GM - General Motors

[TwoCitiesCapital]

China auto sales fall to 17 Month low despite price cuts

 

http://bloom.bg/1Mhmoxn

 

Yuan devaluation sure isn't going to help imports....

[Mephistopheles]

Davids Tepper & Einhorn both increased their stakes significantly this past quarter. Largest equity position for Tepper and 5th largest for Einhorn.

[RadMan24]

China auto sales fall to 17 Month low despite price cuts

 

http://bloom.bg/1Mhmoxn

 

Interesting then that GM increased profits due to increased sales mix of SUVs and crossovers. Gm's China business is very strong and way different than BMW, Mercedes, and VW who have been forced to lower prices.

[Arden]

China auto sales fall to 17 Month low despite price cuts

 

http://bloom.bg/1Mhmoxn

 

Interesting then that GM increased profits due to increased sales mix of SUVs and crossovers. Gm's China business is very strong and way different than BMW, Mercedes, and VW who have been forced to lower prices.

 

Are you suggesting GM didn't lower prices while others did? What are you basing this on?

[merkhet]

Read GM's latest conference call. They talk about changing the mix in China.

[RadMan24]

China auto sales fall to 17 Month low despite price cuts

 

http://bloom.bg/1Mhmoxn

 

Interesting then that GM increased profits due to increased sales mix of SUVs and crossovers. Gm's China business is very strong and way different than BMW, Mercedes, and VW who have been forced to lower prices.

 

Are you suggesting GM didn't lower prices while others did? What are you basing this on?

 

I shouldn't have said "way different," but what I meant is, each company has different exposures to different segments. The true answer can be found by reading the company's 10-Qs, 10-Ks, sales releases, investor presentations, etc. I'm not into the whole CNBC argument on what China sells means for x and y and z. A random Bloomberg article and no specific GM information kinda shows a lack of intent to find the true answer, no offense. But if China is the next worry for GM stock, so be it. The company still spits out $3 in FCF.

[dutchman]

Guys, trying to decide whether to buy common or the warrants for a taxable account. 

Any advice on which is the better by right now ?  thank you.

[tylerdurden]

I also believe the China fears are overblown for GM. Of course the slowdown is going to have an impact on them in China too but having a local brand, introducing more popular SUVs and weighing towards smaller cities (Smaller for China only probably; major cities in western standards) and focusing on more efficiency/cost cuts would enable them to manage the slowdown well according to my view. People in major cities are paying huge fees for getting plates so with that type of demand I don't believe the auto sales in China will come to a sudden stop. It's a call for every investor of course but the stock price takes into account all sorts of major failures at the moment and I don't think that's the real picture...

[muscleman]

http://www.autotrader.com/cars-for-sale/vehicledetails.xhtml;jsessionid=F5EDC20F0F80F3AE814CF5F6057FA38F?LNX=DRMEDFBXDYNAMICRHR&searchRadius=0&listingId=403704993

 

Guys. We are looking to buy a muscle car. Is this typical for GM dealers to sell new cars so much lower below MSRP?

[hyten1]

muscleman part of the reason is because the newly revamp next gen camaro is just around the corner  http://www.autoblog.com/2015/08/21/2016-chevy-camaro-pricing-official/

[muscleman]

muscleman part of the reason is because the newly revamp next gen camaro is just around the corner  http://www.autoblog.com/2015/08/21/2016-chevy-camaro-pricing-official/

 

http://www.autotrader.com/cars-for-sale/vehicledetails.xhtml?zip=98004&endYear=2016&modelCode1=MUST&sortBy=derivedpriceASC&showcaseOwnerId=71257&startYear=2015&makeCode1=FORD&searchRadius=25&showcaseListingId=407816483&mmt=%5BFORD%5BMUST%5B%5D%5D%5B%5D%5D&listingId=407085285&Log=0

 

Is this a muscle car price war? The new Mustang is also priced like this Camero.

[fareastwarriors]

My brother drives a Camaro (2012) and my friend drives a Mustang 2014. They both love it.

[Mephistopheles]

China has 113 motor vehicles per capita, up from 24 per capita 10 years ago. The U.S. has a bit over 800 per capita at the moment. I don't think a 1/3 cut in market cap of an already undervalued stock based on "China fears" is warranted, but hey that's just me.

[muscleman]

My brother drives a Camaro (2012) and my friend drives a Mustang 2014. They both love it.

 

We just bought a 2015 Mustang Coupe ecoboost with Auto transmission. 27990 MSRP. We got it for 21315 before tax with 6 year 0% interest 0 down payment.

This is the first time we bought a US car. Didn't know it is can be bought at such a discount before.  :) We only owned a number of European and Japanese cars before.

My wife loves it.

[LowIQinvestor]

Just bought some GM common @ $27.

 

6 PE on 2015 earnings and 4.9% dividend.

 

Even assuming a continued disaster in China it is hard to ignore. Cheap oil & low interest rates here to stay.

 

Anyone know what Berkshire's cost basis is (roughly)?

[dutchman]

Why arent more of you going gaga over gm ?!!  Isnt this crazy cheap right now ?  :)

[bigbluffzinc]

I'm fully invested or I'd be adding..

[hyten1]

i would go gaga if i didn't already have a full position in GM, instead of going gaga i am going !@#$%

 

Why arent more of you going gaga over gm ?!!  Isnt this crazy cheap right now ?  :)

[Mephistopheles]

GM is selling for less than 10 p/e right now.

 

Oops, I mean 10x China earnings. You're paying less than 10x last year's China earnings...

[vinod1]

Added to GM position.

 

Vinod

[rohitc99]

Cash on book = 16.8 Bn (net of debt)

DTA = 35 Bn (means they will not be paying taxes for 2-3 years at a minimum ?)

Pension and OPEB = 28 Bn (assuming interest rates remain at current rates)

 

GMNA could earn upto 10 bn EBIT. assuming everything else is zero, company is selling for around 4 times cash flow for NA

 

what am i missing ? is the situation so dire ?

[compounding]

Cash on book = 16.8 Bn (net of debt)

DTA = 35 Bn (means they will not be paying taxes for 2-3 years at a minimum ?)

Pension and OPEB = 28 Bn (assuming interest rates remain at current rates)

 

GMNA could earn upto 10 bn EBIT. assuming everything else is zero, company is selling for around 4 times cash flow for NA

 

what am i missing ? is the situation so dire ?

 

They pay taxes now, although their cash tax rate is quite low. Regarding utilising the DTAs - they will be able to shield future earnings but it also depends on where they make money. I would imagine that e.g. GM's and FCAU's tax rates will come down if Europe continues to recover.

 

The pension liability is large but they do not have to make mandatoy contributions for ~five years. If you want to learn more about these issues I can recommend their "Behind the Charts"-presentation from June.

 

The situation, as far as I can tell, is dire because investors believe that the US market is at a cyclical high, and a few of these companies didn't do too well last time the cycle turned. In addition to that China is slowing down, which has been the big driver of growth for these mega OEMs. So if you believe those two points investing in GM is probably not the best idea since the earnings multiples will not be as low as you think if the E is really 0.5x of what they are reporting now. Also, the capital allocation track record has been far from stellar & they have a habit of incurring a lot of "one time" costs that erode profitability.

 

However, if you think that some of these issues are overblown or fixable, you might, as you point out, find the current price attractive.

[Homestead31]

domestic fleet age is still 10 or 11 years, and Peter Lynch pointed out in one of his books 20 years ago, up cycles in autos last longer than anyone expects. 

 

I would also argue that investors need to re-think the range of appropriate multiples that are applied to auto cos - especially those who were able to clean up their cost structure through the BK process like GM.  This is obviously a cyclical industry, but GM is way better able to handle the down side of a cycle now then they were pre BK.  if memory serves pre BK they needed domestic vehicle sales around the ~14 million range to be profitable.  Now they estimate they can stay profitable with sales as low as 10M.  10M is right around the recession low level of sales.  if the company can stay profitable through all but the worst down turns, it deserves a higher multiple. 

[Liberty]

I'm a tourist in autos, but I hear about the age of the fleet a lot. That is getting old, but do you guys take into account that modern care are more durable than cars from a few decades ago?

 

I expect the age of the fleet to go down, but I wouldn't expect it to go down to what it was back when everything broke on your car past 5 years...

[sswan11]

Not that I in any way agree with this:

 

ELL GENERAL MOTORS ON CHINA RISK: MORGAN STANLEY

S&P Capital IQ

2015-08-24

SELL GENERAL MOTORS ON CHINA RISK: MORGAN STANLEY Investors who are closely following their positions that have exposure to China shouldn't overlook the auto industry, according to a new report by Morgan Stanley analysts. Analyst Adam Jonas commented in a note on Monday that General Motors Company (NYSE: GM)'s earnings and cash flows are both "highly dependent" on China. In fact, earnings from the company's Chinese equity affiliates accounted for more than 32 percent of its net income for 2013 and 2014 combined and roughly half of its automotive cash flow. "Outside of Germany, you'll struggle to find another original equipment manufacturer with greater exposure to China than GM," Jonas argued in his note. Jonas said GM's exposure to China has worked "very much" in its favor in the past and represented a "steady and reliable" source of earnings growth and cash flow support. At its peak, GM's China operations was valued at $8 per GM share, but this is now changing. In recent months, GM has seen its sales slow "considerably" (-4.8 percent year-to-date) while overall sedan sales (in which GM has "outsized" exposure) have seen six consecutive months of decline. With that said, Jonas is now making changes to his medium- and long-term forecasts for GM's growth in China. The analyst is now assuming a forward one-year average total China passenger vehicle growth of 4 percent while GM will see 2 percent growth. This implies a 300 basis point loss of share over the next 10 years to a "still-healthy" level of 13.5 percent. Jonas is also assuming a drop in GM margins from a previously forecasted 11.7 percent pre-tax margin to 5.0 percent in 10 years. As such, the resulting 10-year growth rate forecast for GM in China now stands at negative 5.6 percent. Bottom line, the China slowdown is "not just a GM issue" and affects all auto makers. "Longer term, investors must consider the impact of China moving from a demand story to a supply story and the implications of exporting deflation to the rest of the world in the form of capacity and component supply," Jonas concluded. "These may be issues of earnings multiple rather than near-term earnings itself, but can equally impact near-term share performance." Morgan Stanley resumed coverage of General Motors with an Underweight rating and $27 price target.