GM - General Motors

[moody202]

What do you think will be the fine for GM after the $1.2B for Toyota? Is GM equipped to handle this?

[tng]

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).

[fareastwarriors]

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

[moody202]

 

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!

 

[fareastwarriors]

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

[muscleman]

What is everyone doing with their GM stake? add/hold?

 

What is your price target on GM? :)

[fareastwarriors]

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

[fareastwarriors]

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

[fareastwarriors]

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

[brker_guy]

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

[Guest 50centdollars]

Anyone buying the Class B warrants here?

[muscleman]

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?

[fareastwarriors]

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?'

[fareastwarriors]

New GM, New Challenges: Moving to UW, PT to $33

 

 

April 9, 2014

 

 

 

MORGAN STANLEY

New_GM_New_Challenges_-_Morgan_Stanley_-_4-9-14.pdf

[MYDemaray]

Yes...this from the Tesla bull

[thomcapital]

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.

[fareastwarriors]

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.

 

 

[sleepydragon]

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

[ukvalueinvestment]

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.

 

[Guest 50centdollars]

Class B warrants down over 8%

[fareastwarriors]

ouch...

 

 

Class B warrants down over 8%

[BargainValueHunter]

Class B warrants down over 8%

 

...And no "AIG TARP warrant" style dividend adjustment either. :(

[fareastwarriors]

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

[fareastwarriors]

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

[fareastwarriors]

GM crisis ‘catalyst for change’, says chief

 

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.”