Tag Archives: gm

Americans Still Don’t Like Small Cars.

4 May

The Atlantic has generously accepted the second part in my series examining the U.S. automotive market and the drivers thereof.

You can read it here, “Americans Still Don’t Like Small Cars”

BMW to UAW: You Suck

28 Feb

This commercial from BMW is an awesome F*CK YOU to the UAW and all unions.  While the Big 3 were all in bankruptcy and getting federal bailouts, BMW spent a billion dollars expanding a plant in South Carolina.  Last I checked, most of these employees are non-union.  Oh yea, and BMW – a luxury automaker – is actually profitable, and still was, even during the crisis. GM, Ford, Chrysler, friends (or frenemies) of the UAW?  Saved only by the largess and questionably-legal bailout actions of the Government*.

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General Motors Has Profitable 2010, Hurray! But Wait, There’s More…

24 Feb

Yay, GM posted 2010 net income of positive $4,668 billion! Detroit is back, baby!

Oh, what’s that? 28% of 2010 EBIT (earnings before interest & tax) came from just the 3rd quarter of the North America segment?  And that number decreased 67% in the 4th quarter?  GM Europe is hemorraging money, too? And those are the red flags I found just on the FIRST PAGE of their 8-page earnings release?!?!?!?

DON’T.TRADE.THE.HEADLINE.NUMBER.

Dig deeper.  The truth is seldom as rosy as the headlines would have you believe.

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Translating Corporate Speak: Fiat/Chrysler Edition

13 Jan

Fiat/Chrysler Honcho Sergio Marchionne is just as full of shit as his peers at GM were.  He claims that the firm’s #1 goal is to refinance their debt to the U.S. and Canadian Governments with private loans/bonds or possibly even an IPO.  Perhaps – and I’m just throwing this out there – his #1 goal should be, uh, running a freaking car company…

Remember when GM was prepping the IPO and the rushed re-payment of Government bailout loans?  They said the same sort of BS.  “We need to repay the Government ASAP because the loans are hindering our financial position.”  Right.  The generously-granted Government loans that you got after slashing half of your pre-bankruptcy debt are such a huge problem.  Not dysfunctional corporate culture, operations, and management.  Right…

Let’s be honest here: the ONLY reason GM and Chrysler want to repay the Government(s) is to get Uncle Sam (and whatever his Canadian counterpart is called) off their back and out of their hair.  It has little, if anything to do with the burden of extreme debt service.  If Chrysler can’t IPO do they really think the terms they’ll receive on private-sector borrowing are going to be more generous than emergency bailout funds from the Government? Please.*

Could Chrysler do an IPO and raise enough money to repay the $7bn it owes the Governments?  I haven’t seen recent complete financial statements so I can’t say for certain, but I sincerely hope investors will proceed with extreme caution if they do.  Chrysler is not GM (and I dont think GM’s prospects are nearly as good as the rest of the market seems to think they are).

Learn how to read between the lines when company executives talk.  It’s a skill that will serve you very-well over time.  I promise.

Short Story: Why I’m Skeptical About GM

17 Nov

I tweeted this earlier but for those who missed it, let me throw out a few reasons why I don’t buy the “hype” behind the GM IPO/”successful” restructuring/turn-around, in no particular order.

  • Government still has huge role.  As Michael Steinhardt said on CNBC yesterday, “I don’t think one should be a long-term holder of Government securities, especially equity securities.”
  • Still a bit opaque.  Sure, they’ve disclosed alot of the things I had questions about (pensions, etc) but its not only a lot to process, with so many moving parts – many of which could turn into problems down the road – that I’d be hesitant to buy into the story (stock) for anything other than any IPO pop + subsequent pop from index purchasing.  For more, see this great post I somehow totally spaced on (thanks @rmsnickers!) from Francine McKenna.  Preview: Unaudited financials are just a wee bit of a red flag.
  • GM’s early leadership position in China is under alot of pressure.  Buick is a big draw there, but rest assured, Volkswagen and GM’s other competitors won’t let them enjoy that position for long.
  • A successful IPO does not a successful reorg/turnaround make.  GM’s employee count is down about 75,000 from pre-bankruptcy and they’ve closed about a dozen plants, but as I said above, its a huge, sprawling company in an intensely competitive industry.  Throw in a history of bureaucratic bloat, questionable (at best) product design and basically every aspect of the company from the past 30-ish years and I’m nowhere close to buying into the lean & mean story the company, its underwriters, and the media would have you believe.
  • The Chevy Volt is doomed for failure.  I’d just as soon chalk up all the recent attention from the Automotive Media up to IPO-related pre-excitement rather than any realistic expectation that it’ll be a commercial success.  Without heavy Government subsidies (here we go again with that Government thing again), no one would even consider buying it, save for the most economically ignorant tree-hugging types.
  • UAW
  • Only time will tell.  Not nearly enough time has passed to see this story play out.  I seriously advice ignoring anyone who claims otherwise.

Remember, this is just a very short take, each of these bullet points can easily be its own post (if not several).

On the GM IPO Debacle, Part II

16 Nov

In part I, I explained that even if the online/discount brokers (that serve “everyman,” apparently) had gotten allocated GM IPO shares, no matter what Treasury said about every American having access to buy, in practice, it would never go down that way because of the way brokerage firms go about allocating shares.  I may be wrong, but as far as I know, Treasury (besides threatening not to include an underwriting firm in the deal) has no influence over how underwriters allocate shares (someone please enlighten me as to any other authority Treasury has, if any. Thanks).

Now, I really don’t have anything revolutionary to add here and for the purposes of brevity I’m over-simplifying, but I just wanted to add another thought or two.  Even if Etrade, Schwab, and Ameritrade (major advertiser on CNBC, which I suspect may have a not-insignificant part in the network’s annoyingly persistent coverage of this issue)  received allocations of IPO shares, 1. Not every Tom, Dick, and Harry has a brokerage account nor knows how to open one, 2. even if they did, there’s still the little issue of suitability.  On this 2nd point, generally, equity IPO’s are considered to be amongst the least risky of syndicate trades, at least compared to secondary’s, structured products, etc (but certainly not considered risk-less, not by any stretch of the imagination!)  Suitability may vary from firm-to-firm and even from issue-to-issue (e.g. buying an equity IPO from a bankrupt company still married to the Government may require investors clear a higher threshold than a “vanilla” IPO), as firms seek to CYA.

So, the first impediment to “everyone” having access to the GM IPO: brokerage firms choose to whom they allocate shares, not treasury.  Second: even if Treasury was able to influence Brokers’ allocation methodology (doubtful considering the institutional/HNW client outrage that’d result), firms can’t just sell a risky issue to any schmuck with an account (or else they’d get sued/crushed with arbitration claims) into next century if/when things go “wrong” (e.g. the stock goes bankrupt at some point down the road).

The last thing I want to discuss is that even if Treasury HAD explicitly stated verbatim that every American will be able to buy into the GM IPO (and I’ve yet to see any evidence they did), putting the above aside, why do we think EVERY American should be able to buy the IPO?  1. 40% of Americans don’t have any net Federal income tax liability (i.e. 40% of people don’t pay any Federal taxes), 2. why does anyone think just because someone pays Federal taxes they should be automatically qualified to buy-into a questionable IPO?  Whats driving Joe and Jane Outraged Investor’s motivation to get into the IPO?  Does the average retail investor understand dynamics of public offerings, the auto industry, index/fund “frontrunning,” pension accounting, turn-arounds, or any of the relevant factors affecting the performance of the issue?  Methinks not.

So, instead of all of the (mostly) MSM coverage discussing the outrage from “everyday investors” why don’t we get some insight into why these ‘folks want to get into the deal in the first place.  I’ll bet that the responses won’t be much more informed than the testimony given by the NTC employees about their “Robo-Signing” duties (see my Thoughts & Good Reading post from Monday).

Not only do investors need to be protected from predatory practices, they need to be protected from themselves (and firms need to protect themselves from frivolous lawsuits resulting from “improper” conduct and the like).

Securities Law types, brokers, advisors, etc please feel free to weigh in on the issue.

On the $GM IPO Debacle, Part I (of likely several)

12 Nov

Just a warning, this is a rant, and as such, it is going to be stream-of-consciousness and likely rambling and at times borderline incoherent.  That being said, here we go:

The argument today on CNBC (and several other outlets I saw in my twitter stream I don’t have the inclination or patience to read) from several pundits, flapping heads, etc seems to be that because “taxpayers” (if you don’t know why I put that in quotes please stop reading now) bailed out GM, all of that cohort should be given access to the IPO.  In the immortal words of the Geico Caveman: “fuh, what?!”

Let me get this straight.  Apparently small retail investors are outraged (or at least their self-proclaimed advocates are) that they can’t retain/increase their exposure to the clusterf*ck that is GM?  Gluttons for punishment they be, no?  My thoughts on GM’s financial, strategic, and operational condition aside, what’s the rationale behind this non-sequitur?  There’s a missing link in this argument that I can’t for the life of me comprehend.  Given A (…) B seems to be the logic as far as I can tell, similar to the

1. Steal underpants

2. ??????

3. Profit!

argument.  Seriously, someone please enlighten me why every American with a brokerage account deserves an allocation of GM IPO shares because I really just.don’t.get.it.

Now, on to how things actually work in the brokerage industry because MSM apparently doesn’t realize this.  At big brokerage firms (and I imagine the same is true at smaller shops as well), syndicate deals (stock, bond, structured products, whatever) are allocated to clients based on several factors, captured by a firms internal scoring, itself based on factors like how much commissions a client generates, the size of the account, and past participation in syndicate deals.  Now, if Treasury doesn’t feel it necessary to include the discount brokerages (Schwab, E-trade, Ameritrade, etc) in the underwriting group, perhaps there’s sufficient demand among clients of the other 15-ish underwriters (including the 2 biggest brokerage firms in the country MSSB and BAML) to sell the deal at a fair price (leaving the definition of that term aside for a second).  Just sayin…

Now I’m not saying a Dutch Auction wouldn’t have been a good idea (it likely would have, politically and financially), but there seems to be way too much hate for how this GM IPO is being sold.