The shine is off the new GM for investors
04-16-11, 08:37 AM
#1
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The shine is off the new GM for investors
Shocking....
DETROIT (Bloomberg) -- The new General Motors made its Wall Street debut with much fanfare last November. The initial public offering that was supposed to max out at about $10 billion ended up raising more than double that amount.
CEO Dan Akerson had a good story to tell: The Detroit automaker had posted a $4.8 billion profit for the nine months ended Sept. 30, and new models like the Chevrolet Equinox and Cadillac SRX SUV were selling well. Two weeks after the IPO, GM was worth just $1.6 billion less than Ford Motor Co., and by mid-January the stock ran up 20 percent, to almost $40 a share, giving GM a value of $59.3 billion.
GM's feel-good moment didn't last. Since the beginning of January the stock has fallen more than 18 percent, to close Friday at $30.24 a share, which is $2.76 below its IPO price. GM's market valuation now trails Ford's by almost $8 billion. Analysts fret about the churn in GM's management ranks, the aggressive use of incentives to sell its cars, ongoing losses in Europe, and a softening in the Chinese market, where GM is the leader.
There's also the thin pipeline of new models. Add it up, and investors may be better off taking a wait-and-see approach, says Peter Nesvold, an analyst with New York research firm Jefferies.
As soon as practical
The U.S. Treasury owned 61 percent of GM as a result of its 2009 bailout of the automaker. It sold shares equal to a 28 percent stake during the IPO and can unload the rest as early as May 18. In a January interview, Ron Bloom, head of the Obama Administration's auto-industry task force, said the government wanted to sell its GM shares "as soon as practical."
The Feds need a $53 share price to break even, and right now auto stocks are under pressure from higher oil prices and Japan's disaster, which has disrupted production for many carmakers. "Politically it would be hard for the administration to sell the remaining shares below the original deal price," says Nesvold.
A GM spokesman declined comment.
Even in China, a bright spot for GM over the last decade, there are challenges. Growth in the world's largest auto market slowed to 8 percent this year after reaching almost 30 percent in the fourth quarter. Some local governments, such as the city of Beijing, are placing restrictions on new-car sales to battle traffic congestion. In the long run, GM may struggle to sustain its 11 percent net margin in China as more competition continues to pour in.
Revolving door
The revolving door in GM's executive suite also has investors nervous, according to Brett D. Hoselton, analyst for KeyBanc Capital Markets. The carmaker is on its third CEO since it emerged from bankruptcy in 2009.
Same for its chief financial officers: The latest, Chris Liddell, left on Apr. 1 after 15 months on the job, saying he was ready for bigger things. He ceded the job to GM Treasurer Daniel Ammann. "I don't know what the management team will do," says Hoselton. "There's a lack of predictability."
Ammann attempted to calm Wall Street's nerves at a dinner with analysts on Apr. 7 by indicating he will be in the job for years. He also said GM's heavy spending on sales incentive -- at $3,300 per vehicle, they were the highest of any major carmaker in March -- will not become the status quo. Analysts said the next day they were satisfied that GM won't start a price war and may be firming up its management team.
Still, to say shareholders are feeling confident would be a stretch. Says Nesvold: "GM remains a 'show-me' story."
The bottom line: Management turnover, weakness in China, and big sales incentives have hit GM's stock, complicating Treasury's plans for an exit.
Read more: http://www.autonews.com/apps/pbcs.dl...#ixzz1JhW0G0px
CEO Dan Akerson had a good story to tell: The Detroit automaker had posted a $4.8 billion profit for the nine months ended Sept. 30, and new models like the Chevrolet Equinox and Cadillac SRX SUV were selling well. Two weeks after the IPO, GM was worth just $1.6 billion less than Ford Motor Co., and by mid-January the stock ran up 20 percent, to almost $40 a share, giving GM a value of $59.3 billion.
GM's feel-good moment didn't last. Since the beginning of January the stock has fallen more than 18 percent, to close Friday at $30.24 a share, which is $2.76 below its IPO price. GM's market valuation now trails Ford's by almost $8 billion. Analysts fret about the churn in GM's management ranks, the aggressive use of incentives to sell its cars, ongoing losses in Europe, and a softening in the Chinese market, where GM is the leader.
There's also the thin pipeline of new models. Add it up, and investors may be better off taking a wait-and-see approach, says Peter Nesvold, an analyst with New York research firm Jefferies.
As soon as practical
The U.S. Treasury owned 61 percent of GM as a result of its 2009 bailout of the automaker. It sold shares equal to a 28 percent stake during the IPO and can unload the rest as early as May 18. In a January interview, Ron Bloom, head of the Obama Administration's auto-industry task force, said the government wanted to sell its GM shares "as soon as practical."
The Feds need a $53 share price to break even, and right now auto stocks are under pressure from higher oil prices and Japan's disaster, which has disrupted production for many carmakers. "Politically it would be hard for the administration to sell the remaining shares below the original deal price," says Nesvold.
A GM spokesman declined comment.
Even in China, a bright spot for GM over the last decade, there are challenges. Growth in the world's largest auto market slowed to 8 percent this year after reaching almost 30 percent in the fourth quarter. Some local governments, such as the city of Beijing, are placing restrictions on new-car sales to battle traffic congestion. In the long run, GM may struggle to sustain its 11 percent net margin in China as more competition continues to pour in.
Revolving door
The revolving door in GM's executive suite also has investors nervous, according to Brett D. Hoselton, analyst for KeyBanc Capital Markets. The carmaker is on its third CEO since it emerged from bankruptcy in 2009.
Same for its chief financial officers: The latest, Chris Liddell, left on Apr. 1 after 15 months on the job, saying he was ready for bigger things. He ceded the job to GM Treasurer Daniel Ammann. "I don't know what the management team will do," says Hoselton. "There's a lack of predictability."
Ammann attempted to calm Wall Street's nerves at a dinner with analysts on Apr. 7 by indicating he will be in the job for years. He also said GM's heavy spending on sales incentive -- at $3,300 per vehicle, they were the highest of any major carmaker in March -- will not become the status quo. Analysts said the next day they were satisfied that GM won't start a price war and may be firming up its management team.
Still, to say shareholders are feeling confident would be a stretch. Says Nesvold: "GM remains a 'show-me' story."
The bottom line: Management turnover, weakness in China, and big sales incentives have hit GM's stock, complicating Treasury's plans for an exit.
Read more: http://www.autonews.com/apps/pbcs.dl...#ixzz1JhW0G0px
04-16-11, 05:34 PM
#2
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gm may get bailed out again if it keeps going the way it is. 
how about getting the crapload of money given to uaw back in such a bailout?
how about getting the crapload of money given to uaw back in such a bailout?
04-16-11, 08:04 PM
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The thing that scares me the most is CEO Dan Akerson. They were stupid enough to go with this non car guy. There's nothing worse that an automaker can do. A number of others have done it and it never works out. What you end up with is lineups with no passion. Passion is what is going into the latest Ford's and Hyundai's. You can see what a difference it makes.
Without it, you get bean counter cars like the GM cars of the '80's to the early 2000's. You get rental fleet cars.
A couple of weeks ago, Akerson made it clear who he was when he equated cars to cans of Coke. Akerson recently told The Wall Street Journal that a GM car was just like the can of Diet Coke he was drinking during the interview. He said...
"GM has to start acting like a consumer-driven -- not [an] engineering-driven -- company," Akerson said. "We sell a consumer product -- our can just costs $30,000."
WTF????
This is exactly what caused GM's demise. Here we go again, unless the board is smart enough to can him (no pun intended).
They need another Bob Lutz to stay on this recent roll they've been on.
Without it, you get bean counter cars like the GM cars of the '80's to the early 2000's. You get rental fleet cars.
A couple of weeks ago, Akerson made it clear who he was when he equated cars to cans of Coke. Akerson recently told The Wall Street Journal that a GM car was just like the can of Diet Coke he was drinking during the interview. He said...
"GM has to start acting like a consumer-driven -- not [an] engineering-driven -- company," Akerson said. "We sell a consumer product -- our can just costs $30,000."
WTF????
This is exactly what caused GM's demise. Here we go again, unless the board is smart enough to can him (no pun intended).
They need another Bob Lutz to stay on this recent roll they've been on.
Last edited by -J-P-L-; 04-16-11 at 08:54 PM.
04-16-11, 10:03 PM
#6
Lexus Fanatic
It would be interesting to see an automaker collapse.
Last edited by mmarshall; 04-16-11 at 10:10 PM.
04-16-11, 10:13 PM
#7
If they start going south again, I hope they are let to fail. Let other companies buy em out, or just let them collapse into obscurity.
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04-16-11, 10:25 PM
#8
Lexus Fanatic
The bolded part I'm sure people don't mind at all. It's not using tax payer money to prop the failure up. If a company wants to use its own money to buy a failing company that's their decision. People had a big problem with the gov't using tax payer money to prop up the failure that was GM.
04-16-11, 10:29 PM
#9
Lexus Fanatic
The Feds need a $53 share price to break even
"Politically it would be hard for the administration to sell the remaining shares below the original deal price,"
04-17-11, 06:24 AM
#10
04-17-11, 07:08 AM
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The thing that scares me the most is CEO Dan Akerson. They were stupid enough to go with this non car guy. There's nothing worse that an automaker can do. A number of others have done it and it never works out. What you end up with is lineups with no passion. Passion is what is going into the latest Ford's and Hyundai's. You can see what a difference it makes.
Without it, you get bean counter cars like the GM cars of the '80's to the early 2000's. You get rental fleet cars.
A couple of weeks ago, Akerson made it clear who he was when he equated cars to cans of Coke. Akerson recently told The Wall Street Journal that a GM car was just like the can of Diet Coke he was drinking during the interview. He said...
"GM has to start acting like a consumer-driven -- not [an] engineering-driven -- company," Akerson said. "We sell a consumer product -- our can just costs $30,000."
WTF????
This is exactly what caused GM's demise. Here we go again, unless the board is smart enough to can him (no pun intended).
They need another Bob Lutz to stay on this recent roll they've been on.
Without it, you get bean counter cars like the GM cars of the '80's to the early 2000's. You get rental fleet cars.
A couple of weeks ago, Akerson made it clear who he was when he equated cars to cans of Coke. Akerson recently told The Wall Street Journal that a GM car was just like the can of Diet Coke he was drinking during the interview. He said...
"GM has to start acting like a consumer-driven -- not [an] engineering-driven -- company," Akerson said. "We sell a consumer product -- our can just costs $30,000."
WTF????
This is exactly what caused GM's demise. Here we go again, unless the board is smart enough to can him (no pun intended).
They need another Bob Lutz to stay on this recent roll they've been on.
GM needs a CEO with a sack to come in, stay, and get things going in the right direction, but since Barry owns the company, it'll never happen....
04-17-11, 08:03 AM
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While I agree Akerson scares the pi$$ out of me as CEO (just another govt puppet), I'll disagree with non-car guys being successful. Case in point- Alan Mulally came from an engineering background and Boeing, yet Ford is the BEAST that cannot be stopped right now. He saw the future, didn't borrow a dime, and now look at Ford's valuation against GM. Which company in healthier? Which has a brighter future? Who would you invest in? Not even close....
GM needs a CEO with a sack to come in, stay, and get things going in the right direction, but since Barry owns the company, it'll never happen....
GM needs a CEO with a sack to come in, stay, and get things going in the right direction, but since Barry owns the company, it'll never happen....
What I meant was that when you put finance guys or guys with no design or engineering background to head car companies, it turns disastrous. Like when Chrysler LLC recently put Bob Nardelly in the top spot. I believe he's already gone, but what a stupid *** move. These types of guys are nothing but bean counters interested in making cars as cheap as possible. Not about making cars as great as possible and still turn a reasonable profit.
04-17-11, 08:10 AM
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That's a good point, but no doubt, Mulally loves cars too even though his background is elsewhere. Indeed, Mulally is a perfect man for the job. Engineering background and running Boeing to more success is very transferable to turning a car company around.
What I meant was that when you put finance guys or guys with no design or engineering background to head car companies, it turns disastrous. Like when Chrysler LLC recently put Bob Nardelly in the top spot. I believe he's already gone, but what a stupid *** move. These types of guys are nothing but bean counters interested in making cars as cheap as possible. Not about making cars as great as possible and still turn a reasonable profit.
What I meant was that when you put finance guys or guys with no design or engineering background to head car companies, it turns disastrous. Like when Chrysler LLC recently put Bob Nardelly in the top spot. I believe he's already gone, but what a stupid *** move. These types of guys are nothing but bean counters interested in making cars as cheap as possible. Not about making cars as great as possible and still turn a reasonable profit.
Look at Palmisano at IBM... meets a customer EVERY day... think ANY of the GM clowns do that????
04-17-11, 10:20 AM
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While it is true that Ford did not take the same bailout money that GM and Chrysler took, they did borrow money from the Fed during the financial meltdown, which they had every right to do. This is an interesting article that is mainly casting stones (boulders actually) at the Fed:
http://dailyreckoning.com/the-half-t...he-half-truth/
It is all taxpayer money, and if they all pay it back with interest, then great. I do agree, however, they if any of the big three are in danger of failing again, then the government should not be involved.
http://dailyreckoning.com/the-half-t...he-half-truth/
It is all taxpayer money, and if they all pay it back with interest, then great. I do agree, however, they if any of the big three are in danger of failing again, then the government should not be involved.
04-17-11, 10:28 AM
#15
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While it is true that Ford did not take the same bailout money that GM and Chrysler took, they did borrow money from the Fed during the financial meltdown, which they had every right to do. This is an interesting article that is mainly casting stones (boulders actually) at the Fed:
http://dailyreckoning.com/the-half-t...he-half-truth/
It is all taxpayer money, and if they all pay it back with interest, then great. I do agree, however, they if any of the big three are in danger of failing again, then the government should not be involved.
http://dailyreckoning.com/the-half-t...he-half-truth/
It is all taxpayer money, and if they all pay it back with interest, then great. I do agree, however, they if any of the big three are in danger of failing again, then the government should not be involved.
There is a massive difference between a short term loan and the government bailing out GM and Chrysler by injecting massive amounts of cash and taking over stocks, and essentially control of the automakers.
This new information proves, once again, that the government should not have bailed them out and GM and Chrysler should have died.
