Posts Tagged ‘GM’

Will GM go bankrupt again?

August 24, 2012

That’s the question posed in a recent Forbes article that’s worth reading.

Here are some of the underlying facts … read the article for the editorial stuff …

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Stock Market

The federal government owns 500,000,000 shares of GM, or about 26% of the company.

The stock is trading at about $20/share, so the government is holding about $10 billion worth of stock

The government’s GM stock is worth about 39% less than it was when the company went public at $33 /share

Since GM’s IPO almost two years ago, the broader S&P 500 has gone up about 30%.

During that period, Ford shares have gone down about 15%, Toyota up about 15%, Honda up about 5%, Nissan up about 35%, Hyundai up about 60% and Volkswagen up about 85%.
Source

It would take about $53.00/share for the gov’t to break even on the bailout.

 

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Car Market

As a company, General Motors peaked in 1965, when it commanded 50.7% of the U.S. market, and made a stunning-for-the-time $2.1 billion dollars in after-tax profits.

In the 1960s, GM averaged a 48.3% share of the U.S. car and truck market.

For the first 7 months of 2012, their market share was 18.0%, down from 20.0% for the same period in 2011.

GM is flailing in the D-car segment (Malibu, Camry) which accountd for about 20% of the U.S. car market.

Recent (and forthcoming) versions of the Malibu score dead last in Car & Driver reviews.

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Uh-oh

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Remember GMAC? … GM going sub-prime (again)

July 31, 2012

According to IBD

Near the end of 2010, GM acquired a new captive lending arm, subprime specialist AmeriCredit.

Renamed GM Financial, it has played a significant role in GM’s growth.

Ken’s Note: Approximately 20% of GM revenues go thru GM Financial

The automaker is relying increasingly on subprime loans.

Potential borrowers of car loans are rated on FICO scores that range from 300 to 850.

Anything under 660 is generally deemed subprime.

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So, lots of fleet sales to the Federal & Blue state governments … lots of self-financed sub-prime loans to move the metal

Cue the repo man … for the deadbeats’ cars … and the stock-sliding company.

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Note: GM shares are now about half of the IPO price.

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GM offers no-haggle prices … and a money-back guarantee.

July 11, 2012

According to Bloomberg

Losing ground to Toyota and needing to clear out end-of-model-year vehicles, GM will offer no-haggle pricing on 2012 Chevrolet cars and trucks plus a money-back guarantee on all new Chevys .

The new promotions, which GM calls its Chevy Confidence program, address two things car shoppers dread: haggling and commitment.

Americans aren’t great at haggling and we are expected to do so on the two biggest purchases we face: real estate and autos.”

“This Chevrolet Confidence program alleviates the issue of haggling and eliminates ‘buyer’s remorse.’”

The no-haggle program pledges to offer 2012 vehicles at the “best possible prices” in addition to current incentives.

The no-haggle sales price, called Total Confidence Pricing … harkens back to previous sales programs offered by GM.

The company’s Saturn included no-haggle buying before the brand ended as part of GM’s bankruptcy reorganization in 2009.

Such programs are “marginally effective,” according to Dennis Virag, president of Automotive Consulting Group. “There will be some buyers, but I don’t think it’s going to attract a large number of new customers for Chevy.”

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GM is trying to boost Chevy as the brand faces greater pressure from Toyota.

U.S. sales of Chevrolet, GM’s largest brand, rose 6.3 percent to 961,662 cars and light trucks in the first half, a slower pace than the industrywide increase of 15 percent; Toyota’s namesake brand gained 29 percent to 937,964.

Ken’s Note: Toyota faced what President Obama would call “headwinds” the past couple of years with a tsunami knocking out production for a few months, and Obama’s Secretary of Transportation calling Toyotas unsafe to drive … a hysterical charge that was never proven.

GM CEO Dan Akerson  is pushing the company to boost operating margins and strengthen Cadillac and Chevrolet as global brands.

Anybody see a trend?

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What do GM and Facebook have in common?

June 13, 2012

Easy question, right?

Two high profile IPOs that have lost about of their value since their IPOs.

C’est la vie …

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GM

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Facebook
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Remember the last big IPO? … You know, the one before Facebook

May 21, 2012

Well, Facebook went out at $38 and closed at $38.

The pundits are whining that the IPO was a failure because there wasn’t a big first day pop.

My take: one of the rare times that the IB’s priced a deal at fair market value.

Oh my, “flippers” didn’t get a chance to earn millions by just showing up for work.

Sounds ok to me.

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What I didn’t like about the Facebook IPO is that it got most analysts talking about the Government Motors IPO.

Given the chatter, I got curious and checked out the stock price

Oops, down almost 40% from the IPO price …. during a period when the overall market was up over 10%.

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Geez, since Bin Laden is dead and GM is alive, why the stock dip?

The company claimed record profits of $7.6 billion in 2011, the “highest profits in the 100 year history of that company” according to President Obama.

And, the company paid no Federal income taxes on taxes those record earnings.

Why?

Because New GM came out of bankruptcy “owning” all of the tax loss carry forwards from old GM.

That’s not supposed to be allowed when a company goes through bankruptcy — a deterrent to companies trying to simply buy losses to offset some of their taxable earnings.

How did it happen?

According to several sources:

The Obama administration quietly snuck in a special tax break for GM, which allows the company to write off approximately $45 billion in post-bankruptcy losses against post-bankruptcy profits.

It’s good for twenty years.

The $45 million tax write-off is in addition to the more than $50 billion given to General Motors in the bailout,

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GM unfriends Facebook … ouch.

May 16, 2012

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According to the WSJ … GM is going to stop advertising on Facebook

General Motors plans to stop advertising on Facebook after the company’s marketing executives determined their paid ads had little impact on consumers’ car purchases.

GM will continue to expand its use of marketing through Facebook’s pages, in which marketers can display content at no cost

The news comes at a bad time for Facebook  which is expected to hold a historic initial public offering on Friday. Facebook executives have spent the last two weeks trying to convince investors that its advertising business makes it worthy of a $105 billion valuation.

GM, started to re-evaluate its Facebook strategy earlier this year after its marketing team began to question the effectiveness of the ads.

GM marketing executives met with Facebook managers to address concerns about the site’s effectiveness and left unconvinced advertising on the website made sense,.

GM spends about $40 million on its Facebook presence. About $10 million of that is paid to Facebook for advertising, the rest covers content created for the site,

Companies in industries from consumer electronics to financial services tell us they’re no longer sure Facebook is the best place to dedicate their social marketing budget — a shocking fact given the site’s dominance among users.”

Although GM’s $10 million worth of ad spend on Facebook won’t impact its $3.7 billion in revenue, the move is a disappointing development for the social network and could hurt if more big advertisers choose to follow suit.

“Disappointing and could hurt” … you think ?

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About that GM success story ….

May 2, 2012

Team Obama is touting the rousing success of GM. 

You know, Bin Laden is dead; the UAW is alive.

Oops, Imeant GM is alive.

Hmmm.  Let’s see …

The original GM stockholders — you know, your grandma and the pension funds — got completely wiped out.

The secured creditors got about 65% of their principal wiped out.

And privileged folks got the opportunity to buy stock in the new GM.

Those share have declined by 30% from the $33 IPO price ,,, a 50 point spread vs, the S&P 500 which increased  20% over the same period.

That’s a loss of about $16 Billion in market cap in about 18 months.

Now, that’s what I call a roaring success … many more successes and we really will be bankrupt.

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How does GM’s tax rate compare to Buffett’s secretary’s?

March 2, 2012

Interesting editorial in the WSJ re: the GM bailout.

Everybody knows the GM’s stock holders were wiped out, that secured debt holders were subordinated to the unsecured UAW claims and  haircut to about 50 cents on the dollar, and that “New GM” stock is trading about 25% below its IPO price — leaving taxpayers with a $15 billion book loss on Treasury holdings.

What most folks don’t know is that GM got a special deal that rolls old GM’s $45 billion in accumulated tax losses into new GM.  That’s usually not allowed when restructuring companies — as a means of stopping companies from just acquiring losses from other companies as a tax dodge.

Bottom line:

In a 2011 working paper, J. Mark Ramseyer of Harvard and Eric Rasmusen of Indiana University argue that by manipulating corporate tax rules by fiat, “Treasury gave the firm (and its owners, including the UAW) $18 billion more in assets.”

The WSJ observed:

Mr. Obama crowed yesterday about GM’s “highest profits in its 100-year history.”

We’d be interested to hear how its effective tax rate compares with Warren Buffett’s secretary’s.

Hmmm ….

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What if PEs stop trying to turnaround failing companies?

January 17, 2012

The fanned hysteria against private equity firms is ripe with hypocrisy and unintended consequences.

The hypocrisy is almost comedic.

Gingrich was on the board of Forstman-Little.

Obama just promoted Jack Lew – formerly head of Citi’s PE group – to be his chief of staff.  And, don’t forget that Team Obama picked Dan Akerson to run Government Motors. What’s his background?

Prior to joining GM, Akerson was a managing director and head of global buyout for The Carlyle Group in Washington, D.C. In this position, Akerson managed more than $50 billion in assets and more than 200 portfolio companies with several hundred thousand employees around the world. He was instrumental in helping Carlyle achieve 30 percent gross internal rates of returns in the firm’s corporate private equity business.

Gee, sounds a bit like Romney doesn’t it?  I’d even be willing to bet that Akerson closed a few plants and laid off a few people in his time.

That’s not bad.  That’s how failing businesses are turned around.

Which leads me to my bigger point.

Connecting some dots, I see a disturbing trend.

  • A doctor friend of mine opined that if MDs start getting paid based on “success rates” then docs will simply start taking fewer difficult cases … why risk your pay check on on high risk patients? … treat the ones that are certainly curable … bingo, high success rate
  • Similar story with a dedicated teacher friend … asked about pay based on students success (e.g. test score improvement) … he parried: fine, then who’s going to teach the mainstreamed special needs students … or the incorrigible discipline students …  not the teachers striving for high success rates.

Easy to project those stories into the PE debate,

PEs go into turnaround situations knowing that tough actions will need to be taken, that companies will need to be restructured, and that some managers won’t make the cut.  That’s the way businesses are turned around

And, they know that – despite their best efforts – some turnarounds will fail.  That’s part of the game.

If the world lasers in on the unsuccessful attempts, who is going to step-in and start taking on the toughest turnarounds?

If the answer is nobody – or worse yet, the Feds – then those failing companies are certain for demise.

Is that what Gingrich and Obama want?

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GM: The Volt isn’t about how many you sell … say, what?

December 2, 2011

According to the WSJ:

  • The company sold 1,139 Volts in November, bringing sales to 6,142 this year.
  • GM will miss a target to sell 10,000 Volts in 2011.
  • GM has 134 day’s supply of the Volt, while the Nissan has a 21 day supply of the Leaf, the only other electric car on sale in the U.S. mass market.

GM’s reaction: “The Volt isn’t just about how many cars we sell …. This car is revolutionary.”

Speaking of revolutionary …

GM offered to buy back Volts from any owner who fears the car is a fire risk amid a U.S. safety investigation of its lithium-ion battery.

Not exactly a textbook example of Crossing the Chasm …

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Tracking the progress at GM …

October 12, 2011

The U.S. Treasury aimed to sell more of its 26.5% stake in GM by August or September.

Then, the stock started tanking.

GM stock would need to hit $53 a share for the U.S government to break even on its $50 billion bailout of the auto maker.

At $30 a share, the U.S. would lose more than $10 billion on its $50 billion bailout of GM.

So far this year, GM stock is down about 40%

It was trading just over $22  this week,

Than makes the loss about $15 billion … but, who’s counting?

 

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