Anyone else thinking about buying some GM stock now? Its down to almost $25 now and pays a $2 dividend....thats 8% return from the dividend alone. They have 32 billion in cash and assets so they aren't going to be filing bnkruptcy anytime in the next 10 years. Not to mention all the new vehicles they are coming out with. The new Tahoe coming out I believe is hands down the best looking full-sized SUV on the market. They were the top performer among U.S. automakers in value. I'm thinking about buying some shares. Any opinions?

 

This I can't understand. It happens a lot in the corporate world!

 

SSbaby, I think this is how they keep some of the executives they still have from jumping ship, but I think that if money is your key motivation for doing things, you need to find another job.

 

That's exactly my point. Why the bonuses when others are losing their awards? Hardly seems fair, and creates an 'Us and Them' mentality.

 

Okay, we're back now.

Which domestic automakers would I think would fail in order?


1. Ford.

Why? Ford has vaults of money. Ford clears more per car than GM because they don't have a multitude of marketing divisions to pay for. Ford can react quicket to the market than GM. But... Ford is more suseptible to to catastrophic changes in the marketplace. Those Firestone-Focus intro-Thunderbird intro-V6 headgasket-fan bearing catastrophies that hit Ford almost non-stop had the potential of sinking Ford if they hadn't reacted as decisively as they did. GM, on the other hand, could have rode the thing out.

Ford's strength is in their reaction time and profit per model. As long as Mustang, F-series, and at least 1 SUV is profitable, Ford US is in great shape. They can drag along money-losing Jaguar forever, they can make cars like the MN12 Thunderbird & Cougar which sold extremely well, but were way too expensive to make at the price they sold at.



2. GM.

Why? GM is one of the largest companies on the planet. In size, employees, assets, importance to the economy on at least 3 continents. Yet, not only is Toyota drawfing GM in profit, even Wal-Mart makes more profit per year.... and NO you don't even want to know by how much!

IMO, GM is also probally the only automaker on the planet that has the potential of crashing, despite having every vehicle they make sell well.

GM's problem is simply they are too big for the amount of business they do. They have way too much management, they take way too much time to react to changes in the marketplace, they have too many people protecting fifedoms, and even GM's own CEO can't reign things in (he's simply building a more efficient approval process right over the existing system). They have great product in the pipeline, but these are things that need to be out within the next year or so, not the end of the decade. Solstice was ramrodded through the system, yet took nearly 4 years... same as it used to take to get cars done.

The good thing is that GM is so massive that it's not going to crash overnight, and everyone's going to see it coming way before it happens, even GM. They also have a ton of options from downsizing (save costs) to selling assets (raising cash) to merging & partnerships (cars or technology to fill in holes in exchange for factory capacity, or for use of GM's massive purchasing resources) to bankruptcy (relief from union contracts and labor cost burdens).


3. Chrysler.

Why? 1st, Daimler has survived 2 world wars, a 50 year cold war, the destruction of Germany, a great depression, countless recessions, and setbacks, is supported by the Bank of Germany, the German government, and is now the world's oldest car company. Chrysler is now the ONLY US maker actually making money (and this isn't from just the 300 either... all of Chrysler's lines are selling well, even that gas guzzling Ram!). As long as Chrysler's part of Daimler, the only way Chrysler risks going under is if Daimler sells it off. And if Daimler sells Chrysler off, there's going to be something seriously wrong with one of the 2 divisions.

At the moment, Chrysler is actually supporting DaimlerChrysler. Smart is losing money, Mercedes is losing money, what bit of Mitsubishi DCX still owns is losing money. When Daimler bought Chrysler, Chrysler's cash chest was looted to pay for the current crop of MB and the Smart line, so perhaps one can say things came full circle.



Ford is most vunerable right now. They need a hit beyond Mustang, Explorer, and the F-series. If Fusion-Zephyr-Milan are a hit, I'll move Ford to 2nd place. If it's only so-so in sales, Ford stays at #1.

GM has the knife to their own throat. I truely think they have some home runs in the pipeline, but it takes them forever to get them out. And then when they do get them out, they are going to STILL be too top heavy unless they trim themselves down, which I'm not sure they can. Can't close dealers, can't simply buy out everyone. Rock & a hard place here.

Chrysler's going to make money for the forseeable future. They have shed management, factories, and workers like like a person on fire shedding clothes. Even if sales drop, Chrysler still has an extremely sound structure.

 

And this would aid how?

 

GM's auto operations have $30B in bond debt. Add on the $10B that the government just found in understated pension liabilities, and the $11B that GM will pick up from the Delphi debacle. That takes care of any cash reserves the company may have.

Then consider that GMAC carries another $260B in bond debt. That's nominally recovered through repayment of loans. But if the economy tanks or even if just the housing market goes soft, then a high rate of default would leave GM holding the short end of the stick.

There's no magic price that would have me buying GM stock. Then again, I passed over Kmart stock, which is why I'm an engineer and not a fund manager ($1000 invested in that stock would have paid off my house and bought me a new Z06 by the time the company merged with Sears).

 

If Delphi UAW now strikes due to the chapter 11 filing, GM will be screwed big time.. UAW is going down, and the contracts I am thinking will be tossed out, giving Delphi a fresh start.

http://money.iwon.com/ht/nw/bus/2005...=home&SEC=news

 

the UAW isn't stupid ... they might not be the nicest kids in the class, but they're not stupid. someone within the UAW management must realize that setting off a strike when the company is at the point its at now would be the end of the company and the end of the UAW.

they're going to bend more than they would have in the past. they have to.

 

1) If GM did go under, wouldn't that almost put an end to the UAW, seeing as GM is its biggest employer?

2) Why does Kerkorian keep buying stock even though the company is "supposedly" sinking?

3) Who can do a mangement overhaul within GM, the president?

I think the 2nd one is the most questioning. Either he sees something good coming or he is going to be there to take over the company if it tanks.

 

There is a reason he is a billionaire and we aren't. He knows that the government won't allow them to fail, merger would give him the buying companies stock, Chapter 11 is a reorganization, and he has the money to gamble a little. It could pay off huge.

 

what amazes me more than anything is that reporters in some cases claim to have figured a lot of stuff out..............NOT!

How can they possibly know what's going to happen?

 

Amen...

 

I believe most of what we are seeing IS a result of our downsizing and outsourcing our market.
Take the very successful marketing ploy GM started of Employee Pricing. Even with all of that success, (many people I know bought when they really were'nt planing to..) they still reported a market share loss of roughly 25%. As did Ford.
Why is the pie shrinking? More players? Possibly some of it. But the LOSS of several MILLION "Good Paying" manufacturing jobs, due to Outsourcing and consolidation, or downsizing, is what I believe is the driving force behind our problem. The household incomes just aren't there, and once the credit spending slows, well....
If I'm right, we're just begining to see the preverbial "Tip of the Iceberg"....
(MHO..only.)

 

Let Delphi go under and farm the work out to less expensive non-union companies. That has to be the plan now.