GM - General Motors

[thomcapital]

Do I understand it correctly that there is no adjustments for cash dividends?

 

 

I think you are correct. I just emailed IR and will report back.

 

If we make a dividend or other distribution to all holders of our common stock of shares of (i) our capital stock (other than our common stock), (ii) evidences of our indebtedness, (iii) rights or warrants to purchase our securities or assets, or (iv) property or cash (excluding ordinary cash dividends and excluding any dividend, distribution or issuance covered by the two bullets above), then the exercise price will be adjusted based on the following formula:

 

 

EP1 = EP0 x ((SP0 – FMV) / SP0)

 

where:

 

EP0 = the exercise price in effect at the close of business on the record date;

 

EP1 = the exercise price in effect immediately after the record date;

 

SP0 = the Current Market Price (as defined above) as of the record date; and

 

FMV = the fair market value (as determined in good faith by our Board of Directors), on the record date for such dividend or distribution, expressed as an amount per share of outstanding common stock.

 

 

[Packer16]

My reading of the warrant agreement was there is no dilution adjustment like for the other TARP warrants.

 

Packer

[PlanMaestro]

Thanks guys.

[thomcapital]

My response from GM IR:

 

These would be ordinary dividends declared by the Board of Directors. For example, quarterly cash dividends declared by the Board of Directors, paid out of earnings on a particular date to all holders of record on a particular date. Yes, ordinary cash dividends declared would not reduce the exercise price.

 

 

[muscleman]

Thanks guys.

 

Plan, it looks like you have tracked GM for a while.

What's your take on GM's subprime lending?

 

http://freebeacon.com/grand-theft-auto-loans/

[hyten1]

"General Motors still owed $21.6 billion on its $49.5 billion bailout as of Jan. 30."

 

that is false

[PlanMaestro]

Plan, it looks like you have tracked GM for a while.

What's your take on GM's subprime lending?

 

http://freebeacon.com/grand-theft-auto-loans/

 

It's something to follow for sure. However, one of the things we learned in the last crisis, is that subprime auto loans behave much better than subprime mortgages. They have a securitization market that was already tested in the 90s and its loses were reasonable even during the last crisis … it's not easy to have a bubble in used cars, in case of repossession, and borrowers preferred to keep their work tool even more than their homes.

[hyten1]

also note GM financial concentrate on subprime. before gm acquired americredit and ally financial (international divisions) gm's percentage of sales that was subprime was below industry average. they have just been ramping up after americredit/ally.

 

i can't recall the actual percentages.

 

i think i read somewhere total industry average aas 24% for subprime loans

[txlaw]

Plan, it looks like you have tracked GM for a while.

What's your take on GM's subprime lending?

 

http://freebeacon.com/grand-theft-auto-loans/

 

It's something to follow for sure. However, one of the things we learned in the last crisis, is that subprime auto loans behave much better than subprime mortgages. They have a securitization market that was already tested in the 90s and its loses were reasonable even during the last crisis … it's not easy to have a bubble in used cars, in case of repossession, and borrowers preferred to keep their work tool even more than their homes.

 

If you guys are further interested in dissecting GM Financial, I highly recommend looking at the history of AmeriCredit (former name of GM Financial before it was acquired by GM), its processes, and what happened to it during the financial crisis. 

 

Notably, both LUK and Bruce B were involved in that investment.

[muscleman]

Plan, it looks like you have tracked GM for a while.

What's your take on GM's subprime lending?

 

http://freebeacon.com/grand-theft-auto-loans/

 

It's something to follow for sure. However, one of the things we learned in the last crisis, is that subprime auto loans behave much better than subprime mortgages. They have a securitization market that was already tested in the 90s and its loses were reasonable even during the last crisis … it's not easy to have a bubble in used cars, in case of repossession, and borrowers preferred to keep their work tool even more than their homes.

 

True. One thing to keep in mind is how many cars in the delinquent loans are never found. For houses, you can never take it away, but for delinquent auto loans, they can take the car away, which makes the bank's loss recovery percentage to be 0% on these cases.

I read David Einhorn's Fooling some of the people all the time book, and in the first few chapters he mentioned investing in a subprime auto loan company and lost money due to the false assumption that ignored cars that never got found.

[muscleman]

Plan, it looks like you have tracked GM for a while.

What's your take on GM's subprime lending?

 

http://freebeacon.com/grand-theft-auto-loans/

 

It's something to follow for sure. However, one of the things we learned in the last crisis, is that subprime auto loans behave much better than subprime mortgages. They have a securitization market that was already tested in the 90s and its loses were reasonable even during the last crisis … it's not easy to have a bubble in used cars, in case of repossession, and borrowers preferred to keep their work tool even more than their homes.

 

If you guys are further interested in dissecting GM Financial, I highly recommend looking at the history of AmeriCredit (former name of GM Financial before it was acquired by GM), its processes, and what happened to it during the financial crisis. 

 

Notably, both LUK and Bruce B were involved in that investment.

 

Thanks a lot! I will look into that.

Besides GM financial, how much do you think is the upside for GM? 2x? 3x?

[txlaw]

Plan, it looks like you have tracked GM for a while.

What's your take on GM's subprime lending?

 

http://freebeacon.com/grand-theft-auto-loans/

 

It's something to follow for sure. However, one of the things we learned in the last crisis, is that subprime auto loans behave much better than subprime mortgages. They have a securitization market that was already tested in the 90s and its loses were reasonable even during the last crisis … it's not easy to have a bubble in used cars, in case of repossession, and borrowers preferred to keep their work tool even more than their homes.

 

If you guys are further interested in dissecting GM Financial, I highly recommend looking at the history of AmeriCredit (former name of GM Financial before it was acquired by GM), its processes, and what happened to it during the financial crisis. 

 

Notably, both LUK and Bruce B were involved in that investment.

 

Thanks a lot! I will look into that.

Besides GM financial, how much do you think is the upside for GM? 2x? 3x?

 

Depends on your time frame. 

 

I have my own idea of what IV is, but I don't really like to put that out there to the public.  I have a warrant position, so that skews things a bit for me as well.

[jay21]

Apparently GM Financial files.  Here's 2012 results:  http://www.sec.gov/Archives/edgar/data/804269/000080426913000010/acf12311210-k.htm

 

Delinquencies up, which is consistent with what I am seeing in the subprime auto space.

[muscleman]

Apparently GM Financial files.  Here's 2012 results:  http://www.sec.gov/Archives/edgar/data/804269/000080426913000010/acf12311210-k.htm

 

Delinquencies up, which is consistent with what I am seeing in the subprime auto space.

 

What is the weighted average rate for the sub-prime loans?

I see find this in the 10-K. Is that the right number? Who would buy a car with 15% APR. ::)

Years Ending December 31,

 

2012

 

2013

 

2014

 

2015

 

2016

 

Thereafter

 

Fair Value

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer finance receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal amounts

 

$

3,889,053

 

 

$

2,571,226

 

 

$

1,531,495

 

 

$

946,448

 

 

$

547,500

 

 

$

264,992

 

 

$

9,385,851

 

Weighted average annual percentage rate

 

15.19

%

 

[PlanMaestro]

Thanks Jay, very interesting 10-K.

 

Apparently GM Financial files.  Here's 2012 results:  http://www.sec.gov/Archives/edgar/data/804269/000080426913000010/acf12311210-k.htm

 

Delinquencies up, which is consistent with what I am seeing in the subprime auto space.

[MYDemaray]

GM reaches agreement to shut down German factory by 2016:

http://online.wsj.com/article/SB10001424127887324662404578332160811576992.html?ru=yahoo&mod=yahoo_hs

[jay21]

Thanks Jay, very interesting 10-K.

 

Apparently GM Financial files.  Here's 2012 results:  http://www.sec.gov/Archives/edgar/data/804269/000080426913000010/acf12311210-k.htm

 

Delinquencies up, which is consistent with what I am seeing in the subprime auto space.

 

Plan, I know you follow banking and autos.  Any thoughts on the subprime auto market?  It seems credit is loosening and credit metrics are worsening.    Do you have a sense where these numbers fall in the subprime auto history?

[hyten1]

http://www.subprimenews.com/spn/news/story.html?id=2813

 

"As expected auto loan delinquencies rose slightly in the fourth quarter, though they remain near the all-time record low set in the second quarter of 2012," said Peter Turek,

[jay21]

http://www.subprimenews.com/spn/news/story.html?id=2813

 

"As expected auto loan delinquencies rose slightly in the fourth quarter, though they remain near the all-time record low set in the second quarter of 2012," said Peter Turek,

 

Thanks.  However, this article seemed to talk about the entire auto market, not specifically subprime.

[hyten1]

jay yes this article is about deliquency for entire auto market (which is still helpful)

 

you want subprime specific search that website they have other article about it

[jay21]

jay yes this article is about deliquency for entire auto market (which is still helpful)

 

you want subprime specific search that website they have other article about it

 

Yes, I'm looking at it now.  There's some very good articles there.  Some that highlight my worries, like this one:  http://www.subprimenews.com/spn/news/story.html?id=2807

 

 

"We're seeing more lenders enter into that subprime space again,"

 

 

"As we have discussed for several quarters, an important driver of recovery in auto sales is the expansion of consumer credit, particularly for lower-tiered customers," Holzshu said. "Lenders are committed to increasing their portfolios of automotive loans and loosening their lending criteria to accomplish this objective.

 

"We focus on continuing to get the subprime customers back into our stores. I can tell you the subprime customer is an opportunity for us today," he concluded.

 

 

Here's another: http://www.subprimenews.com/spn/news/story.html?id=2788

 

"The environment that we're in today is very competitive," Doug Busk, senior vice president, treasurer and head of investor relations at Credit Acceptance.

 

"There are hundreds of companies that serve the subprime auto space across the country," Busk told analysts. "We have historically found that the primary factor that impacts how competitive the environment is, is the availability of capital to the industry. At the current time, capital is readily available and due to the low interest rate environment, capital is very cheap. That has led to an increase in competition."

 

 

[hyten1]

jay this is definitely worth watching

 

base on what i have read, the current subprime loans as a percentage of entire loans is still within the historical norm.

 

hy

[PlanMaestro]

GM struggles to overcome Chevrolet and Opel rivalry.

http://news.yahoo.com/gm-struggles-overcome-chevrolet-opel-rivalry-131915125--finance.html

[MYDemaray]

Any thoughts on European ops in general?  Do you agree that winding them down would be ludicrous -- because I understand the appeal of that given the past, present and likely near future losses?

[PlanMaestro]

Any thoughts on European ops in general?  Do you agree that winding them down would be ludicrous -- because I understand the appeal of that given the past, present and likely near future losses?

 

Personal opinion. Opel doesn't provide much in terms of scale, brand, or technology. And it's facing some of the best global competitors in their home turf … and the Koreans are coming. Considering that GM is also facing the risk of completely losing its, once dominant, leading positions in the attractive US and Chinese markets, I would prefer a little more focus.