Goldman Sachs downgrades GM stock.

Reuters
Goldman cuts General Motors, shares down
Thursday June 26, 9:31 am ET


(Reuters) - Goldman Sachs downgraded General Motors Corp (NYSE:GM - News) to "sell" from "neutral," and added the stock to its "Americas Sell List," saying the main risks for the automaker included likely equity dilution, dividend cut and cash burn.






GM shares, which have lost 47 percent of their value since the start of the year, were down nearly 8 percent at $11.81 before the bell on Thursday.

Analyst Patrick Archambault, who also cut his ratings on Lear and Tenneco, said he expects GM shares to continue to underperform as market fundamentals deteriorate which exacerbates liquidity concerns.

He cut his 6-month price target on GM stock by $8 to $11.

"We think GM's automotive cash flow burn this year and next is likely to lead it to look to raise capital, which we believe could lead to significant shareholder dilution and/or a cut to the company's dividend," Archambault said.

He downgraded auto parts maker Lear Corp (NYSE:LEA - News) to "sell" from "neutral," citing its large exposure to Big Three trucks, referring to General Motors Corp (NYSE:GM - News), Ford Motor Co (NYSE:F - News) and Chrysler LLC (CBS.UL), and rising raw material costs.

The analyst slashed his 6-month price target on Lear stock by $12 to $16. Lear shares closed at $18.12 Wednesday on the New York Stock Exchange.

Archambault also cut his rating on Tenneco Inc (NYSE:TEN - News) to "neutral" from "buy," and price target to $18 from $29. He removed the stock from the "Americas Buy List."

Tenneco's shares are expected to remain under pressure as the company is likely to post weak second-quarter results, he said. However, the analyst believes this would be a better buying opportunity as he sees the company as a core long-term holding with strong earnings and growth prospects.

He also cut his price target on "neutral"-rated Ford Motor Co (NYSE:F - News) to $5 from $8. Ford shares were down almost 4 percent at $5.04 in early trade.

(Reporting by Eric Yep and Dilipp S. Nag in Bangalore; Editing by Himani Sarkar)

And GM thinks that raising prices on cars a grand will help their financial position/stock price. That will play right in to the Japanese/Koreans hand.

And GM thinks that raising prices on cars a grand will help their financial position/stock price. That will play right in to the Japanese/Koreans hand.

I don't think they'll be alone in raising prices. The entire economy is showing major signs of inflation (I paid $3 for eggs the other day!).

Still, for the next 72 hours you can buy a Tahoe for $7,000 off (if you're a GM owner) and 0 percent financing for 72 months.

My lord things look bleak for this company right now.

Will Ford or GM have the first penny stock (under $1)?

If GM stock dips low enough, I'm considering buying. :D

If GM stock dips low enough, I'm considering buying. :D

Now would be a good time to buy. I bought half of my GM stock at $63 and the other half at $31.:bang:

I bought some at 16.50 and some at about 14. I'm reevaluating when I'm going to make my next purchase now though.

Now would be a good time to buy. I bought half of my GM stock at $63 and the other half at $31.:bang:

I'm a hesitant buyer. Most of the stocks I've purchase have failed, and I don't want to see GM fail.

I'm still kicking myself for not buying Apple ten years ago when it was at $10 and I thought it was going to go up. :p

I'm a hesitant buyer. Most of the stocks I've purchase have failed, and I don't want to see GM fail.

I'm still kicking myself for not buying Apple ten years ago when it was at $10 and I thought it was going to go up. :p

I'm kicking myself for not buying Google... My goodness, that stock was the gold mine. It went from $85 at IPO, to $700 in October 2007.

Time to give Wagoner the boot. How couldn't the gm board members predict the affect of gas prices? Seriously, two ASIAN auto manufactures can predict America's economy but the American Big 3 cant. WTF. What is exactly going on in the gm board room i wonder? Are they having mad halo 3 tournaments? I bet because you forget to do important things like, i dunno, making reliable fuel efficient cars.

GM needs to get serious if they are going to save the company. GM stock hasn't been this low sense 1955! Kill GMC, Pontiac, and HUMMER.

I am die hard GM but, they need to get their chit together fast.

yeah a 53 year low is no joke. Its falling farther and faster than I thought it would when I bought in. I though 12 would be the bottom but its under 11.50 now. Market Cap is at 6.5 Billion. Avon is worth more than that!

Time to give Wagoner the boot. How couldn't the gm board members predict the affect of gas prices? Seriously, two ASIAN auto manufactures can predict America's economy but the American Big 3 cant. Which two asian manufacturers? Is one of them Toyota? The same Toyota who's having just as much trouble selling their fullsize trucks and SUVs as GM is? Give me a freakin' break! :rolleyes:

No, Toyota was stupid. However, they have the cash to be stupid.

Wagoner needs to go......... and probably Lutz too. The board has to actually make a decision, and needs to actually look like they are doing something............... anything. Wagoner needs to go because he has had plenty of time to really make a difference, and also seems hesitant to make decisions. Lutz needs to go because of his mouth, and the fact that he really isn't the best product guy when fuel economy is a main purchase consideration.

No, Toyota was stupid. However, they have the cash to be stupid.

Wagoner needs to go......... and probably Lutz too. The board has to actually make a decision, and needs to actually look like they are doing something............... anything. Wagoner needs to go because he has had plenty of time to really make a difference, and also seems hesitant to make decisions. Lutz needs to go because of his mouth, and the fact that he really isn't the best product guy when fuel economy is a main purchase consideration.Lutz has been vital to the product turnaround that is happening right now. The improved interiors, more expressive styling, better overall image... he was instrumental in that.

I don't think Lutz should go anywhere. The company is going to need someone with some cojones now more than ever.

GM closed down 10.77% to end the day at $11.43/share on a day the DJIA dropped $358. Oil is up over $5/bbl and the head of OPEC claims it will hit $150-170/bbl.

Lutz needs to stay put. 100%.

It takes a lot of time to get stuff going, stuff from 4 years ago is JUST NOW getting out there, Wagoner I don't think has had enough time to really make a difference from the previous CEO, and he certainly seems to be on the right track with cars like Malibu and Astra.

I think GM needs managerial stability now more than ever, a lineup change now would just cause more havoc.

Lutz also said that hybrids were stupid (we all know that is true, but the pure panic public doesn't want to hear reality, they want fuel economy smoke blown up their ass), that noone would want small cars until gas was $8 a gallon............ and a myriad of other lame statements that he shouldn't have said.

I never said he did not do anything good. The problem now, is this is not what matters. He has a tendency to sound elitist and arrogant. The public doesn't want that.......... they want decisions, and FAST!!!!

The stock market would probably have a very positive reaction to an announcement of them leaving, as they would feel like the board is at least doing SOMETHING (instead of sitting on their thumbs, and wringing their hands in indecision).

Thats the last thing GM needs is smoke and mirrors bull****. Giving the appearence of doing something is basically what got them where they are. Lutz has done an amazing job with the quality and design standpoint. As stated, it takes a long time for stuff to get down the pipeline....it's a rough time....no doubt, but I don't think it's time to throw in the flag.

Over-reaction would be bad at this point. This fuel bubble will pop within a few years, and we'll go back to our large, powerful gas guzzerlers just like we did last time. It's a great time to buy a cheap truck :thumb:

Lutz also said that hybrids were stupid (we all know that is true, but the pure panic public doesn't want to hear reality, they want fuel economy smoke blown up their ass), that noone would want small cars until gas was $8 a gallon............ and a myriad of other lame statements that he shouldn't have said.

I never said he did not do anything good. The problem now, is this is not what matters. He has a tendency to sound elitist and arrogant. The public doesn't want that.......... they want decisions, and FAST!!!!

The stock market would probably have a very positive reaction to an announcement of them leaving, as they would feel like the board is at least doing SOMETHING (instead of sitting on their thumbs, and wringing their hands in indecision).

Thats the last thing GM needs is smoke and mirrors bull****. Giving the appearence of doing something is basically what got them where they are. Lutz has done an amazing job with the quality and design standpoint. As stated, it takes a long time for stuff to get down the pipeline....it's a rough time....no doubt, but I don't think it's time to throw in the flag.

Over-reaction would be bad at this point. This fuel bubble will pop within a few years, and we'll go back to our large, powerful gas guzzerlers just like we did last time. It's a great time to buy a cheap truck :thumb:
Amen. Oil prices are being lofted up only by the wishful thinking of speculators at this point. There's plenty of oil to be had, and no fundamental basis for the current ridiculous prices. Now is a GREAT time to get a truck or SUV...

I dont think the analysts claiming gas will hit $7/gal are doing it just to buy a cheap SUV. The market changed in about 4 weeks and it takes 4 years to get an idea to production.

GM is burning thru cash at $1 billion a month. I dont see their dividend lasting much longer.

Forgive me for sounding pessimistic but I just can't help but feel GM and Ford are both destined for doom. There is nothing in their short term plans that would convince me they will turn their fortunes around. The US government doesn't seem interested in helping the auto industry survive and consumers are increasingly turning to Asian-based brands. The trend suggests I'm almost right...

Amen. Oil prices are being lofted up only by the wishful thinking of speculators at this point. There's plenty of oil to be had, and no fundamental basis for the current ridiculous prices. Now is a GREAT time to get a truck or SUV...

Unfortunately, those 'speculators' are also the powerbrokers of the world.

$170/bbl looms and those reports never identify the source regarding the speculative figure. How bizarre?

Unfortunately, those 'speculators' are also the powerbrokers of the world.

$170/bbl looms and those reports never identify the source regarding the speculative figure. How bizarre?

That report is all the reason they need to make it happen.

Unfortunately, those 'speculators' are also the powerbrokers of the world.

$170/bbl looms and those reports never identify the source regarding the speculative figure. How bizarre?

Blarney. These all-knowing ( :rolleyes: ) speculators will turn on a dime once the mainstream media's news embargo of good news from Iraq comes crashing down...

http://www.usatoday.com/news/world/iraq/2008-06-07-iraq-oil_N.htm

Face it, doomsayers. The world has plenty of oil. Prices will come back down and Americans will want their big rigs all over again.

It doesn't matter that demand has been flat for oil this year, that is not the issue. They are raising prices because they figured out that unlike housing or stocks we still have to buy the stuff and they can charge whatever they like. Returning to the regulations we once had and closing other loopholes is the only real solution to this mess.

Blarney. These all-knowing ( :rolleyes: ) speculators will turn on a dime once the mainstream media's news embargo of good news from Iraq comes crashing down...

http://www.usatoday.com/news/world/iraq/2008-06-07-iraq-oil_N.htm

Face it, doomsayers. The world has plenty of oil. Prices will come back down and Americans will want their big rigs all over again.


Production last month hit the pre-war level of 2.5 million barrels a day. And al-Shahristani tells parliament that in the coming five years, Iraq should be able to produce between 4 and 4.5 million barrels a day.

And all for a pittance of 10 billion a month.

Forgive me for sounding pessimistic but I just can't help but feel GM and Ford are both destined for doom. There is nothing in their short term plans that would convince me they will turn their fortunes around. The US government doesn't seem interested in helping the auto industry survive and consumers are increasingly turning to Asian-based brands. The trend suggests I'm almost right...

I must disagree. GM is growing overseas revenue by roughly 20% currently. That translates into an incremental $13-$15B in revenue for 2008. That will actually more than offset the NA decrease. People get way to caught up in the US market without looking at the bigger picture.

GM burned $3B in cash for Q1 because they got caught with their shorts down on the truck build numbers. Internal inventory went up nearly $2B for the quarter because they could not react in time to both the demand change and the American Axle strike. They will work this number back down pretty quickly.

An incremental $6B in cost improvements is only 18 months away when the UAW contract begins to pay-off. Given a 30% contribution margin, overall revenue would have to fall over $19B before GM would be worse off than 2007. They are a long way from done.

Also, at some point the pension overfunding of $18B is going to enter this equation. When you only have a market capitalization of $6.5B, it is time to start figuring out how to cap the pension plan and get some of this excess back into the company. I am sure some smart people are working on this issue.

^ ^ Thanks for your optimism!!!! :) I sure hope you're right! ;) I hate the knee-jerk reaction. An automatic assumption that "GM is done" is probably in the neighborhood of crying "the sky is falling!" ?? :shrug:

I must disagree. GM is growing overseas revenue by roughly 20% currently. That translates into an incremental $13-$15B in revenue for 2008. That will actually more than offset the NA decrease. People get way to caught up in the US market without looking at the bigger picture.

GM burned $3B in cash for Q1 because they got caught with their shorts down on the truck build numbers. Internal inventory went up nearly $2B for the quarter because they could not react in time to both the demand change and the American Axle strike. They will work this number back down pretty quickly.

An incremental $6B in cost improvements is only 18 months away when the UAW contract begins to pay-off. Given a 30% contribution margin, overall revenue would have to fall over $19B before GM would be worse off than 2007. They are a long way from done.

Also, at some point the pension overfunding of $18B is going to enter this equation. When you only have a market capitalization of $6.5B, it is time to start figuring out how to cap the pension plan and get some of this excess back into the company. I am sure some smart people are working on this issue.

Well I hope you're right and I certainly hope I'm wrong!!! :D

As a GM diehard, sometimes I just need cheering up and need to vent my anger and frustration! :D

Thanks. ;)

And all for a pittance of 10 billion a month.

Small price to pay, for the victories won:

http://www.timesonline.co.uk/tol/comment/columnists/gerard_baker/article4221376.ece

Every loss of life by America and her allies in this war on terror has been a personal tragedy... but every loss was necessary, and the implications of this conflict (and our triumph in it) will not be understood by some people for quite a few years.

I must disagree. GM is growing overseas revenue by roughly 20% currently. That translates into an incremental $13-$15B in revenue for 2008. That will actually more than offset the NA decrease. People get way to caught up in the US market without looking at the bigger picture.

You're talking revenue, but what about profit? Can the overseas divisions make enough profit to offset the persistant losses in NA?


GM burned $3B in cash for Q1 because they got caught with their shorts down on the truck build numbers. Internal inventory went up nearly $2B for the quarter because they could not react in time to both the demand change and the American Axle strike. They will work this number back down pretty quickly.

This would be far more believable if GM had only experienced one or two bad quarters. The financial pain is over three years old by this point, though.


An incremental $6B in cost improvements is only 18 months away when the UAW contract begins to pay-off. Given a 30% contribution margin, overall revenue would have to fall over $19B before GM would be worse off than 2007. They are a long way from done.

But doesn't GM also owe $4.5B to the VEBA in about that same timeframe?

A drop of $19B in revenue would only require the loss of 475,000 truck and SUV sales. That's actually a bit less than the yearly percentage fall-off we saw from May '07 to May '08.


Also, at some point the pension overfunding of $18B is going to enter this equation. When you only have a market capitalization of $6.5B, it is time to start figuring out how to cap the pension plan and get some of this excess back into the company. I am sure some smart people are working on this issue.

I'm guessing that the pension is overfunded by the current accounting rules, which if I recall correctly, have a tendency to overstate returns (especially in a protracted bear market).

You're talking revenue, but what about profit? Can the overseas divisions make enough profit to offset the persistant losses in NA?

No they can't. In Q1 combined international profit was around $1B and it is increasing along with revenue. Pretty good, but not enough. They have to get the incremental $1.5B a quarter in NA cost savings to right the ship.



This would be far more believable if GM had only experienced one or two bad quarters. The financial pain is over three years old by this point, though.

From a cash flow standpoint, 1Q was an aberation. For the last three years, net cash flow from operations was negative $8.2B (2005), negative $4.4B (2006), and negative $2.4B (2007). The $6B would actually put them into positive territory. Forget all the mumbo/jumbo tax write-offs, cash is the king.

But doesn't GM also owe $4.5B to the VEBA in about that same timeframe?

They certainly do, it is already on the books but gets internally eliminated until Jan 1, 2010. Somehow I doubt the UAW would force the issue to take cash vs a note if it meant the difference in bankruptcy.

A drop of $19B in revenue would only require the loss of 475,000 truck and SUV sales. That's actually a bit less than the yearly percentage fall-off we saw from May '07 to May '08.

Two things, as discussed international is going up at the same time. Secondly, no way does NA come even close to that much of a revenue drop. They went down $4B in revenue on a drop of 177K unit build in Q1. At the same time, international went up $3.5B. The projected NA build in Q3 is projected higher than 2007. They will be back in revenue growth mode overall beginning in Q3.



I'm guessing that the pension is overfunded by the current accounting rules, which if I recall correctly, have a tendency to overstate returns (especially in a protracted bear market).

They assume an 8.5% return on their projections. GM has actually made right over 10% on their return averaged over the past 9 years. This includes three years in which the S&P 500 market return was negative (2000, 2001, 2002). They also moved the mix much heavier to bonds in Jan 2007 to "lock-in" their returns and avoid some of the fluctuation.


I am not saying they are home free, only there are assets at GM that defy conventional wisdom.