GM - General Motors

[bmichaud]

GM potentially buying tesla?

 

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

[hyten1]

i hope not

 

GM potentially buying tesla?

 

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

[DCG]

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.

[Liberty]

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.

[jay21]

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.

[Yours Truly]

Fantastic write up, thanks for the find

[fareastwarriors]

December U.S. Auto Sales Miss Expectations

 

 

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

[plato1976]

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

 

 

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

[dpetrescu]

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.

[bmichaud]

Old, but good comments here by Einhorn on GM:

 

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

 

 

[txlaw]

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!

[fareastwarriors]

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

[fareastwarriors]

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

[fareastwarriors]

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

[fareastwarriors]

GM Global Vehicle Sales Rise 4% in 2013

 

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.

 

[hyten1]

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

 

GM declare 0.30 dividend

 

warrant holders, plan to exercise?

[txlaw]

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.

[original mungerville]

I've got the LEAPS. Stock should rise in the morning...

 

 

[fareastwarriors]

3% up after hours.

 

Wish I bought more warrant.

;)

[txlaw]

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.

[fareastwarriors]

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/

Auto Loans Bring Growth, and Scrutiny, for Banks

[ERICOPOLY]

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.

[racemize]

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.

[ERICOPOLY]

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.

[racemize]

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.