GM news

[nitro]

"07:52 GM General Motors: Expect a positive near-term reaction to the dividend announcement - JP Morgan (31.33 )

JP Morgan notes that GM reaffirmed its quarterly dividend of $0.50/share last night. They say fears on a near term dividend cut had been heightened by the co's major Q1 profit warning, and would expect a positive near-term reaction to the co's announcement (although they believe the market has, more recently, at least partly discounted a stable dividend). Firm considers the risk of a near term dividend cut as low, and continues to see Kerkorian's involvement at GM as a positive for equity shareholders. At a minimum, assuming his tender offer is not revoked, they think the stock has a floor. Maintains Overweight."

nitro

 

[tnewman1]

Trust me, JP Morgan doesn't know diddly about the auto business and I don't trust anyone that never sat in a showroom and didn't spend time selling cars, working on them or in a dealership setting. I've been in the auto business for 30 years and GM has their work cut out for them. The foreign makes are killing their business as well as the customer awareness about GM vehicles in general. It could take years for this company to turn around right now. I think the stock will go down eventually because you can't polish a turd. The management at GM has killed the company as well as the Unions, so it's going to be a while before this company starts stealing back market share.

 

[nitro]

Quote from tnewman1:

Trust me, JP Morgan doesn't know diddly about the auto business and I don't trust anyone that never sat in a showroom and didn't spend time selling cars, working on them or in a dealership setting. I've been in the auto business for 30 years and GM has their work cut out for them. The foreign makes are killing their business as well as the customer awareness about GM vehicles in general. It could take years for this company to turn around right now. I think the stock will go down eventually because you can't polish a turd. The management at GM has killed the company as well as the Unions, so it's going to be a while before this company starts stealing back market share.

From what I understand, the problems at GM are contained to SUVs. It is such a large part of their profit that when the price of oil went > $50, that part of the product line got slammed.

In the meantime Japanese automakers are far ahead of the curve making Hybrid SUVs, and SUVs is not even their niche like it is for the American automakers (with the excpetion of Chrysler.)

IMO, if it were not for the problems it has with retirees and the healthcare costs, GM would be a screaming buy. Even still, from a _traders_ point of view, this is a very enticing long play. GM/GMAC has $40B in cash and is trading at close to 70% of book value.

nitro

 

[dougcs]

Quote from nitro:

From what I understand, the problems at GM are contained to SUVs. It is such a large part of their profit that when the price of oil went > $50, that part of the product line got slammed.

In the meantime Japanese automakers are far ahead of the curve making Hybrid SUVs, and SUVs is not even their niche like it is for the American automakers (with the excpetion of Chrysler.)

IMO, if it were not for the problems it has with retirees and the healthcare costs, GM would be a screaming buy. Even still, from a _traders_ point of view, this is a very enticing long play. GM/GMAC has $40B in cash and is trading at close to 70% of book value.

nitro

I disagree:while health care costs are very high for GM, the other auto makers have them also, especially the foreign makes produced in the US.

GM sales down; Toyota's are up big time. This tells me GM is making undesireable cars and IMO the health care costs are a red herring to shift the focus away from GM's lousy product management to blaming the unions. A strategy similar to what GM had back in the 80s when Japanese quality was killing them. At that time they claimed cheaper labor rates in Japan were to blame for their shortcomings. In fact, when you added the Japanese labor costs plus shipping costs, GM had the lower effective labor rates; it just took GM many more manhours to build a car vs. Japanese cars made in Japan.

I hope GM pulls out of this but I have my doubts.

DS

 

[inandlong]

Quote from nitro:

From what I understand, the problems at GM are contained to SUVs. It is such a large part of their profit that when the price of oil went > $50, that part of the product line got slammed.

In the meantime Japanese automakers are far ahead of the curve making Hybrid SUVs, and SUVs is not even their niche like it is for the American automakers (with the excpetion of Chrysler.)

IMO, if it were not for the problems it has with retirees and the healthcare costs, GM would be a screaming buy. Even still, from a _traders_ point of view, this is a very enticing long play. GM/GMAC has $40B in cash and is trading at close to 70% of book value.

nitro

Dead on accurate post top to bottom.

Some might argue about the cash posted as it is usually stated as 26 billion, but that is cash on hand. GM has another 14-16 billion in readily marketable securities, so using the number 40 is accurate.

As for dividend stability, several years back the div was set at the current value so that it could be sustained "through lean years." Whether or not the present scenario falls within the context of "lean years" is yet to be seen, but for this quarter it does.

Previous management hurt this company - not the current group. The current group inherited an aged product mix along with UAW and retiree contracts that are ridiculous. UAW layoffs get 95% of their pay for up to 5 years! How does that happen? Autos have always been a cyclical business. When the work is there the pay is great, when it isn't... get another job until you get to go back.

UAW doesn't even have to pay a copay at the doc's office. I used to see a lot of UAW's in my office and very few had anything going on that you or I would go to the doc for. They wanted a day off because they hated their job.

The post previous to nitro's cracks me up though. No offense, but when you post that you have worked in a car dealership fo 30 years and you have 2 whole posts on ET, it's pretty funny when you begin by saying "trust me." Those are absolutely the most famous words ever uttered on a car lot.

 

[DHOHHI]

Quote from dougcs:

I disagree:while health care costs are very high for GM, the other auto makers have them also, especially the foreign makes produced in the US.
GM sales down; Toyota's are up big time. This tells me GM is making undesireable cars and IMO the health care costs are a red herring to shift the focus away from GM's lousy product management to blaming the unions. A strategy similar to what GM had back in the 80s when Japanese quality was killing them. At that time they claimed cheaper labor rates in Japan were to blame for their shortcomings. In fact, when you added the Japanese labor costs plus shipping costs, GM had the lower effective labor rates; it just took GM many more manhours to build a car vs. Japanese cars made in Japan.


DS

I agree with a lot of what you wrote above. I worked in advanced engineering at GM for 5 years at their Tech Center in the early 80's. Back then it was quality and Deming. Later is was their excessive time to build a car. Part of that problem was engineering and part was the unions. When your quality sucks and you have a lot of rework it adversely impacts the time to get cars out the door. Last, the union is a BIG problem IMO. They have steadfastly refused to budge over certain issues like healthcare. IMO they're slitting their own throat as far as longer term. They have to give in a bit or they'll push GM into bankruptcy eventually ... unions can be tough to negotiate with ... but unless they want to end up like United Airlines, US AIr, ....

And GM has depended so much on the high profit SUV's for way too long. Such an incredibly poor strategic long term vision. Now their backs are up against the wall. Hydrogen vehicles are a ways off and their hybrids have a ways to go to even touch Toyota.