brands: ~12% of global sales = ~38% of profits. GM has a 11.4% global market share - Cadillac's share is only 3.4%.
   * US still largest market for Cadillac.  Inventory supply has been reduced to 50 days from about 134 in January 2014. Goal is to maintain a supply of around 60-65 days. ATP's have risen thanks to a rigorous and disciplined approach and are second only to Mercedes-Benz in the US. Driven also by model mix (Escalade).
   * Cadillac and Mercedes-Benz are the only two in the luxury space with a yoy decline in incentive spend.
   * Volumes flat for 2015, market share slightly down. Market growth has happened largely in segments Cadillac is not active. Japanese automakers leveraging weak yen and aggressive incentive spending.
   * Anticipated future portfolio covers >90% of the luxury market compared to ~54% today.
   * The 2016 CT6 will include SuperCruise, V2V and will be available PHEV technology.
   * Cadillac will become more global compared to a more US based brand today. A lot of growth from China - expect 80k sales in 2015. Volume goals for 2015: 270k, 2018: 350k, 2020: 500k


Matt Tsien

   * China market is maturing: expect 3-5% cagr in 2014-2020 compared to 17% from 2008-2014. 24m units sold in the industry in 2014, at least 5m more units per year in 2020.
   * Tier 1 cities have been in negative growth in H1 15 while Tier 2-4 have grown at double digit rates. Registration caps holds back growth in some cities. Average age of the car parc in China is around 4 years compared to 10 in more developed markets. 85% of GM volume is in Tier 2-4 markets.
   * GM competes in all price ranges in China.
   * Mix will change in China in the rest of the decade, primarily with luxury, MPV and SUV growing faster than the market (80% of total growth). GM will have 26 new/refreshed entries in these markets until 2020.
   * 10+ alternative propulsion entries planned for China from 2016-2020. Localization: will be first foreign OEM to have battery assembly plant in China.
   * Challenges: moderating/volatile markets, pricing pressure (5% down from previous year), cost inflation (wages up 8% per year), regulatory constraints.
   * Opportunities: improved mix, cost efficiencies (been able to offset majority of headwinds this year), leveraging scale (working on 2m units on common architecture), downstream revenues (onstar, SAIC GMAC - largest auto finance company in China, INSAIC - insurance, ACDelco - aftermarket)
   * 4000+ dealer outlets in China. 9 manufacturing bases. "Well positioned for future."


Karl-Thomas Neumann

   * Onstar: available for the entire product portfolio. They have call centers for every European language. 50% of Opel vehicles will have Onstar from now on. 500k by the end of 2016, 2017 1.7m vehicle, largest fleet in Europe.
   * New Astra: 200 kg lighter, larger on the inside, new efficient engines, good reception in media so far.
   * Opel Bank: new full captive financing arm. Takes deposits, 17k customers, 450m deposits.
   * CarUnity: peer-to-peer carsharing in Frankfurt with 7500 registered users/1700 cars.
   * Working on the Opel brand. 130 years of history. Want to make it more exciting to own an Opel.
   * 29 new models until 2020 - "strongest pipeline ever." Average age coming down from >5 years to 3.9.
   * Light commercial vehicles: growing 25% vs 8.1% for the market.
   * Drive! 2022: goal to be no 2 in Europe with 8% market share and EBIT-adjusted margins in excess of 5%. A step to this is to breakeven next year through higher profitability per car from higher transaction prices, lower material & fixed costs (closure of Bochum + other restructuring), taking market share in a growing market.


Alan Batey

   * The road to 10% margins in North America: 10.4% in Q2. Key factors going forward: material cost, sales performance, new models, adjacent sales, GM Financial.
   * US market share performance: retail up 0.4% and fleet down 3% - down 0.1% in total. Growing faster than the markets with Chevrolet in important markets like New York, Washington and LA.
   * Pick-up share performance: 31% share in mid-size from zero, highest ATPs and $500 incentives. Full capacity at the moment. 15% of customers come from FS pickups. 3.1 percentage point increse in FS light duty and 2.5 in FS heavy duty. Largest share gains from F-150.
   * Medium duty truck: agreement with Navistar to get into the market by 2018. Gives complete lineup of commercial vehicles.
   * GM mainstream brands are making progress in sales satisfaction/service index surveys. Five years ago put dealerships through Disney Institute training to improve customer service. One point in customer loyalty represents $700m in revenue.
   * Improved customer loyalty by 15 points since 2010.


Chuck Stevens

   * Earnings growth accelerating: expect double-digit earnings growth over the next number of years.
   * Disciplined capital allocation: committed to return all excess cash to shareholders.
   * Robust downside protection: different company with much lower breakeven which will enable robust performance throughout the cycle.
   * FCF growth greater than earnings growth: $20B FCF last five years = >40% of market capitalization. Have returner >100% of FCF to owners in the last three years. Expect FCF-generation to accelerate going forward. Expect $6-7B FCF/year in 2016-18 and $9-10B/year in 2020 and beyond.
   * Cost efficiencies: expect run rate improvement of $5.5B in 2018 by lowering material costs & logistics, manufacturing and reducing footprint + global business services and IT/SG&A.
   * Capital allocation framework: invest at 20%+ ROIC, higher FCF, increased earnings => share price appreciation & additional return of capital. $12B returned to shareholders from 2012-2015 YTD; ~100% of FCF.
   * Different company to last downturn: total automotive debt down from $39B in 2007 to $9B today. Net pension & OPEB down from $49B to $18B today. US breakeven rate in SAAR units down from 16m in 2007 to 10-11m today. Target cash balance of $20B. Fixed cash obligations associated with the balance sheet in 2007 were $5B/year - today it's less than $1B/year. Fixed costs has been relatively flat in the past 4-5 years.
   * Expect EPS of $5.00-5.50 in 2016


Q&A

   * China margins will be maintained by: better mix, cost efficiencies. They are at 90% capacity utilization now.
   * Opel diesel penetration is 43%. All OEMs need diesels in Europe to reach emissions targets.
Title: Re: GM - General Motors
Post by: vinod1 on October 05, 2015, 07:36:47 AM
compounding - Thank you!
Title: Re: GM - General Motors
Post by: MarkS on October 21, 2015, 05:08:54 AM
Great numbers out for GM. Beats on revenues and earnings. Hopefully the stock will finally run.
Title: Re: GM - General Motors
Post by: CorpRaider on October 21, 2015, 05:11:33 AM
Yeah, $1.50 eps, ex recall costs.  Man, I don't get how this is not in the $40s.
Title: Re: GM - General Motors
Post by: MarkS on October 21, 2015, 07:10:32 AM
Now that the recall crises is at an end  I'm hoping she raises the dividend - that should drive the stock price higher.
Title: Re: GM - General Motors
Post by: RadMan24 on October 21, 2015, 06:53:40 PM
But if it stays lower, what's the rush???
Title: Re: GM - General Motors
Post by: ratiman on October 22, 2015, 04:38:21 AM
The problem is not with their calculation, it is just that the balance sheet is not a good representation of the economics of the company. The adjustments they do make sense. Pension obligations are similar to debt and needed to be added back. DTA is not an operating asset and needed to be removed.

- Their equity got wiped out during bankruptcy and New GM does not really reflect the equity that is needed to reproduce the company. So equity is understated. So their starting point itself is problematic.
- They generate $2 billion in net income from chinese JV on equity of about $8 billion. This is a gross misrepresentation of the economics of the business there.

So I really do not give much consideration for their ROIC metric.

Vinod

Why not look at the pension and DTA assets separate from the business? It doesn't seem like either reflects the core economics of the business. Not really following the argument here.
Title: Re: GM - General Motors
Post by: vinod1 on October 22, 2015, 09:00:01 AM
The problem is not with their calculation, it is just that the balance sheet is not a good representation of the economics of the company. The adjustments they do make sense. Pension obligations are similar to debt and needed to be added back. DTA is not an operating asset and needed to be removed.

- Their equity got wiped out during bankruptcy and New GM does not really reflect the equity that is needed to reproduce the company. So equity is understated. So their starting point itself is problematic.
- They generate $2 billion in net income from chinese JV on equity of about $8 billion. This is a gross misrepresentation of the economics of the business there.

So I really do not give much consideration for their ROIC metric.

Vinod

Why not look at the pension and DTA assets separate from the business? It doesn't seem like either reflects the core economics of the business. Not really following the argument here.

We need to ignore DTA per the reasons you mentioned.

But we need to include pensions as they are just another form of compensation - which I think you agree is somewhat relevant to the economics of the business  :)

Vinod
Title: Re: GM - General Motors
Post by: ratiman on October 22, 2015, 12:55:45 PM
The problem is not with their calculation, it is just that the balance sheet is not a good representation of the economics of the company. The adjustments they do make sense. Pension obligations are similar to debt and needed to be added back. DTA is not an operating asset and needed to be removed.

- Their equity got wiped out during bankruptcy and New GM does not really reflect the equity that is needed to reproduce the company. So equity is understated. So their starting point itself is problematic.
- They generate $2 billion in net income from chinese JV on equity of about $8 billion. This is a gross misrepresentation of the economics of the business there.

So I really do not give much consideration for their ROIC metric.

Vinod

Why not look at the pension and DTA assets separate from the business? It doesn't seem like either reflects the core economics of the business. Not really following the argument here.

We need to ignore DTA per the reasons you mentioned.

But we need to include pensions as they are just another form of compensation - which I think you agree is somewhat relevant to the economics of the business  :)

Vinod

Still not following. Why not treat the pension as just another liability, separate from the core business? It is a form of deferred compensation, but nothing changes if we call the pension liability "debt" instead of "deferred wages." Likewise, it would make no sense to recognize pension gains as income.   
Title: Re: GM - General Motors
Post by: Shooter MacGavin on October 23, 2015, 09:25:49 AM
Hello all, this is my first ever post.  I've been creeping for a few years.

I think one has to consider the point of the ROIC calc and make adjustments.  Since GM is a mature business and doesn't really deploy too much incremental capital into the business, the ROIC as presented isn't very useful for understanding incremental growth.  (The earnings growth is coming from greater units sold in North America and China which are financed primarily by working capital.  The other big driver of earnings growth is actually cost cutting, or by free'ing up capital.)  It may be useful internally, but its not terribly useful to outside investors, in my view.

To me the point of measuring returns on capital employed is to compare GM's business advantage over other automotive companies.  In this case, the returns must be calculated in a comparable fashion to other companies. However, certain balance sheet items are wonky of course.  DTAs, pensions (which are a legacy issue), etc, revalued land post bankruptcy, goodwill, difference in leverage of the captive financing arm.  I think GM is trying to adjust for this, but starting from book equity is weird and adding back pension liability certainly doesn't make sense if you're trying to compare performance vs. other auto companies.  Additionally, the JV's are going to be problematic since we don't have the "debt" portion of their capital and the income is booked after tax but added to Adj. EBIT.  Anyway, blah blah...

if the exercise is to compare GM's raw economics (on capital efficiency) vs. Ford vs. VW vs. FCAU etc....I think you should put them all on an equal footing, and just compare the return on adj. assets (assets should exclude excess cash, goodwill, dtas, and captive financing assets)..the ebit should exclude the JV income/loss component...I think if you do this you find that GM is more profitable than Ford, and many others, and yet GM has more material optimization to go than does Ford.

Thoughts?   

 
Title: Re: GM - General Motors
Post by: vinod1 on October 24, 2015, 07:10:40 AM
Hello all, this is my first ever post.  I've been creeping for a few years.

I think one has to consider the point of the ROIC calc and make adjustments.  Since GM is a mature business and doesn't really deploy too much incremental capital into the business, the ROIC as presented isn't very useful for understanding incremental growth.  (The earnings growth is coming from greater units sold in North America and China which are financed primarily by working capital.  The other big driver of earnings growth is actually cost cutting, or by free'ing up capital.)  It may be useful internally, but its not terribly useful to outside investors, in my view.

To me the point of measuring returns on capital employed is to compare GM's business advantage over other automotive companies.  In this case, the returns must be calculated in a comparable fashion to other companies. However, certain balance sheet items are wonky of course.  DTAs, pensions (which are a legacy issue), etc, revalued land post bankruptcy, goodwill, difference in leverage of the captive financing arm.  I think GM is trying to adjust for this, but starting from book equity is weird and adding back pension liability certainly doesn't make sense if you're trying to compare performance vs. other auto companies.  Additionally, the JV's are going to be problematic since we don't have the "debt" portion of their capital and the income is booked after tax but added to Adj. EBIT.  Anyway, blah blah...

if the exercise is to compare GM's raw economics (on capital efficiency) vs. Ford vs. VW vs. FCAU etc....I think you should put them all on an equal footing, and just compare the return on adj. assets (assets should exclude excess cash, goodwill, dtas, and captive financing assets)..the ebit should exclude the JV income/loss component...I think if you do this you find that GM is more profitable than Ford, and many others, and yet GM has more material optimization to go than does Ford.

Thoughts?   

Shooter MacGavin,

Welcome to the board.

Terrific post. You said it much better that what I am trying to say.

Vinod

Title: Re: GM - General Motors
Post by: vinod1 on October 24, 2015, 07:18:45 AM
The problem is not with their calculation, it is just that the balance sheet is not a good representation of the economics of the company. The adjustments they do make sense. Pension obligations are similar to debt and needed to be added back. DTA is not an operating asset and needed to be removed.

- Their equity got wiped out during bankruptcy and New GM does not really reflect the equity that is needed to reproduce the company. So equity is understated. So their starting point itself is problematic.
- They generate $2 billion in net income from chinese JV on equity of about $8 billion. This is a gross misrepresentation of the economics of the business there.

So I really do not give much consideration for their ROIC metric.

Vinod

Why not look at the pension and DTA assets separate from the business? It doesn't seem like either reflects the core economics of the business. Not really following the argument here.

We need to ignore DTA per the reasons you mentioned.

But we need to include pensions as they are just another form of compensation - which I think you agree is somewhat relevant to the economics of the business  :)

Vinod

Still not following. Why not treat the pension as just another liability, separate from the core business? It is a form of deferred compensation, but nothing changes if we call the pension liability "debt" instead of "deferred wages." Likewise, it would make no sense to recognize pension gains as income.

Shooter MacGavin has done a much a better job of laying out the rationale.

Also qualitatively my assessment is that GM and most other auto companies do not really have any moat. When business is good and there are tailwinds, they make good returns on capital but over the full cycle they would earn average to just above average returns. So I am not looking at ROIC too closely or giving much credence to these point in time calculations.

I am just looking at what normalized earnings are likely to be and capitalize them at a low multiple. If I can get a good MOS to this value, I buy.

Vinod

Vinod
Title: Re: GM - General Motors
Post by: Own The Rails on October 24, 2015, 05:12:07 PM
Hi all, excited to join the Corner community in my first post.

I was fortunate enough to attend the Pabrai Funds annual meeting this year in Chicago, and he said that GM was trading at 4x earnings. I tried adding certain items (cash, etc.) from the roughly 13x number you'll find on Google Finance but couldn't seem to get to just 4x. I realize the meeting was a little over a month ago when it was trading around $29-30, but I still can't seem to figure out how Pabrai got to such a low multiple. Any ideas on what might be useful in valuing GM on an earnings basis, or perhaps what you think might be a more relevant/accurate proxy? I'm trying to figure out how much juice this baby still has left in it over the next few years. Would you be comfortable with the margin of safety if you were to initiate now?
Title: Re: GM - General Motors
Post by: Shooter MacGavin on October 24, 2015, 08:03:56 PM
The problem is not with their calculation, it is just that the balance sheet is not a good representation of the economics of the company. The adjustments they do make sense. Pension obligations are similar to debt and needed to be added back. DTA is not an operating asset and needed to be removed.

- Their equity got wiped out during bankruptcy and New GM does not really reflect the equity that is needed to reproduce the company. So equity is understated. So their starting point itself is problematic.
- They generate $2 billion in net income from chinese JV on equity of about $8 billion. This is a gross misrepresentation of the economics of the business there.

So I really do not give much consideration for their ROIC metric.

Vinod

Why not look at the pension and DTA assets separate from the business? It doesn't seem like either reflects the core economics of the business. Not really following the argument here.

We need to ignore DTA per the reasons you mentioned.

But we need to include pensions as they are just another form of compensation - which I think you agree is somewhat relevant to the economics of the business  :)

Vinod

Still not following. Why not treat the pension as just another liability, separate from the core business? It is a form of deferred compensation, but nothing changes if we call the pension liability "debt" instead of "deferred wages." Likewise, it would make no sense to recognize pension gains as income.

Shooter MacGavin has done a much a better job of laying out the rationale.

Also qualitatively my assessment is that GM and most other auto companies do not really have any moat. When business is good and there are tailwinds, they make good returns on capital but over the full cycle they would earn average to just above average returns. So I am not looking at ROIC too closely or giving much credence to these point in time calculations.

I am just looking at what normalized earnings are likely to be and capitalize them at a low multiple. If I can get a good MOS to this value, I buy.

Vinod

Vinod

Vinod, thank you the kind accolade! 

Again, just to be clear, it's my view that the underfunded pension has little place in an ROIC calcuation, if the ROIC is to be meaningful for determining GM's performance relative to other Auto OEMs.

 That does not mean the underfunded pension liability has no place in a valuation.  From a valuation vantage point, to be conservative, I would probably subtract it from my enterprise value (before pension expense), to arrive at my per share equity value. 
Title: Re: GM - General Motors
Post by: Shooter MacGavin on October 24, 2015, 08:25:09 PM
Hi all, excited to join the Corner community in my first post.

I was fortunate enough to attend the Pabrai Funds annual meeting this year in Chicago, and he said that GM was trading at 4x earnings. I tried adding certain items (cash, etc.) from the roughly 13x number you'll find on Google Finance but couldn't seem to get to just 4x. I realize the meeting was a little over a month ago when it was trading around $29-30, but I still can't seem to figure out how Pabrai got to such a low multiple. Any ideas on what might be useful in valuing GM on an earnings basis, or perhaps what you think might be a more relevant/accurate proxy? I'm trying to figure out how much juice this baby still has left in it over the next few years. Would you be comfortable with the margin of safety if you were to initiate now?

If Google Finance has 13x, it is probably on trailing P/E, which includes some litigation accruals and ignition switch non-recurring expense accruals.  GM guided to $5.00 - $5.50 in run-rate EPS next year (2016).  So at the midpoint of $5.25 (which is around where I get to as well), the P/E multiple, when the stock was as $30, was closer to 5.7x.  Of course, one should probably exclude the value of the deferred tax assets (DTAs) since the $5.25 estimate includes an accrual for taxes, but in truth they won't pay US federal taxes for the next 4-5 years roughly. 

The present value of these DTAs by my math ends up being worth around 4-5 per share.  Of course this is very subjective.

Therefore, at $30, I suspect Pabrai was also excluding the present value of the DTAs to arrive at his 4x P/E multiple.  Today at ~$36, the multiple is ~5.9x (ex-DTAs). 

In terms of MOS, let me ask you this:  how much would you pay for an admittedly cyclical business that is likely to remain be profitable even in recessionary conditions (in the US), where the run rate earnings growth is likely to increase 25-30% by 2018 on materials optimization alone (which means there is growth plus ~100% of the earnings left over for dividends and share repurchases)?  repurchases will increase EPS by another ~10-12% by 2018.  I would pay 11x, and would think I'm getting a steal.  that's just me.  If I get to 11x, I've got a double.  By 2018, I've got another 50-60% on earnings. and then I've got 3 years of dividends too.  That's plenty of safety for me to be wrong (which is often the case) and still do pretty well, i'd hope.
Title: Re: GM - General Motors
Post by: alexbossert on October 25, 2015, 01:57:25 PM
Hi all, excited to join the Corner community in my first post.

I was fortunate enough to attend the Pabrai Funds annual meeting this year in Chicago, and he said that GM was trading at 4x earnings. I tried adding certain items (cash, etc.) from the roughly 13x number you'll find on Google Finance but couldn't seem to get to just 4x. I realize the meeting was a little over a month ago when it was trading around $29-30, but I still can't seem to figure out how Pabrai got to such a low multiple. Any ideas on what might be useful in valuing GM on an earnings basis, or perhaps what you think might be a more relevant/accurate proxy? I'm trying to figure out how much juice this baby still has left in it over the next few years. Would you be comfortable with the margin of safety if you were to initiate now?

There are multiple ways to think about it. Here are my back of the envelop numbers:

At a $30 stock price GM has a market cap of $47.5