GM - General Motors

[SwedishValue]

Disclaimer: This was my first day of serious GM research ever.

 

I have a question regarding the growth of the Finance division. I can see that GM talks about increasing leverage in their finance unit as earning assets increase. However, isn't it likely that GM will have to finance part of its growth in the Finance division through capital injections from the parent?

 

If that would be the case, it should be welcome news for the holders of the A/B/C Warrant, as this would decrease the likelihood of significantly raised ordinary cash dividends.

 

Also, has anyone seen a good overview of the profitability and scope of the financing units of other car companies, or is my best bet to look into all companies individually?

[fareastwarriors]

UAW, Detroit Prep for Talks

 

Big Bonuses Will Be in Mix When Union, Auto Makers Negotiate

 

 

http://www.wsj.com/articles/uaw-detroit-prep-for-talks-1418002628

[moody202]

Have you guys read this interview on Barron's? Essentially saying no government data is to be trusted. If true, this really concerns me about GM.

Interview_-_Anne.docx

[merkhet]

Have you guys read this interview on Barron's? Essentially saying no government data is to be trusted. If true, this really concerns be about GM.

 

What does this have to do with GM? I'm confused.

[moody202]

What does this have to do with GM? I'm confused.

 

If China's economy take a big hit as the interview suggests, won't it be a major issue for GM's profits? Car sales won't continue at the current pace in China if the economy takes a hit.

[DCG]

Do people in Asia actually buy GM cars?

[plato1976]

GM and VW are doing really well in China...

 

Do people in Asia actually buy GM cars?

[merkhet]

What does this have to do with GM? I'm confused.

 

If China's economy take a big hit as the interview suggests, won't it be a major issue for GM's profits? Car sales won't continue at the current pace in China if the economy takes a hit.

 

China has been slowing down for a while, and you can see that in the 3Q financials, but NA is still growing like gangbusters, so I'm not terribly worried.

[tylerdurden]

I think if China will crash at some point as that article from Barron's was suggesting, we'll have much bigger problems than GM only.

[xazp]

Do people in Asia actually buy GM cars?

 

Not sure if serious, GM sells more cars in China than in the U.S., and has for some time. 

 

Through November, China sales = 3.2 million, U.S. sales = 2.6 million.

 

[Homestead31]

GM getting beat up over the last few sessions...  given that the company should be a beneficiary of cheaper oil (cheaper gas leads consumers to buy more SUVs and pickups which are higher margin) I have to think that some of this selling pressure is non-economic tax loss selling.  if this continues into year end i think GM is set to be a huge winner in 2015 as sales benefit from cheaper gas and as the recall news fades into the background.

[Picasso]

GM getting beat up over the last few sessions...  given that the company should be a beneficiary of cheaper oil (cheaper gas leads consumers to buy more SUVs and pickups which are higher margin) I have to think that some of this selling pressure is non-economic tax loss selling.  if this continues into year end i think GM is set to be a huge winner in 2015 as sales benefit from cheaper gas and as the recall news fades into the background.

 

My thinking as well.  It almost seems too easy though....

[gokou3]

GM getting beat up over the last few sessions...  given that the company should be a beneficiary of cheaper oil (cheaper gas leads consumers to buy more SUVs and pickups which are higher margin) I have to think that some of this selling pressure is non-economic tax loss selling.  if this continues into year end i think GM is set to be a huge winner in 2015 as sales benefit from cheaper gas and as the recall news fades into the background.

 

My thinking as well.  It almost seems too easy though....

 

Can it be argued that because of the low oil prices, drilling activities in the US will be tapered which will reduce sales of  pickup trucks, the most profitable segments?

 

 

[karthikpm]

Since energy is where most of the new employment has been, a decrease in oil prices could worsen employment / sentiment as much as the low cost makes for a stimulus . Hard to know if the auto segment will benefit if oil gets crushed

[philly value]

Since energy is where most of the new employment has been, a decrease in oil prices could worsen employment / sentiment as much as the low cost makes for a stimulus . Hard to know if the auto segment will benefit if oil gets crushed

 

My guess is that the reduction in spending from the loss in oil activity will outweigh the effect lower gas prices will have on general demand. As much as consumers may have a short memory, we've lived through a major cycle in oil/gas prices over the past decade. I think most people will appreciate the relief from lower prices but will not assume that prices will be lower long-term.

[Mephistopheles]

I've been digging into GM Financial to try and gauge the subprime risk. Overall, things seem fine. The % of subprime loans has increased quite a bit over the last few years, but that's because subprime lending disappeared in 08/09. Delinquencies are on par with historical measures. The one concern I have is that loan terms have lengthened substantially, with the average term now at 71 months.

 

I noticed that much of the loans are securitized, with GM Financial servicing them, and that these are fully consolidated in GM's balance sheet. So their exposure isn't as much as it looks. I'm trying to find out GM's equity and debt exposure to these but can't seem to find the information. I looked into the SEC filings for the trusts that house the ABS, with no luck. Anyone know where I can find this info?

[moody202]

I'm thinking of buying GM stock and puts to protect my downside. What puts would the board recommend I sell to raise money for the GM puts? All I am trying to do here is to make the downside more diversified so hopefully the fall is these stocks is less than GM if the market and GM were to go down.

 

 

[gjangal]

I'm thinking of buying GM stock and puts to protect my downside. What puts would the board recommend I sell to raise money for the GM puts? All I am trying to do here is to make the downside more diversified so hopefully the fall is these stocks is less than GM if the market and GM were to go down.

 

 

 

At 30$ it has a 4% dividend yield, that could potentially be a floor to the stock price. Out of the money puts below this price could be a good bet IMO

 

I am long this one via warrants. My thesis/speculation is that US SAAR expected to be flat around 16.5mn for next year. China JV should bring in about $1.8- $2bn in net profit. They can easily make around 5.xx bn in net profit in a normal environment . This is even without any improvements in Europe ( GM has actually gained a tiny bit of market share in Europe this year). At a 12 P.E it's around 42$. They have also accrued for recall related costs this year. Hopefully not much next year,

 

[bobozou]

I've been digging into GM Financial to try and gauge the subprime risk. Overall, things seem fine. The % of subprime loans has increased quite a bit over the last few years, but that's because subprime lending disappeared in 08/09. Delinquencies are on par with historical measures. The one concern I have is that loan terms have lengthened substantially, with the average term now at 71 months.

 

I noticed that much of the loans are securitized, with GM Financial servicing them, and that these are fully consolidated in GM's balance sheet. So their exposure isn't as much as it looks. I'm trying to find out GM's equity and debt exposure to these but can't seem to find the information. I looked into the SEC filings for the trusts that house the ABS, with no luck. Anyone know where I can find this info?

 

Not certain, but GM Financial is the 'old Americredit' right?  If so, the current securitizations might be under the old name

 

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&company=americredit&owner=exclude&match=&start=40&count=40&hidefilings=0

[pabraifan]

I've been digging into GM Financial to try and gauge the subprime risk. Overall, things seem fine. The % of subprime loans has increased quite a bit over the last few years, but that's because subprime lending disappeared in 08/09. Delinquencies are on par with historical measures. The one concern I have is that loan terms have lengthened substantially, with the average term now at 71 months.

 

I noticed that much of the loans are securitized, with GM Financial servicing them, and that these are fully consolidated in GM's balance sheet. So their exposure isn't as much as it looks. I'm trying to find out GM's equity and debt exposure to these but can't seem to find the information. I looked into the SEC filings for the trusts that house the ABS, with no luck. Anyone know where I can find this info?

 

GM Financial SEC filing: http://www.gmfinancial.com/investors-information/financial-information/sec-filings.aspx

 

hope that helps

james

 

[moody202]

Toyota trades at around 10x PE, why would you put a 12x PE on GM?

 

I'm thinking of buying GM stock and puts to protect my downside. What puts would the board recommend I sell to raise money for the GM puts? All I am trying to do here is to make the downside more diversified so hopefully the fall is these stocks is less than GM if the market and GM were to go down.

 

 

 

At 30$ it has a 4% dividend yield, that could potentially be a floor to the stock price. Out of the money puts below this price could be a good bet IMO

 

I am long this one via warrants. My thesis/speculation is that US SAAR expected to be flat around 16.5mn for next year. China JV should bring in about $1.8- $2bn in net profit. They can easily make around 5.xx bn in net profit in a normal environment . This is even without any improvements in Europe ( GM has actually gained a tiny bit of market share in Europe this year). At a 12 P.E it's around 42$. They have also accrued for recall related costs this year. Hopefully not much next year,

[RadMan24]

Toyota trades at around 10x PE, why would you put a 12x PE on GM?

 

I'm thinking of buying GM stock and puts to protect my downside. What puts would the board recommend I sell to raise money for the GM puts? All I am trying to do here is to make the downside more diversified so hopefully the fall is these stocks is less than GM if the market and GM were to go down.

 

 

 

At 30$ it has a 4% dividend yield, that could potentially be a floor to the stock price. Out of the money puts below this price could be a good bet IMO

 

I am long this one via warrants. My thesis/speculation is that US SAAR expected to be flat around 16.5mn for next year. China JV should bring in about $1.8- $2bn in net profit. They can easily make around 5.xx bn in net profit in a normal environment . This is even without any improvements in Europe ( GM has actually gained a tiny bit of market share in Europe this year). At a 12 P.E it's around 42$. They have also accrued for recall related costs this year. Hopefully not much next year,

 

Currency fluctuations with the Yen/US Dollar? 

[AJDelphi]

December sales numbers look good!

 

http://www.gm.com/company/investors/latest-news/news_detail_page.content_pages_news_us_en_2015_jan_gmsales.~content~gmcom~home~company~investors~latest-news.html

[compounding]

Disclaimer: This was my first day of serious GM research ever.

 

I have a question regarding the growth of the Finance division. I can see that GM talks about increasing leverage in their finance unit as earning assets increase. However, isn't it likely that GM will have to finance part of its growth in the Finance division through capital injections from the parent?

 

If that would be the case, it should be welcome news for the holders of the A/B/C Warrant, as this would decrease the likelihood of significantly raised ordinary cash dividends.

 

Also, has anyone seen a good overview of the profitability and scope of the financing units of other car companies, or is my best bet to look into all companies individually?

 

This was addressed during today's GM presentation. They do not expect to be required to transfer capital from the automotive division to the financing division.

 

Some overlap from their presentation from October, but here's the link to the webcast and slides: http://www.gm.com/company/investors/announcements-events/event_detail_page.event_5179138.~content~gmcom~home~company~investors~announcements-events.html

 

I also attached an industry report from KPMG regarding the general question on captive finance that I haven't yet read, but might be useful.

automotive-finance-leasing.pdf

[CorpRaider]

Seemingly nice earnings report, up ~3% in pre-market.  http://finance.yahoo.com/news/gm-reports-much-higher-expected-123053389.html