GM - General Motors

[ERICOPOLY]

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.

 

[jeffmori7]

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

 

 

 

[jay21]

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.

[ERICOPOLY]

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.

 

[Mephistopheles]

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.

[fareastwarriors]

Hayman still owns General Motors

 

http://video.cnbc.com/gallery/?video=3000322710&play=1

[ERICOPOLY]

Hayman still owns General Motors

 

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.

[dutchman]

Eric, can I ask if you bought the common or b-warrants ? 

[ERICOPOLY]

Eric, can I ask if you bought the common or b-warrants ?

 

I bought the common.

[Homestead31]

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

[fareastwarriors]

Must be Eric's buying that is moving up the stock even in down market day.

[ERICOPOLY]

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.

 

 

 

[ERICOPOLY]

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.

[biaggio]

Hayman still owns General Motors

 

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.

[ERICOPOLY]

Hayman still owns General Motors

 

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.

[CorpRaider]

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.

[TonyG]

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.

   

[moody202]

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.

[pabraifan]

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

 

 

[wisdom]

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.

[Avyalake]

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.

[CorpRaider]

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. 

 

[Guest 50centdollars]

http://www.ctvnews.ca/autos/gm-reports-profit-nearly-doubled-in-third-quarter-1.2067315

[Homestead31]

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

 

 

[xazp]

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.