GM - General Motors

[fareastwarriors]

General Motors activist shareholders go cold on Fiat tie-up

 

http://www.ft.com/intl/cms/s/0/95078a10-1699-11e5-9883-00144feabdc0.html#axzz3doLlopTa

[merkhet]

The interesting thing here is that GM should be a big beneficiary either way the Fiat thing plays out. If Fiat finds a way to make an offer to GM, they'll likely have to offer a premium, so GM shareholders win. Alternatively, in order to make such an offer not palatable to GM shareholders, management has to deliver in the form of better operating results and/or better capital allocation (maybe an increased buyback) and, once again, GM shareholders win.

 

Thanks Marchionne. :)

 

I kind of get the feeling that this is all smoke and mirrors, and Marchionne is really angling for someone else to get involved with FCA.  VW would be a great fit, for example.  Maybe Marchionne can convince Piech, who just left the board, to stir up some trouble.

 

Regardless, I agree that this is good for GM shareholders. ;D

 

That might be true, but GM doesn't know that. :)

[Sportgamma]

The interesting thing here is that GM should be a big beneficiary either way the Fiat thing plays out. If Fiat finds a way to make an offer to GM, they'll likely have to offer a premium, so GM shareholders win. Alternatively, in order to make such an offer not palatable to GM shareholders, management has to deliver in the form of better operating results and/or better capital allocation (maybe an increased buyback) and, once again, GM shareholders win.

 

Thanks Marchionne. :)

 

I kind of get the feeling that this is all smoke and mirrors, and Marchionne is really angling for someone else to get involved with FCA.  VW would be a great fit, for example.  Maybe Marchionne can convince Piech, who just left the board, to stir up some trouble.

 

Regardless, I agree that this is good for GM shareholders. ;D

 

I´m getting that warm tingly feeling of conformation bias from txlaw´s comment

[brker_guy]

I should put this on the TSLA thread, but since this is about the Chevy Bolt and EVs, I thought I put the links here:

 

http://time.com/money/3940042/nissan-leaf-chevy-bolt-tesla-driving-range/?xid=yahoo_money

 

http://insideevs.com/may-2015-plug-electric-vehicle-sales-report-card/

 

[merkhet]

If General Motors has stuck to its $375 million of buyback per week pace that it had in March prior to the blackout period for earnings, then, by now, they should have bought back close to $3.75 billion in shares (if not more).

 

I hope they were in the market yesterday, but I think they're in the blackout period again.

[tylerdurden]

If General Motors has stuck to its $375 million of buyback per week pace that it had in March prior to the blackout period for earnings, then, by now, they should have bought back close to $3.75 billion in shares (if not more).

 

I hope they were in the market yesterday, but I think they're in the blackout period again.

 

Blackout should start with the end of quarter, no? I hope you are right. Goldman downgrade didn't really make much sense to me. They are out of their patience i guess after having GM on their conviction buy and buy lists that long...Anyways I don't pay too much attention to analysts of course but it moved the stock price recently though... Hope GM took advantage.

[bigspydee]

Question, when do 2018 leap call options open up for GM? Currently i only see Jan 20 2017 options under leaps. I already own GM-B warrants.

[rico1181]

Does anyone have a good handle on the financial impact of the latest recalls (Hummer)? It seems like the market is overly concerned. Not sure if justifies an EV/EBITDA multiple of ~2.0x. Any thoughts?

[TwoCitiesCapital]

Does anyone have a good handle on the financial impact of the latest recalls (Hummer)? It seems like the market is overly concerned. Not sure if justifies an EV/EBITDA multiple of ~2.0x. Any thoughts?

 

I think the market's biggest concern, along with a general dislike of GM that has existed since the IPO, is the impact of the chinese slowdown since GM has a large amount of business there.

[JPerez]

The strange thing is that their chinese partners stock price, SAIC motors, has not drop much. It has a capitalization of 40 billion and gm partnerships seem to be 60% of the volume. Gm Chinese operations could be worth between 20-25 billion.

Gm capitalization has drop 8 billion in the last month so you that is a 30-40% drop on the value of the Chinese operations if that is the main concern.

On the other hand at this prices it has a 50 billion capitalization as a SOTP story you can value the Chinese partnerships at 20 B, gm financial 5 B, net cash 13 B, repurchases 4-5 B.

That is 43 B. The rest of gm including north america, Europe, south america and Row operations are value at 7 B. Of course there are the pension liabilities to take into account but it does not need any extra cash infusion for the next 4-5 years.

The hummer recall can not be material in the scale of a company the size of gm

[Mephistopheles]

I think Buffett should make a bid for GM, it has all the qualities he likes: great price, solid American brand, can help soak up capital going forward, management that seems to be focused on profitability, can be synergestic with their dealership business, a position that is already in Berkshire's portfolio, a product Buffett uses and enjoys, and a woman CEO.

 

What's not to like?

[jawn619]

I think Buffett should make a bid for GM, it has all the qualities he likes: great price, solid American brand, can help soak up capital going forward, management that seems to be focused on profitability, can be synergestic with their dealership business, a position that is already in Berkshire's portfolio, a product Buffett uses and enjoys, and a woman CEO.

 

What's not to like?

 

Lack of free cash flow, commodity product, not very profitable.

[Spekulatius]

I think Buffett should make a bid for GM, it has all the qualities he likes: great price, solid American brand, can help soak up capital going forward, management that seems to be focused on profitability, can be synergestic with their dealership business, a position that is already in Berkshire's portfolio, a product Buffett uses and enjoys, and a woman CEO.

 

What's not to like?

He bought Berkshire and learned his lesson. Better to buy a wonderful company at a fair price than a fair company at a wonderful price.

[Guest 50centdollars]

I think Buffett should make a bid for GM, it has all the qualities he likes: great price, solid American brand, can help soak up capital going forward, management that seems to be focused on profitability, can be synergestic with their dealership business, a position that is already in Berkshire's portfolio, a product Buffett uses and enjoys, and a woman CEO.

 

What's not to like?

He bought Berkshire and learned his lesson. Better to buy a wonderful company at a fair price than a fair company at a wonderful price.

 

I don't think GM is a great business long term. Company is doing well now but the culture of GM has been terrible for decades. I don't know if the culture has changed but I wouldn't bet on it with union workers.

[randomep]

I think Buffett should make a bid for GM, it has all the qualities he likes: great price, solid American brand, can help soak up capital going forward, management that seems to be focused on profitability, can be synergestic with their dealership business, a position that is already in Berkshire's portfolio, a product Buffett uses and enjoys, and a woman CEO.

 

What's not to like?

 

Lack of free cash flow, commodity product, not very profitable.

 

terrible ROIC

[compounding]

The strange thing is that their chinese partners stock price, SAIC motors, has not drop much. It has a capitalization of 40 billion and gm partnerships seem to be 60% of the volume. Gm Chinese operations could be worth between 20-25 billion.

Gm capitalization has drop 8 billion in the last month so you that is a 30-40% drop on the value of the Chinese operations if that is the main concern.

On the other hand at this prices it has a 50 billion capitalization as a SOTP story you can value the Chinese partnerships at 20 B, gm financial 5 B, net cash 13 B, repurchases 4-5 B.

That is 43 B. The rest of gm including north america, Europe, south america and Row operations are value at 7 B. Of course there are the pension liabilities to take into account but it does not need any extra cash infusion for the next 4-5 years.

The hummer recall can not be material in the scale of a company the size of gm

 

Interesting on SAIC. I think GM Financial is worth more than $5b, it had $6bn tangible net worth at the end of Q1 and is very profitable and growing. Also the deferred tax assets are worth quite a bit, especially if things turn around in Europe...

 

The valuation of GM baffles me, I hope they are buying back stock like crazy. Will be interesting to see what the activists have planned if stock performance doesn't improve over the next few quarters.

[Aberhound]

I watched a google driverless car video and read some of the recent articles. Is there an analogy here with Geico vs. traditional insurance companies selling through an agent network? Driverless cars will likely be by subscription similar to the existing car sharing services like Car 2 Go. So GM and the like would have to abandon their existing model of selling large volumes of different models to effectively compete. They can't and won't. Since the car sharing increases usage of cars ten fold (very roughly 5% to 50%) the capital efficiency is so much greater cars sold to individuals cannot compete and the number of cars sold will drop up to ten fold for that segment of the market. Further, IT companies like Google have huge advantages because the sharing side requires their type of skills building efficient software based sharing systems. Google also gets to cross subsidize with their revenues from passengers using computers and smartphones as they are driven around. I personally look forward to going to a 1 car from a 3 car family and then be driven around while I work and read with a car appearing anywhere I need one within a minute or two summoned by smartphone and at a cost of hundreds instead of thousands per month. This trend is so much in accordance with Agenda 21 dense cities, sustainability and lower carbon use I don't see how any politician could oppose it. It should also stimulate all the other competing uses for cash now wasted on excess cars which sit around un utilized most of the time.

 

Who else thinks this suggests a long google short GM and Ford trade?

[rkbabang]

I watched a google driverless car video and read some of the recent articles. Is there an analogy here with Geico vs. traditional insurance companies selling through an agent network? Driverless cars will likely be by subscription similar to the existing car sharing services like Car 2 Go. So GM and the like would have to abandon their existing model of selling large volumes of different models to effectively compete. They can't and won't. Since the car sharing increases usage of cars ten fold (very roughly 5% to 50%) the capital efficiency is so much greater cars sold to individuals cannot compete and the number of cars sold will drop up to ten fold for that segment of the market. Further, IT companies like Google have huge advantages because the sharing side requires their type of skills building efficient software based sharing systems. Google also gets to cross subsidize with their revenues from passengers using computers and smartphones as they are driven around. I personally look forward to going to a 1 car from a 3 car family and then be driven around while I work and read with a car appearing anywhere I need one within a minute or two summoned by smartphone and at a cost of hundreds instead of thousands per month. This trend is so much in accordance with Agenda 21 dense cities, sustainability and lower carbon use I don't see how any politician could oppose it. It should also stimulate all the other competing uses for cash now wasted on excess cars which sit around un utilized most of the time.

 

Who else thinks this suggests a long google short GM and Ford trade?

 

 

Everything you said above is going to happen.  The question is "when?".  Don't underestimate governments' ability to act insane under pressure from interest groups who benefit from the status quo.  Look at Uber in France (or many American cities for that matter), or look at the hard time some states are giving Telsa, because of it simply wants to sell directly to consumers without the state protected middlemen.  GM/Ford/Toyota will not give up without a fight, and since they can not compete freely using the voluntary means, they will focus on the political means (legitimized violence) and they have the clout/money to do so.    I wouldn't be surprised if the government keeps self driving vehicles off the streets for a decade or longer after they otherwise would have taken over the market.  The same goes with flying drones.  There is no reason why autonomous drones couldn't carry people eventually as well as goods, this terrifies many people in a lot of industries and that is one of the real reasons Amazon is having a hard time with the politics of making autonomous deliveries.    Roads? Where we're going we don't need roads ....

 

[tylerdurden]

In that long term we'll all live in Mars and since teleportation will be the easy option for travel who needs any sorts of cars anyways. J/k I agree with the "when" question. There are all sorts of issues with driverless cars like who'll be responsible if there is an accident etc. i don't think i can see that far for a long google short auto companies play. i'd stick to 3-5 years timframe for my investment horizon...

 

In terms of GM, there is huge anti sentiment for the stock. It started with Goldman downgrade and now China. Only fix is solid earnings... I personally think with Europe gradually getting better they should weather any problems in china. Low gas will continue to be tailwind for sometime and they should increase efficiency with limited no of new platforms and lower input prices. Execution time for the management since time is running out on their targets...

[krazeenyc]

I'm hoping for driverless tech sooner rather than later hopefully within 10 years -- fingers crossed. I don't imagine Google/Apple will get involved in the business of actually manufacturing cars -- that would be a major step down in terms of quality of business for them. I would expect them to partner with existing car companies to get their technologies into cars.

[tylerdurden]

I'm hoping for driverless tech sooner rather than later hopefully within 10 years -- fingers crossed. I don't imagine Google/Apple will get involved in the business of actually manufacturing cars -- that would be a major step down in terms of quality of business for them. I would expect them to partner with existing car companies to get their technologies into cars.

 

10 years sounds reasonable. I don't think apple/google would be involved in auto manufacturing either and even in terms of who will eat whose lunch it is all up in the air to me as well. Auto comps are also not stupid. They are trying to be involved by being present in silicon valley etc. Actually there would be a case that autos copy the software/technology from googles of the world and incorporate that into their cars as the end game. Who knows...

[ZenaidaMacroura]

I'm hoping for driverless tech sooner rather than later hopefully within 10 years -- fingers crossed. I don't imagine Google/Apple will get involved in the business of actually manufacturing cars -- that would be a major step down in terms of quality of business for them. I would expect them to partner with existing car companies to get their technologies into cars.

 

10 years sounds reasonable. I don't think apple/google would be involved in auto manufacturing either and even in terms of who will eat whose lunch it is all up in the air to me as well. Auto comps are also not stupid. They are trying to be involved by being present in silicon valley etc. Actually there would be a case that autos copy the software/technology from googles of the world and incorporate that into their cars as the end game. Who knows...

Tesla is probably the driverless manufacture of choice -but given Musk's distrust of AI expect them to be equipped with a self destruct failsafe  ;D

[LowIQinvestor]

I can't help but start to get bullish on GM when i see silly headlines & logic like this!:

 

"General Motors: Cheap Valuation, Sizable Dividend ‘Largely Irrelevant’"

 

http://blogs.barrons.com/stockstowatchtoday/2015/07/16/general-motors-cheap-valuation-sizable-dividend-largely-irrelevant/?mod=yahoobarrons&ru=yahoo

[valuedontlie]

I can't help but start to get bullish on GM when i see silly headlines & logic like this!:

 

"General Motors: Cheap Valuation, Sizable Dividend ‘Largely Irrelevant’"

 

http://blogs.barrons.com/stockstowatchtoday/2015/07/16/general-motors-cheap-valuation-sizable-dividend-largely-irrelevant/?mod=yahoobarrons&ru=yahoo

 

I tend to agree. The pessimism seems to be building with China headlines. I came across an article trying to pin the selloff:

 

"The weakness, attributable to general market malaise, fears over slower growth in China and uncertainty over the sustainability of near-record U.S. auto sales"

 

I scanned the Barclay's downgrade today and found the analysis somewhat laughable. Maintaining above consensus EPS but downgrading shares? It actually reinforced the fact that returning foreign ops (ex-China) to breakeven will be far more impactful than a decline in China JV income.

 

 

[merkhet]

I am dying to see how many shares GM has been able to buy back in the last quarter.