GM - General Motors

[Dalal.Holdings]

Am I trolling tho? I asked a Q about evidence supporting that Tesla is in a commoditized business—there isn’t any. It’s dominating its market with zero advertising budget. Those regulatory credits will flow from auto co’s with EVs to Tesla because the consumers are choosing Teslas, not Bolts.

 

Compare that to GM, F, VW, TM and you will see what real commoditization looks like. Toyota RAV4 or Honda CRV? Silverado or F150? Who gives a F. It explains why GM has performed as it has despite being a single PE stock for a decade.

 

Or should we just continue to throw out the words “commoditization”, “moat”, “brand equity” without really knowing what they mean.

[Gregmal]

When you sell GM to buy Tesla at $200 you can kind of troll whenever the f you want.

[Dalal.Holdings]

When you sell GM to buy Tesla at $200 you can kind of troll whenever the f you want.

 

  8)

[petec]

GM = BlackBerry?

Tesla = Apple?

Model 3 = iPhone?

 

You are forgetting one big thing.  Apple was/is consistently profitable.  All iterations of the iPhone have been profitable, some wildly so.

 

TSLA still has not achieved consistent profits...so I don't think the comparison is valid.

 

It’s very easy to be profitable with a product when you outsource all the manufacturing to Foxconn. Much harder when you run a giant factory in the SF bay area (just ask GM and Toyota who threw in the towel at NUMMI when cost of living in Bay Area was much lower).

 

I have the greatest respect for what Tesla has achieved and I suspect they are just beginning, but the reason they are making lower profits than Apple is because they are competing in a much more commoditised market. That is not to say their product isn't differentiated - it clearly is in some ways - but in terms of getting you from A to B it does much the same as any other car, just with a bit more acceleration and an added feel-good factor (for some). The same can't be said of the iPhone, which was hugely differentiated when it came out and is now protected by app and data moats which confer silly margins.

 

If you think they are *undifferentiated*, how do u explain the large market share in EVs, the failure of the Bolt/Volt/iPace/Etron/i8? No moat and no brand equity must explain how easy Tesla has been to disrupt, at least that’s what CoBFers claim. Are Tesla’s also *undifferentiated* from a $150K taycan with 200mi range? Sorry, I am in the weeds here and I know when it comes to Tesla, we like discussing higher level, more important things like Elon’s tweets.

 

And clearly Tesla also doesn’t have a software platform much better than any competitor where they can charge customers for services and earn fat margins like AAPL did...

 

I don't think they're undifferentiated. In fact, I said they are clearly differentiated in some ways, and that explains their impressive dominance in the EV market despite low marketing spend.

 

But the sub-thread I was replying to compared Tesla's profitability to Apple's, and in that context I made the point that that despite the points of differentiation, the machine still does basically the same job of getting you from A to B as competing machines do.

 

As a result, Tesla's pricing is capped because there is a limit to the extra money that the vast majority of families are prepared to pay to have a Tesla vs a competing vehicle. My wife and I looked at a Tesla X a year ago. Loved it. Absolutely loved it. But for half the price we got a Mitsubishi Outlander which moves the family around just as well and can do c.80% of our mileage on its electric battery because a lot of our driving is short hops between charging points. (It can't accelerate as well, but frankly that's probably a good thing the way my wife drives.)

 

We would not, however, switch to a half price phone. We'd only save a few hundred dollars and the switching costs aren't worth it to us.

 

Now, if Tesla can dominate the top end car niche and offer services that create switching costs then maybe it can close the profitability gap with Apple somewhat. But it is not there yet. And personally I doubt it will ever get there because I think:

1) Unless ICE's are actually banned, EV's will remain a niche product unless they are commoditised and cheap.

2) Automation likely leads to standardised fleets of cheap cars rather than expensive personalised ones. Tesla could do very well out of this if it dominates automated driving software and outsources production, but the path to that future is strewn with boulders.

3) It says something about barriers to entry that literally dozens of companies from established manufacturers to start ups are entering the EV and automation markets, and absolutely none are trying to enter the phone software market in any serious way.

 

To put it another way: Apple would still be staggeringly profitable if it insourced manufacturing. Tesla isn't. That's because the economics of the markets they compete in are just different.

 

None of this says anything about Tesla's achievements (amazing), future (likely impressive), or status as an investment (I have no view, and FWIW I have no view on Apple either).

 

Sorry for hijacking the GM thread!

 

 

 

 

[Spekulatius]

It is incorrect that Apple outsources manufacturing. They outsource the labor, but meticulously control the know how part. They don’t do what most company does, give the print to The contract manufacturers and let them figure it out. They develop the manufacturing processes, even buy the machinery and have their own people on the floor in the contract manufacturing chain at critical locations.

They do this in a very smart way and have a lot of control on what happens in their supply chain. Most other companies do not do it this way.

[Dalal.Holdings]

It is incorrect that Apple outsources manufacturing. They outsource the labor, but meticulously control the know how part. They don’t do what most company does, give the print to The contract manufacturers and let them figure it out. They develop the manufacturing processes, even buy the machinery and have their own people on the floor in the contract manufacturing chain at critical locations.

They do this in a very smart way and have a lot of control on what happens in their supply chain. Most other companies do not do it this way.

 

AAPL may oversee Foxconn’s work moreso than others, but it doesn’t change the fact that there are high capex and opex needs to run your own factories, esp in U.S. AAPL did U.S. manufacturing in the 90s and went nearly bankrupt. When Jobs took over, COO Tim Cook was the one who outsourced manufacturing to China as one of his big moves.

 

It’s naive to think that Tesla is not handicapped by running a big factory in SF bay area. Guess that will become clearer once the Shanghai factory margins start rolling in.

[Gregmal]

https://seekingalpha.com/news/3564584-gm-suspends-dividend-buybacks-takes-liquidity-actions

 

Mary's work on the fortress balance sheet is clearly paying dividends!

 

https://seekingalpha.com/news/3564584-gm-suspends-dividend-buybacks-takes-liquidity-actions

 

Looks like she was swimming in the nude..

[JRM]

We are also starting to see the fruits of the "Growth initiatives" as they shut down Maven.  Lyft is likely a 0, and I don't have much hope for Cruise Automation being anything more than an expensive science project.

[Xerxes]

I am pissed. :-)

I guess with my GM stock down by this much, they contribute less going forward just by default.

 

[Gregmal]

What? Not happy with what you're getting out of the $20M a year CEO? Barra proven to be very much the dimwit type that came before her.

[Xerxes]

She is not the only fool.

 

Xerxes had owned Alibaba since the IPO in 2014.

 

Xerxes sold 15% of his position Alibaba (kept all the rest since) when it closed around $200 before China trade spat and added to his GM position at around $38-40, because Xerxes got excited about Softbank investing in Cruise. You know that this-is-undervalued-b/c-there-is-a-$20-bill-in-the-$5-purse … so the whole is worth $25 trade. As it happens, the purse is worth $5 all in all.

 

Xerxes felt like a Motely Fool for doing a relative valuation trade. Seem like a good idea at the time.

Now he feels just like a fool with small 'f'.

 

Thank god, I am long term holder and it is rare indeed for me to sell.

 

[RadMan24]

https://seekingalpha.com/news/3564584-gm-suspends-dividend-buybacks-takes-liquidity-actions

 

Mary's work on the fortress balance sheet is clearly paying dividends!

 

https://seekingalpha.com/news/3564584-gm-suspends-dividend-buybacks-takes-liquidity-actions

 

Looks like she was swimming in the nude..

 

You're an idiot.

[Gregmal]

Dont be mad Radman. Some of us saw this was a compensation scheme and likely to end badly for shareholders, and moved on. Others, I guess, wanted to be value investors or something.

 

I mean even now, how atrocious is it that these guys need to again get on their knees and ask permission from the UAW just to re-open? This is just a bad business, run by incompetents, horse collared by corrupt unions, and now, bag holders dont even get their precious dividend after being told to ignore the putrid performance this past decade because at least the balance sheet was robust....Ooops. Live and learn, dont hate the player, hate the game is the saying, I believe.

[valueinvestor]

She is not the only fool.

 

Xerxes had owned Alibaba since the IPO in 2014.

 

Xerxes sold 15% of his position Alibaba (kept all the rest since) when it closed around $200 before China trade spat and added to his GM position at around $38-40, because Xerxes got excited about Softbank investing in Cruise. You know that this-is-undervalued-b/c-there-is-a-$20-bill-in-the-$5-purse … so the whole is worth $25 trade. As it happens, the purse is worth $5 all in all.

 

Xerxes felt like a Motely Fool for doing a relative valuation trade. Seem like a good idea at the time.

Now he feels just like a fool with small 'f'.

 

Thank god, I am long term holder and it is rare indeed for me to sell.

 

As they say, it’s not a loss, unless you sell. Most of us been there, even myself with BOX.UN, Hudson’s Bay, Valeant, etc. Ackman with JC Penny, Buffet with Occidental. List goes on! :D

[SHDL]

This is just a bad business

 

This is the biggest problem with this investment — more so than anything else (e.g., management, unions, pensions, etc) — and the problem was arguably made worse by the various innovations that recently took place in the industry.

 

There was a story somewhere about when Buffett still had the textile mill running at Berkshire and someone told him about this new amazing piece of equipment that would make textile mills 2x more productive or whatever. Buffett’s reaction to that was something like, “Gee I hope that isn’t true because if it is I’m shutting this business down right now.” His rationale was that such an innovation would necessitate a huge capital outlay just to buy the equipment and keep up with competitors, and yet would not meaningfully increase future profits because at the end of the day the benefits would simply all flow to consumers thanks to brutal commodity market competition.

 

I think that is basically what happened at GM. They felt like they needed to make these new flashy investments just to maintain their relevance and but the fruits of those investments got (or will likely get) competed away by rivals like Uber, Tesla, Waymo, etc, and simply went to consumers, leaving GM shareholders with not much more than financial losses.

[RadMan24]

Dont be mad Radman. Some of us saw this was a compensation scheme and likely to end badly for shareholders, and moved on. Others, I guess, wanted to be value investors or something.

 

I mean even now, how atrocious is it that these guys need to again get on their knees and ask permission from the UAW just to re-open? This is just a bad business, run by incompetents, horse collared by corrupt unions, and now, bag holders dont even get their precious dividend after being told to ignore the putrid performance this past decade because at least the balance sheet was robust....Ooops. Live and learn, dont hate the player, hate the game is the saying, I believe.

 

Here we are at an economic collapse and GM is using its supply chain expertise to ramp up production of ventilators. They entered the pandemic with $18 billion in hard cash. They're not begging anyone for anything, but keep dreaming that they are.

[JRM]

You can probably halve that $18B to account for unfunded pension liability (with 0% interest rates).  GM Financial will probably need to up its loan loss reserves.  Residuals have fallen.  It will be interesting to see the impact from this. I doubt there have been many defaults yet, but there may be in the future.

 

I think this gets worse, unfortunately.

 

I was fortunate to get out with a nominal profit, but it was still extremely frustrating.  This was a situation where I (and others on this board) were correct about the thesis back in 2015, but the share price never reflected the results. 

 

 

[fareastwarriors]

GM’s self-driving unit Cruise to cut 8% of staff

 

https://www.cnbc.com/2020/05/14/gms-self-driving-unit-crusie-to-cut-8percent-of-staff.html

[Xerxes]

The thread was created in 2012 with 177 pages.

The stock price way below IPO and not much to show for it. ;-)

Perhaps the shift from mass transit to ownership will give it a short term boost.

[RadMan24]

The thread was created in 2012 with 177 pages.

The stock price way below IPO and not much to show for it. ;-)

Perhaps the shift from mass transit to ownership will give it a short term boost.

 

On the day the thread was created, the stock price is flat, but dividends received are materially better than cash and you lost no principal and maintained purchasing power. So, it could have been worse - pandemic notwithstanding.

[Gregmal]

The thread was created in 2012 with 177 pages.

The stock price way below IPO and not much to show for it. ;-)

Perhaps the shift from mass transit to ownership will give it a short term boost.

 

On the day the thread was created, the stock price is flat, but dividends received are materially better than cash and you lost no principal and maintained purchasing power. So, it could have been worse - pandemic notwithstanding.

 

This is certainly worthy of the #bagholderquotes.....

[RadMan24]

The thread was created in 2012 with 177 pages.

The stock price way below IPO and not much to show for it. ;-)

Perhaps the shift from mass transit to ownership will give it a short term boost.

 

On the day the thread was created, the stock price is flat, but dividends received are materially better than cash and you lost no principal and maintained purchasing power. So, it could have been worse - pandemic notwithstanding.

 

This is certainly worthy of the #bagholderquotes.....

 

Hey, look at you - making no good investments but trolling constantly.

[fareastwarriors]

https://www.cnbc.com/2020/08/18/wall-street-pushes-for-gm-to-spin-off-its-electric-vehicle-business.html

 

Pressure is mounting from Wall Street for General Motors to spin off its electric vehicle business.

 

The spin-off company could be worth between $20 billion to $100 billion, according to Deutsche Bank.

 

GM CEO Mary Barra last month said “nothing is off the table” when it comes to the company unlocking shareholder value.

[tng]

https://www.cnbc.com/2020/08/18/wall-street-pushes-for-gm-to-spin-off-its-electric-vehicle-business.html

 

Pressure is mounting from Wall Street for General Motors to spin off its electric vehicle business.

 

The spin-off company could be worth between $20 billion to $100 billion, according to Deutsche Bank.

 

GM CEO Mary Barra last month said “nothing is off the table” when it comes to the company unlocking shareholder value.

 

It would be nice for shareholders if the market decides to value the EV business like a tech company and probably overvalue it. But it sounds like a pretty crazy idea to me in terms of the business. If GM loses all the tech of the EVs, then what is left for GM? Just a dying old car business? And what advantage does the EV spin-off have if it doesn't take the manufacturing capacity of GM with it?

[Gregmal]

For the sake of those that have stuck with this, I hope they follow through. But they've played this game plenty of times before, and yet, still, here we are talking about "spinning off the EV biz"...again.