GM - General Motors

[Sullivcd]

Also the business generates negative cash flow.

[ander]

Also the business generates negative cash flow.

 

Curious are you referring to the overall car manufacturing business or the plants they’re closing?

[Viking]

‘Demand problem on cars’? Can’t be good for economic growth moving forward. Another headwind as we enter 2019. Especially if competitors take the same action (cut production versus offering bigger rebates) in response to slowing demand.

 

https://www.cnbc.com/2018/11/26/gm-unallocating-several-plants-in-2019-to-take-3-billion-to-3point8-billion-charge-in-future-quarters.html

 

Former GM Vice Chairman Bob Lutz said the automaker historically would have raised sales incentives to try to to sell more cars before resorting to plant closures.

 

"Nowadays GM looks at the hard reality, says we've got a demand problem on cars, what are we going to do about it. We have to shut some facilities and move production to truck plants," Lutz said on CNBC's "Halftime Report." "So I think what we are seeing is a fast acting and reality oriented GM management."

[vince]

‘Demand problem on cars’? Can’t be good for economic growth moving forward. Another headwind as we enter 2019. Especially if competitors take the same action (cut production versus offering bigger rebates) in response to slowing demand.

 

https://www.cnbc.com/2018/11/26/gm-unallocating-several-plants-in-2019-to-take-3-billion-to-3point8-billion-charge-in-future-quarters.html

 

Former GM Vice Chairman Bob Lutz said the automaker historically would have raised sales incentives to try to to sell more cars before resorting to plant closures.

 

"Nowadays GM looks at the hard reality, says we've got a demand problem on cars, what are we going to do about it. We have to shut some facilities and move production to truck plants," Lutz said on CNBC's "Halftime Report." "So I think what we are seeing is a fast acting and reality oriented GM management."

 

I dont want to spend too much time looking through the release but can anyone confirm that these actions will increase fcf by 6 billion on a run rate basis....in addition to the original 6 billion of savings announced a few years ago?  Is she honestly claiming that they just created 60 billion of value overnight?  And if anyone believes that shouldnt she be tortured for not acting sooner?

[rb]

I doubt that they'll get 6 billion extra fcf. That would translate to 400k per employee. Doesn't seem realistic.

 

Edit: If you back out the 1.5 Bn of capex reduction because of this move as GM stated. Then you're left with labour cost saving of 300k per employee. So no they're not gonna get an extra 6bn of fcf.

[vince]

I doubt that they'll get 6 billion extra fcf. That would translate to 400k per employee. Doesn't seem realistic.

 

Edit: If you back out the 1.5 Bn of capex reduction because of this move as GM stated. Then you're left with labour cost saving of 300k per employee. So no they're not gonna get an extra 6bn of fcf.

 

Thanks for the reply, and I don't think so either......but is that what she is really claiming?  I find that cost saving explanations coming out of many executives are not clear in terms of cumulative vs run rate etc.  I read the release quickly but it sure sounded like that's what she was saying.

[DTEJD1997]

Hey all:

 

It was announced the other day that GM is closing the Poletown plant here in Detroit.

 

I remember when that plant was planned and built in the very early 80's.

 

GM demanded that a section of Hamtramck be demolished for the factory.  Of all the places they could have built it, they selected one of the rare areas that was holding it's own.  So all the residents & churches & businesses had to go. 

 

It was just so incredibly stupid.  All the vacant and abandoned land in Detroit, and GM selects a spot where people are actually living.

 

The city also gave MASSIVE tax incentives to get the plant built.  The factory never produced the number of jobs or vehicles initially projected.

 

The other crazy thing is that the factory is one of GM's newer factories?

 

What a waste!

[LowIQinvestor]

Sounds like a Tesla move!

 

What Trump is proposing in terms of eliminating GM EV subsidies is not going to happen. Is it even legal?

 

Given the recent announcement of an increase in annual adjusted automotive free cash flow by $6 billion by year-end 2020 on a run-rate basis

it looks like GM could do $10B in FCF in 2020.

 

GM is cheap here:

6 PE

 

Highly recommend buying today

 

[ander]

The EV subsidies are open to any auto manufacturer. Close to impossible he can target GM only - much more likely he’s just tweeting without substance and knowledge. Maybe he could exclude GM from future government purchases but I’d imagine that wouldn’t work.

[Gregmal]

While generally speaking, I applaud this move by Barra, once again you can't help but wonder why they are so tone deaf to things that do have an impact on their shareholders. Would these layoffs not have been better perceived if they were spread out? You had to have imagined Trump would now put GM in his cross hairs. Collateral damage will now also be that any future capital allocation move, such as a dividend increase or buyback will be a huge PR disaster...

 

This is a classic Barra move. Short term stupid, long term, justifiable. Unfortunately the long term never really gets realized because of all the short term noise.

[Spekulatius]

^ Trump is just making Noise. There is nothing he can do about it and Barra knows this. Slow restructurings are ugly too and more expensive. Its now the time to do it when the economy is strong and jobs are plentiful.

[Gregmal]

^ Trump is just making Noise. There is nothing he can do about it and Barra knows this. Slow restructurings are ugly too and more expensive. Its now the time to do it when the economy is strong and jobs are plentiful.

 

I do agree, and that is why overall I am favorable to this move, but please, you can't tell me that this company is not now handcuffed, at least temporarily. Can you imagine the headlines if they raise the dividend or do a buyback?

[vince]

^ Trump is just making Noise. There is nothing he can do about it and Barra knows this. Slow restructurings are ugly too and more expensive. Its now the time to do it when the economy is strong and jobs are plentiful.

 

I do agree, and that is why overall I am favorable to this move, but please, you can't tell me that this company is not now handcuffed, at least temporarily. Can you imagine the headlines if they raise the dividend or do a buyback?

 

Or God forbid, bonuses for mgmt

[Cardboard]

"Slow restructurings are ugly too and more expensive."

 

Absolutely untrue.

 

Top managers should wake up everyday and wonder how could they improve operations? It is a marathon, not a sprint. If this had been done instead all along, this would be unneccessary and their operations would be top notch vs competitors.

 

Every time you see a large corporation doing one of these large restructurings it is because they were asleep at the wheel for many years. Lots of fat, lots of bad decisions, lots of inneficiencies were carried along the way to the detriment of shareholders and now to the detriment of employees who get canned undiscriminately.

 

Top management then comes up with one of these instead of admitting their own screw up, justify it with a nice Power Point presentation and some conference call, one-time charges show up on the income statement et voila! Then next thing you find out is that Barra will get a bonus for a restructuring well done... Disgusting!

 

Cardboard

[rb]

^ Trump is just making Noise. There is nothing he can do about it and Barra knows this. Slow restructurings are ugly too and more expensive. Its now the time to do it when the economy is strong and jobs are plentiful.

 

I do agree, and that is why overall I am favorable to this move, but please, you can't tell me that this company is not now handcuffed, at least temporarily. Can you imagine the headlines if they raise the dividend or do a buyback?

 

Or God forbid, bonuses for mgmt

Disagree. Bonuses always win over bad PR.

[Spekulatius]

^ Trump is just making Noise. There is nothing he can do about it and Barra knows this. Slow restructurings are ugly too and more expensive. Its now the time to do it when the economy is strong and jobs are plentiful.

 

I do agree, and that is why overall I am favorable to this move, but please, you can't tell me that this company is not now handcuffed, at least temporarily. Can you imagine the headlines if they raise the dividend or do a buyback?

 

Or God forbid, bonuses for mgmt

Disagree. Bonuses always win over bad PR.

 

Nobody gives a damn if they buy back the full amount of their existing authorized buyback amount or raise it in 3 month. There will be an article in Bloomberg or another publication but that will be about it. If it’s not on TV, Trump won’t know or care about it either.

 

Cardboard is correct that restructuring should be continuously occurring , but that’s nowhere it works. Often there are strategic reviews that are an expensive way to generate an opinion that corroborates with what manager knew all along and then things are axed rather than continuously trimmed to create big savings numbers and yet another reason for performance based bonus payments for  the enlightened few at the top. Also,in  the car industry, plant shutdowns are binary in nature and lead to larger layoffs for that reason.

[Pondside47]

I don't own GM but the way this factory shutdown or realignment of production capacity is structured and announced is completely politically and socially insensitive. Just because the union's power had been greatly reduced coming out of the bankruptcy doesn't mean we can be insensitive about the issue. Trump is only one side of populism, Bernie is the other side, which we are likely to get in the next election if Trump doesn't get reelected. Barra is a great executioner but she feels very much like a leader of a platoon going in to the battlefield.In other words, she's feels like a hammer, a brut force. I wonder why she appeared very socially insensitive in this mishap is because she is a woman and she is forced by the men dominating the auto world to show toughness. My gut feel to the announcement is 1) the way the announcement in handled is a mess, insensitive to the wealth gap that's already tearing the society apart 2) she's announcing and carrying it out this way partially to win the heart of Wall Street skeptics. 1) is why I miss Sergio Marchionne so much. The few times he was asked about union relationships, his responses were simply mesmerizing. I came away completely convinced he truly can feel the pain and difficulties of the union workers. I have hope that this ability to empathize with line workers is part of the culture of the current management team of FCA.

 

I know a lot of the people chose GM over FCA due to the leverage a few years back. Now that the leverage issue is gone, the driving factory of the success of the sector now is the continuous success of truck and SUV, which GM, FCA and Ford will more or less equally benefit. Why stay with GM going forward with such a management team? 

[Viking]

What surprised me with the announcement is there was no balance. Could they not provide more specifics of what plants (SUV and Truck) are hiring more workers due to higher sales. They also must be hiring (electric and driverless).

 

I think they were smart to announce all closures at one time versus trying to shutter one facility every 6 months over 3 years. Regarding timing, they could not announce anything before the election in November. They also could not wait until next year; too close to the next Presidential election.

 

Tough business is my read.

[Ahab]

Interesting article on the GM closures: https://www.washingtonpost.com/business/economy/the-gm-quandary-whats-good-for-the-business-is-bad-optics/2018/11/28/fd73851c-f34b-11e8-aeea-b85fd44449f5_story.html?utm_term=.4e306d4ae3a9

[ander]

of note from the article below which most of us would have expected: Kudlow made clear any changes in subsidies would not just affect GM. "I think legally you just can’t," he said.

 

 

White House seeks to end subsidies for electric cars, renewables

 

 

WASHINGTON, Dec 3 (Reuters) - White House economic adviser Larry Kudlow said on Monday the Trump administration wants to end subsidies for electric cars and other items, including renewable energy sources.

 

Asked about plans after General Motors Co(GM) announced U.S. plant closings and layoffs last week, Kudlow pointed to the $2,500-to-$7,500 tax credit for consumers who buy plug-in electric vehicles, including those made by GM, under federal law.

 

"As a matter of our policy, we want to end all of those subsidies," Kudlow said. "And by the way, other subsidies that were imposed during the Obama administration, we are ending, whether it’s for renewables and so forth."

 

Asked about a timeline, he said: "It’s just all going to end in the near future. I don’t know whether it will end in 2020 or 2021."

 

The tax credits are capped by Congress at 200,000 vehicles per manufacturer, after which the subsidy phases out. GM has said it expects to hit the threshold by the end of 2018, which means under the current law, its tax credit scheme would end in 2020. Tesla Inc(TSLA) said in July it had hit the threshold. Other automakers may not hit the cap for several years.

 

Experts say the White House cannot change the cap unilaterally. U.S. President Donald Trump last week threatened to eliminate subsidies for GM in retaliation for the company's decision.

 

Kudlow made clear any changes in subsidies would not just affect GM. "I think legally you just can’t," he said.

 

Democrats will take control of the U.S. House in January and are unlikely to agree to end subsidies for electric cars and many have been pushing for additional incentives.

 

Tesla and GM have lobbied Congress for months to lift the cap on electric vehicles or make other changes, but face an uphill battle make changes before the current Congress expires.

 

In October, Senator Dean Heller proposed lifting the current cap on electric vehicles eligible for tax credits but phase out the credit for the entire industry in 2022. Two other senators in September proposed lifting the per manufacturer credit and extending the benefit for 10 years.

 

Also in October, Senator John Barrasso a Republican who chairs the Senate Environment and Public Works Committee, proposed legislation to end the EV tax credit entirely. (Reporting by Jeff Mason and David Shepardson; writing by Doina Chiacu; editing by Sonya Hepinstall and Lisa Shumaker)

 

[JRM]

https://seekingalpha.com/news/3414819-lyft-files-ipo-documents

 

Hopefully GM is able to cash out on this investment in a tax friendly way. 

[voyager]

Why would they cash out?  It gives them the ability to have a strategic partner in the ridehailing space, which has more value than their investment gains do. 

[JRM]

It has been reported that the relationship is not necessarily strategic anymore:

 

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=14&cad=rja&uact=8&ved=2ahUKEwjckNXZz47fAhVq6YMKHSRXB1AQFjANegQIBRAB&url=https%3A%2F%2Fwww.dmv.org%2Farticles%2Fgm-lyft-partnership-may-be-at-an-end&usg=AOvVaw1pK3K4gi0M4hdCbW6xfAjT

 

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=16&cad=rja&uact=8&ved=2ahUKEwjckNXZz47fAhVq6YMKHSRXB1AQFjAPegQIAxAB&url=https%3A%2F%2Fwww.forbes.com%2Fsites%2Falanohnsman%2F2017%2F10%2F18%2Fhoneymoons-over-gm-cruise-said-to-turn-to-uber-as-lyft-alliance-cools%2F&usg=AOvVaw1VfaiotsUOc1E_uHgzpvSo

[Gregmal]

https://seekingalpha.com/news/3422387-gm-plus-6-percent-hiking-guidance

 

$6B FCF... $7 EPS. Peak auto bro...

[dutchman]

guys the gm.ws.b warrants have to be sold/exercised before July or we'll lose are money right?