GM - General Motors

[PlanMaestro]

Still chewing this Morningstar analysis, but it looks excellent on a first glance

 

What's Really Changed At The New GM?

http://seekingalpha.com/article/790771-what-s-really-changed-at-the-new-gm

 

GM's U.S. hourly labor cost per North American vehicle produced has improved--down to $1,606 from $3,295 in 2005. Since the IPO, GM has disclosed that its break-even point for the all-important GM North America (GMNA) segment is now a U.S. industry sales rate of about 10.5 million units with 18%-19% share, compared with industry sales of 15.5 million and 25% share in third-quarter 2007. According to GM, retiree healthcare was about $4 billion of the $16 billion total U.S. hourly labor cost in 2005, so eliminating U.S. retiree healthcare obligations has helped im­mensely, as has reducing hourly head count by 57%. Also critical is that GM's U.S. all-in hourly labor cost is now about $56 per hour, compared with $78/hour under Old GM. For comparison, Toyota is about $55/hour. We think investors con­cerned with continued U.S. market share loss should consider that GM can break even at sales levels that occurred right after the collapse of Lehman Brothers and, as discussed in our report "Why U.S. Auto Sales are Still Too Low," we believe the U.S. is on its way back to normalized annual demand levels of between 16.1 million and 17.3 million units. GM has stated that it is able to run GMNA capacity at up to 150% utilization (three shifts with overtime) if U.S. industry demand reaches at least 16 million units.

....

 

 

At year-end, GM's U.S. hourly worker plan had a projected benefit obligation (PBO) of $71 billion and assets of $61 billion, while the U.S. salaried plan had a PBO of $36 billion and assets of $33 billion. The international plan was underfunded by $12 billion, for a total underfunding of $25 billion. We calculate the overall funding percentage to be 81.1%, compared with 79.2% at Ford. On June 1, GM announced a groundbreaking way to de-risk part of its U.S. salaried pension plan obligation, which has 118,000 retirees. GM will offer participants a buyout if they retired between October 1997 and Dec. 1, 2011--this would apply to about 42,000 people. Those who do not take the buyout, as well as U.S. salaried plan participants who retired before October 1997, will have their obligations transferred to Prudential (PRU) via a group annuity contract starting in January 2013. To compensate Prudential for assuming $26 billion of PBO, GM will transfer approximately $29 billion of plan assets to Prudential to purchase the annuity contract, funding $3.5 billion-$4.5 billion of this purchase from GM's existing cash rather than from the plan. The exact amount is uncertain as it depends on the take rate of the buy-out of­fers, which we expect to be low. The remaining $10 billion of U.S. salaried PBO will stay with GM and be underfunded by about $2 billion. GM will then freeze the U.S. salaried plan on Oct. 1, 2012, and workers will move into a 401(k) plan.

....

 

 

We stress that New GM continues to transform itself into a global automaker. We see tremendous economies of scale yet to be realized, as the firm only builds about 50% of its pro­duction on global architectures--far short of its planned 90% by 2018 (Ford will be at 85% by 2013). The important U.S. market will see 70% of GM's nameplates new or refreshed in 2012 and 2013. Critical GMNA product holes from cutbacks during the crisis will be filled next year with the highly profitable new generation of full-size pickups and the next-generation Chevrolet Impala full-size sedan. Cadillac finally will return to the compact segment with the ATS out this fall, and the new full-size XTS replaces the STS and DTS. In China, GM's largest market at 28% of global unit volume, the company is expanding capacity by 25% through 2013 and will launch more than 60 new and refreshed vehicles in the next five years. Opel will unveil 23 new models through 2016. These product innovations are possible because New GM is investing $8 billion a year in capital expenditure regardless of the state of the economy. Old GM would cut back on capital expenditure in hard times, which caused it to fall further and fur­ther behind competitors. We model nearly $9 billion of annual capital expenditure in the outer years of our five-year forecast period.

 

[BargainValueHunter]

Americans discover easy lending when it comes to automobiles

http://www.washingtonpost.com/business/economy/americans-discover-easy-lending-when-it-comes-to-automobiles/2012/07/05/gJQAdTiVQW_story.html

 

But there’s another, less-noticed factor: Investors and private-equity firms are rushing to buy securities made up of bundles of car loans, seeing these assets as both safe and lucrative. In the first six months of this year, the nation’s largest auto lenders, such as GM Financial and Santander Consumer USA, have pawned off $10 billion of their subprime auto loans on investors, a 20 percent increase over the same period last year. That gives these lenders more capacity to loan to consumers with questionable credit histories and, in turn, helps drive auto sales even higher.

 

It may seem surprising that private-equity firms and other investors are willing to pour billions into auto-backed securities after getting burned by similar mortgage-backed securities when the housing bubble burst. But, analysts say, the auto market is different than housing in several key respects.

 

For one, Americans appear to be less willing to default on their car payments than to walk away from their houses — even in the depths of the recession, auto loans performed better than most. And, in the event of a default, it’s easier for a lender to repossess a car and sell it off, especially right now, when prices for used cars are so high.

 

Yet the fact that the subprime auto market is expanding so rapidly — with some buyers paying interest rates in excess of 10 percent — has led to some concern.

 

 

http://blogs.barrons.com/incomeinvesting/2012/08/07/google-steering-cash-into-auto-abs-out-of-treasuries/?mod=BOLBlog

 

So far, asset-backed securities still represent less than 1% of Google’s cash. But the story notes how Google, the fourth-most cash-rich company in the S&P 100, joins such corporate titans 3M Co. (MMM )and Automatic Data Processing Inc. (ADP) that also have purchased asset-backed securities this year.

 

These ABS typically carry triple-A ratings, 3M’s treasurer notes that the auto and credit card ABS sectors performed relatively well during the financial crisis. The auto portion of a key ABS index has returned 2.34% this year on deals with an average maturity of just over two years, compared with 0.30% for comparable Treasurys this year. Some recent ABS have been priced to yield as little as 0.5%, but even that is a big bump over two-year Treasurys yielding 0.2%.

[PlanMaestro]

http://www.ft.com/cms/s/0/17858506-f68f-11e1-9fff-00144feabdc0.html#ixzz25ZaBEF9u

 

The big three US automakers have reported significantly stronger-than-expected domestic August sales, a rebound that is expected to be hailed at this week’s Democratic party convention. General Motors, which owns the Chevrolet, Cadillac and Buick brands, announced sales up 10 per cent on August 2011 to 240,520 vehicles on Tuesday, while Ford recorded US sales up 13 per cent to 197,249 vehicles. Chrysler, the smallest of the big three US manufacturers and whose brands include Dodge, Ram Truck and Jeep, said monthly sales rose 14 per cent against August 2011 to 148,472. All the figures were well ahead of analysts’ forecasts.

...

 

“Pent-up demand has been building for a while,” she said. “There’s a good chance that people will replace their old vehicles. The total light vehicle fleet’s average age is now close to 11 years old, which is pretty old.”

 

The sales figures showed smaller cars’ growing popularity. The manufacturers attributed this to rising fuel prices and significant improvements in new cars’ fuel economy compared with older ones. Chrysler reported passenger car sales up 21 per cent year-on-year to 40,895, while GM said sales of its Chevrolet passenger cars, including the new Cruze, Sonic and Spark models, were up 25 per cent on the same month last year. Ford reported car sales up only 7.1 per cent but attributed part of its 37 per cent year-on-year growth in utility vehicles to growing interest in more fuel-efficient compact utilities.

 

 

 

 

 

 

 

[giofranchi]

PlanMaestro,

I know that probably you won't care, because you don't hold him in much regard, but GM is Mr. Einhorn's second largest long position, just after Apple. It is a position he established in 2011 Q3, and below is what he had to say about GM:

 

"GM is the largest auto manufacturer in the United States. After the business failed under its legacy high-cost structure during the recession, the U.S. government bailed out the company and took over most of the ownership. Last November, GM completed an IPO of about 30% of its stock at $33 per share. The government continues to own about one-third of the company. After the IPO, the shares initially advanced to almost $40 before retreating. When the shares broke the IPO price, we determined that the shares were attractive, but only purchased a small position, believing that there might be a better opportunity later when the government exited the rest of its stock. Instead, during a weak third quarter where the market punished all cyclical stocks, the shares fell well below the

price where we planned to add to our position. We decided that the shares were cheap enough that we were more than fully compensated for the possible overhang of the government’s stake, and we established a position at an average price of $25.78 per share.

 

GM is being priced by the market as a cyclical company trading at less than 6x this year’s earnings. While some may see it as normal to value cyclicals at low multiples of peak earnings, we believe that 2011 is not a peak and, in fact, is below mid-cycle. Prior to the crisis, U.S. auto sales ran between 15 and 19 million units for many years. While sales have bounced from the recession low to about 13 million units, GM is poised to grow earnings from both a return to mid-cycle volumes, which we estimate to be 15 million units, and from a coming major refresh of its North American product portfolio. The market appears focused on GM’s “legacy liabilities.” However, the new GM does not

have pension and healthcare liabilities that are likely to over-run the company. Instead, GM sits with $33 billion of gross cash which represents nearly its entire current market capitalization. We see potential for GM to begin to return capital to shareholders over the next year. While we are cognizant of the various investment risks that include near-term global economic weakness and the government ownership overhang, we think these concerns are more than priced in at current levels and see significant upside even if the U.S. experiences a very slow "new normal" type of economic recovery."

 

giofranchi

 

[PlanMaestro]

PlanMaestro,

I know that probably you won't care, because you don't hold him in much regard, but GM is Mr. Einhorn's second largest long position, just after Apple.

 

Good for him. I don't have it. Think independently, think correctly.

[PlanMaestro]

 

 

Our retail sales meanwhile increased 11% versus a year ago. Here again all four brands posted increases, about 12% for Chevrolet, Cadillac and GMC, and 8% for Buick. This makes August our best retail month of the year. GM sales to fleet customers were up about 6% compared with the year ago and our year-to-date fleet mix is right in line with the 26% range that we have discussed before.

 

Now our most important highlight of the month is the outstanding performance of Chevrolet passenger cars which were up 25% in total and about 41% at retail compared with last August. The Sonic, the Cruze and the Volt all set new sales records and the Spark was off to a very good start with sales of more than 2600 units in the second month.

 

The Sonic which has now been on the sale of full 12 months has been a homerun for us. In its first year, we have sold 73,000 Sonics and the car has been number one in retail sales in this segment since April. August was also a very robust month for the Chevrolet Equinox crossover which was up 22% for its best August sales ever. I think this broad-based performance shows the power of the confidence message that we advertised for much of the summer, especially during the Olympics. It was a brand building message that really rang through with customers when they saw how much our product line-up has been transformed.

 

Of course, there were some exceptions to what on balance is a very good story. For example, the Malibu saw the decline but it wasn’t a surprise. As was the case in July we are in a bit of a quiet period between the sell-down of the old model which is nearly complete about 20 day supply and the launch of the high volume 2.5 liter four-cylinder models which are now arriving in showrooms.

 

As Don Johnson will tell you, our dealers are very excited about this next stage of the launch because the 2.5 liter Malibu will represent about three quarters of our mix. It will join the 2013 Malibu Eco which had its best sales month of the year and is the second best selling mid-sized hybrid of 2012. The big picture for our dealers and GM is even more compelling. The 2013 Malibu is one of seven Chevrolet passenger car nameplates that will be redesigned to all new in the 2011-2013 timeframe.

 

Now let’s turn to Cadillac. Last month we talked about how we were transforming Cadillac with a combination of excellent products and a brand experience custom tailored for our luxury customers. The pay-off has been recognition by JD Power as the most improved luxury brand, and a 21% increase in July sales. This month we delivered another double-digit sales increase driven by the Cadillac XTS large car and continued strong SRX and Escalade sales.

 

This renewed momentum will continue to build as dealers receive their first shipment of the all new Cadillac ATS, which are on the way as we speak. Here again the bid picture is very compelling. The addition of the XTS and ATS will give us our strongest showroom ever and coverage in 80% of the luxury market by volume, up from just 50% previously.

 

Turning next to Buick, the Verano has been a tremendous success for the brand. August marked its ninth consecutive monthly sales increase since launch. It helped Buick achieve its best retail sales month since September of 2007. When you also consider the GMC Acadia, sales were up 20% and the GMC Terrain were up 16%, it was clearly a good month for that channel.

 

Finally, our combined Chevrolet and GMC large pickup were up more than 6% year-over-year and 31% versus July. As we look at the pickup market, we are clearly at an inflection point. I say this because September usually marks an acceleration of the seasonal factors that favour higher truck sales this time of the year. And we’re also very encouraged by the continued sign of the housing recovery and the overall resilience of the U.S. economy. These are among of the reasons why we’re going to stay the course with the strategy that we have been following now for more than a year which is to compensate for launch-related downtime by carrying higher than normal truck inventories.

[PlanMaestro]

http://www.ft.com/cms/s/0/8a52a12a-f7a9-11e1-8c9d-00144feabdc0.html#ixzz25i6faUbN

 

GM Financial, the finance arm of General Motors, has taken advantage of investor clamour for higher-yielding securities by selling its largest package of debt backed by subprime auto loans so far this year.

 

The $1.3bn sale, which was sold at a record low rate, comes as a rally in such bonds has helped push this year’s total auto asset-backed security issuance above the total for 2011. Investor demand is already being reflected in increased financing options at dealerships, which last month helped propel US car sales to their highest rate in three years.

...

 

The value of subprime auto ABS sold since the start of this year had already hit nearly $13.2bn by the end of August, compared with $12.4bn for the whole of 2011, according to Barclays data.

 

The average yield GM paid on the debt was 1.5 per cent, its lowest ever and down from 1.9 per cent when it sold $1.2bn of subprime ABS in June.

 

 

[PlanMaestro]

Still chewing this Morningstar analysis, but it looks excellent on a first glance

 

What's Really Changed At The New GM?

http://seekingalpha.com/article/790771-what-s-really-changed-at-the-new-gm

 

A longer version

http://ibd.morningstar.com/ERR/500/GM.pdf

[PlanMaestro]

Blunt criticism of the Malibu 2013 and what could it mean regarding General Motors

http://www.forbes.com/sites/louiswoodhill/2012/08/15/general-motors-is-headed-for-bankruptcy-again/

[txlaw]

Blunt criticism of the Malibu 2013 and what could it mean regarding General Motors

http://www.forbes.com/sites/louiswoodhill/2012/08/15/general-motors-is-headed-for-bankruptcy-again/

 

Hmm, I see a trend with this guy's reporting/blogging:

 

-General Motors Is Headed For Bankruptcy -- Again

-Gasoline Prices Are Not Rising, the Dollar Is Falling

-Even the Warmists Don't Believe In Global Warming

-President Obama's 2012 Re-Election Prospects Suffer An Ominous GDP Report

-Electric Cars Are An Extraordinarily Bad Idea

[PlanMaestro]

Hmm, I see a trend with this guy's reporting/blogging:

 

-General Motors Is Headed For Bankruptcy -- Again

-Gasoline Prices Are Not Rising, the Dollar Is Falling

-Even the Warmists Don't Believe In Global Warming

-President Obama's 2012 Re-Election Prospects Suffer An Ominous GDP Report

-Electric Cars Are An Extraordinarily Bad Idea

 

He likes drama that's for sure :)

[Olmsted]

Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.

 

Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.

 

http://www.reuters.com/article/2012/09/10/us-generalmotors-autos-volt-idUSBRE88904J20120910

 

I know this is the legacy of pre-Chapter 11 decisions, but wow...

 

Though in fairness all of the per-vehicle loss estimate comes from development and tooling cost.  At least they are selling them above the cost of marginal production.

[hyten1]

olmsted,

 

also note, in the article it also states toyota and nissan invested enourmous amount of money into their electric in technology as well (5 to 10billion dollars).

 

just want to point this out.

 

hy

[Olmsted]

Yes, agreed, and if they can use that technology development base in future vehicles it's not so bad.  The GM spokesperson in the article said the tech has already spilled over to some extent.

[Olmsted]

Upon further consideration the article was somewhat unfair and needlessly inflammatory.  Of course it will take many vehicles sold to work through a large up-front investment in technology and a factory.  It's all about whether they can sell Volts in volume and whether they can use the tech in forthcoming models.

 

I shouldn't have posted that article before thinking about it some more.

[hyten1]

olmsted,

 

agree, the media like to sensationalize things and like to pick on GM (it is gov motor after all)

 

its funny how toyota and nissan spent 5 to 10bil, and they are being painted in the for positive light or no light at all, while GM is being painted as the dog.

 

don't give me wrong this tech spend is something we need to watch out for and make sure the return is adequate, but the article is very biases.

 

hy

[Guest rimm_never_sleeps]

yep that "loss" is actually an investment in r and d that has a great chance at paying off big time.

[Olmsted]

agree, the media like to sensationalize things and like to pick on GM (it is gov motor after all)

 

its funny how toyota and nissan spent 5 to 10bil, and they are being painted in the for positive light or no light at all, while GM is being painted as the dog.

 

I was actually just thinking whether this could be read as a contrary sentiment indicator!

[hyten1]

for those interested

 

http://www.autoblog.com/2012/09/12/cadillac-nabs-esquire-2012-car-of-the-year-laurels/

[PlanMaestro]

Bob Lutz says bullshit.

 

The Real Story On GM's Volt Costs

http://www.forbes.com/sites/boblutz/2012/09/10/the-real-story-on-gms-volt-costs/

 

The Volt “variable cost” (labor and materials, without revealing any confidential GM information), looks very roughly like this: A Li-Ion battery today runs about $350 per KWh. The Volt’s is 16KWh, so that’s roughly $6000. Add $4,000 for the battery pack structure, the cooling, the high-voltage wiring, the motor and the power electronics. So, that’s the electric portion. Add about 20 hours of assembly labor which we’ll round to a very generous $1000. The dealer net price is, say, $37,000. We now have $26,000 left for the rest of the car, which, cost-wise, is about equal to a Chevy “Cruze” which sells for around $22,000 retail! (And the Volt has no costly conventional transmission.) Thus, the “Volt”, by my estimate, is either close to “variable break-even” or may be on the cusp of a positive gross margin. Deduct the per-unit allocation for all fixed cost, depreciation and amortization and it is, surely, still “under water”….but not by much, and less and less so as the volume builds and other, higher-margin GM cars, like the Cadillac ELR, piggy-back off of the Volt’s initial investment.

 

Maybe the Volt, a first-generation technology masterpiece and the most-awarded car in automotive history, will never make a really decent profit. But succeeding generations of the same technology will. Meanwhile, the happy Volt buyers (most satisfied owners of any nameplate in the market) are getting more that they paid for. (Is that so bad?)

 

 

 

[hyten1]

Top 10 most reliable american cars from consumer report

 

http://news.consumerreports.org/cars/2012/11/top-10-most-reliable-american-cars.html

 

8  out of 10 are GMs

[PlanMaestro]

On the road again

http://www.ft.com/intl/cms/s/0/8b6685bc-24fa-11e2-86fb-00144feabdc0.html#axzz2BJf3LTP6

[PlanMaestro]

Why Ford is more profitable than GM

http://www.autonews.com/article/20121106/BLOG06/121109911/why-ford-is-more-profitable-than-gm

[hyten1]

one thing i have been thinking about is the universally accepted belief that GM has no competitive advantage.

 

does GM have competitive advantage?

 

consider these:

 

1. GM has been badly operated (not counting recently) for decades, decades!

2. GM has been saddle with HUGE pension obligations due to past management/unions (kind of related to above)

 

Now people can argue GM went into bankruptcy recently, but it took a 2008 like event to put them into bankrupty

 

also GM would not have had to file for bankrupty if they did want F did which was to raise tons of money before 2008 hit (not that could be attributed partially to luck for F and mostly due to bad management on GM part)

 

 

And GM is still around and kicking (I understand it went through bankruptcy)

 

now does GM have a competitive advantage?

 

I think GM is not your typical manufacturing company selling some widgets

 

the scale and complexity of cars provides some competitive advantage

[txlaw]

Don't think this got posted, but Berkowitz is in the GM B warrants now. 

 

http://www.sec.gov/Archives/edgar/data/1056831/000105683112000004/submission111412.txt

 

Pretty interesting given the board's discussions on how cheap these warrants appear to be.