For those of us who have closely followed the Chevrolet Volt since its debut at the 2007 NAIAS Auto Show, we have also been forced in a sense to follow General Motor’s financial ups and downs almost as intently. As the General goes, so went the Volt. No GM. No Volt.
It is no secret that many of us were firmly in the “GM is not going to make survive” camp, despite then CEO Rick Wagoner’s confidence in the company, but we all hoped somehow that the Volt project would come to fruition before the company perished. Unfortunately, when the housing market (and greater US economy) collapsed, the auto market went along with it, and sped up the bleeding on the American car institution’s balance sheet…and sure enough, our worst fears where confirmed as the company pled for loans to avoid bankruptcy over the holiday season of 2008, before eventually filing for bankruptcy in June of 2009.
However, what happened next was one of the most controversial, but also one of the most successful, incidents of government intervention into private business of all time. Despite many personal opinions (including my own) that the government should not interfere so significantly in the bankruptcy process, GM was cleared of their debt, given an infusion of working capital, and reborn anew.
Today marks GMs return to the open market. Once again the ticker symbol ‘GM’ will take its place on the New York Stock Exchange. And it is quite a return indeed…the largest IPO in US history, passing that of Visa’s $19.7 billion sale in March 2008.
The recently upped price of the IPO at $33/share, is still $10 light of the $43.67 average transaction price the government needs to break-even. It is thought that GM, under the government’s first hand picked CEO, Ed Whitacre, have intentionally priced the offering below expected market value to create a sense of continued success long after the IPO has come and gone.
However in so doing, the government has backed away from earlier plans to vacate the company as soon as possible, and looks to gain back initial losses when GM has fully realized its value at some point in the future. Reportedly, that delay did not sit well with promises that Mr. Whitacre had made, or had been promised, and that continued government involvement was one of the main reasons why he has stepped away from leading the company.
Still, GM has many reasons to be pleased with the way things have turned out since leaving bankruptcy in July of 2009. While market share has expectedly dropped with the closure of Pontiac and Saturn, GM has been able to retain an average transaction price north of $33,000 per vehicle in North America, with a much higher margin thanks to new efficiencies and an absence of crippling debt on the balance sheet. Things have also gone incredibly well of late in China, South America and many other regions of the world for GM.
GM just posted a Q3 profit of 2.1 billion dollars, bringing their yearly rake up to $4.77 billion, and is coming to market trading at 8 times this year’s earnings (based on the first 3 quarters income), roughly the same as estimates for Dearborn rivals Ford Motor Company.
Is everything perfect now? Not hardly. Daewoo, who actually makes a quarter of every GM product sold is functionally bankrupt without cash from the mothership. Opel was also a mess at the time of bankruptcy, and it (as well as Europe itself) has gotten much worse since…it looks like second to last former CEO Fritz Henderson was right to keep to the plan to sell if off, and the decision to retain Opel would seem to be the one major blemish on Mr. Whitacre’s record in his brief stint as CEO.
So should you invest in new GM now? Sure why not, it is now as healthy an automobile company as any right now, and should ride on market sentiment alone for a good stretch.
The better question is, “is it a good, stable, long term hold?”
The only facet of the government sponsored bankruptcy that is really troubling is the fact the GM under the Troubled Asset Relief Program, can carry forward losses racked up by company before bankruptcy to be used to offset future tax liabilities…$45 billion worth. Not only was this unnecessary (and against accounting principles), this gives GM incentive to overstate profit for its (and the government’s) own gain. We also have to see how Opel and Daewoo unwind themselves from their current situation. It will certainly take many billions of dollars to right those ships, and the financial accounting waters are far too murky to get an adequate feel for the situation still.
Overall however, General Motors and the US government have done an almost flawless job turning things around, and in marketing the new company. They both deserve all the credit in the world. Many jobs at the company (and at hundreds of suppliers) have been saved, as well as the American institution itself. GM’s recovery has really turned into a symbol of the hopes of the country it was founded in.
Will GM live up to the current hype behind it? Probably not. Will GM continue to be a profitable auto maker with a bright future for success? Most definitely. /and that is plenty good enough
+5
Nov 18th, 2010 (7:11 am)It’s gonna be great to have GM return to the list of stocks to track. I hope GM will “ring the bell” loudly at market’s open today and ring the bell for freedom from oil in the years to come. Move over Ford, GM is back!
+7
Nov 18th, 2010 (7:11 am)Capitalism is a good thing, but too much of a good thing can be harmful. There needs to be a balance.
In this case, it seems government intervention worked.
+10
Nov 18th, 2010 (7:15 am)From the post: ” Many jobs at the company (and at hundreds of suppliers) have been saved.”
That was the entire rational for the government’s decision to rescue GM. And it worked. Give credit where it is due.
+3
Nov 18th, 2010 (7:16 am)THANKS, STATIK! Nice write-up. Is it true that the general public cannot get in on the initial offering and is this standard practice.
I have to scoot to work, so I’ll read your answer tonight.
Be well my friend,
Tagamet
+2
Nov 18th, 2010 (7:18 am)Dan, Nice job on CNBC!
Even Joe liked what he heard.
I like the consumer approach you were talking about. This consumer wants electric!
Go Volt!
+6
Nov 18th, 2010 (7:31 am)When thinking about the government’s involvement in GM (and many other things lately) I am reminded of an article that I once read about a particular set of problems in France. The author was clearly in approval of many of the socialist mechanisms that France had in place. But the article went on to say that one of the biggest problems was that France had been too successful at socialism and it was now (several years ago) dug into a situation that it could not dig out of (I think it had to do with the work force being a large percentage of immigrants and a large percentage of the native population of retirement age and not enough working citizens to support things). Government as a whole has just gotten too big, too powerful, too …much. There is a danger even when government does something good. It never seems to go back into the box that Pandora opened.
+7
Nov 18th, 2010 (7:43 am)Nice, balanced analysis.
I will eagerly watch the stock and pray for the day when the government can finally break even or make a profit from their investment. Only then, will the nut-job naysayers finally settle down and STFU. I’m so sick or reading negative commentary regarding the Volt from people that want to use it as a political football.
I can’t wait to own a Volt. Demonstrating its technology and educating people will be very important for us first adopters, and critical to the acceptance of EVs and EREVs.
+5
Nov 18th, 2010 (7:45 am)US Government was the only entity with the means to keep things going at GM until they could clear bankruptcy, so there really wasn’t any choice. I don’t see where a failure of GM could have turned out much better.
Fritz was wrong to try to sell Opel, which is why he was fired. GM would have had a difficult time re-entering the European market if they had dumped Opel. Despite these short term losses, it was strategically wise to keep Opel.
Daewoo is also strategically important. As you say, they design / produce many of GM’s products. Also, LG Chemical is based there, so we can’t muddy the waters for a critical supplier.
This does set a bad precedent, as it may embolden the government to interfere in the markets more.
+13
Nov 18th, 2010 (7:48 am)I love the Volt and the engineering excellence that has gone into it. The Volt, and to a lesser degree, products like the Cruze and Malibu are what will ultimately save GM…..IF quality continues to improve and IF the unions end their adversarial attitude and work WITH the company instead of against it. Their very existence depends on it. Union members should only prosper when the company they work for prospers. People don’t buy a car because it’s made by union members….in today’s world, when I see a union label, I think of drunken disheveled miscreants. I can assure you, I am not alone in my thinking….this is today’s reality. It’s a new world…either strive for EXCELLENCE…..or be gone with you.
I hate the idea of having to use taxpayer money to save GM….it should have never have come to this. I hate even more the idea that unions benefited from the process when they have been such a large part of the problem.
Maybe I’m the eternal optimist. If this whole convoluted mess results in the Volt being the smash hit it deserves and NEEDS TO BE….and we drastically reduce our dependence on oil…..then it will all have been worth it.
Good Job so far “New GM”……Keep this momentum going…..the whole world is watching.
Nov 18th, 2010 (7:54 am)#7
well said mate
+1
-stuey
p.s dont look now but the trolls have figurered out they can play with the latest forum posts section
grow up, you dont see any of us going to the pri website and slagging!
+3
Nov 18th, 2010 (8:08 am)Hey Tag,
Good question. And yes, despite being under written by 35-odd brokerages, and having over 350 million shares, there is little room for small retail investors…pretty much the norm. It is exasperated here by the fact thta GM is oversubscribed to begin with, and the allotment is low.
These firms want to satisfy their larger clients first and the IPO is thought to be “easy money” to some. So the small individual investor is being left out…even if that individual is not really small, having hundreds of thousands or even millions with them.
Still you neve know how something will react because you are not sure how much of the initial offering has been bought up with the intention of flipping quickly. I hate making prediction ahead of the market, but it looks like it will pop on the open. The question you have to ask is it for real and do you buy in, or will it do a Tesla after running up 40%+ out of the gate.
+2
Nov 18th, 2010 (8:12 am)Statik in the last 3 years of following the volt and your posts/articles this is the most positive I’ve ever seen you get on financials of any kind. I’m assuming then you are buying GM this morning. Always great to get your financial perspective but I must admit your pessimist articles are a lot funnier than this newer optimist side we’re seeing today.
+1
Nov 18th, 2010 (8:12 am)GM should flirt with $36 per share today. But, looking forward, carefully metered positive news releases will be needed to maintain mid 30′s. Rivals of GM will step up their news releases as well.
The long term winner in this surge of automotive TV time may be support vendors and services. The government wants in on everything these days. And is pushing for higher new car fuel efficiency. We’ll see low rolling resistance tires on most new models. Goodyear is well positioned.
Citizens of the USA, Canada, and a good portion of the rest of the world have been tight on spending these last two years. Driving less and putting off buying expensive new items. Consumers will return to buying new products in 2011. Here’s a friendly tip for GM. “Mild hybrid” isn’t going to help the bottom line. A major key to maintaining share price is bringing two more (award winning) Voltec models to the consumer. The 2011 Car Of The Year is a plug-in with a honking 40 mile range battery in it.
=D-Volt
+2
Nov 18th, 2010 (8:20 am)I won’t be investing in stock from GM (or any auto company) anytime soon. Just in a Volt.
Financials bore me, so check this out!
http://contest.techbriefs.com/component/content/article/865
(kind of like Witricity’s setup)
+1
Nov 18th, 2010 (8:30 am)Heeh. It is, what it is, Gsned57. And it is true that I am the glass half full guy, the pessimist.
But nope, not buying. I really believe that you should not invest in anything you are so close to…it is hard enough beating the market and thinking clinically about a stock without coming into it with so much personal baggage.
If I am being honest about what I am doing…and I am NOT suggesting anyone follow my lead. If a rising tide lifts all boats, and GM’s offering pushes TSLA back around its all-time high in the near term, I am thinking there is a good opportunity to bet against that company and make a few dollars. /we will see
+7
Nov 18th, 2010 (8:31 am)The reality I see is that in our economy, government is a partner with business–whether we like it or not.
Road construction was a government subsidy to the auto business, which wouldn’t exist without it.
Right of way ‘eminent domain’ powers subsidize the electricity and the transport of natural gas/POL products to our homes and businesses where we work.
Speaking of ROW, the railroads wouldn’t exist without government land ‘giveaways’ especially out west.
Tax breaks for oil exploration, Medicare/Medicaid that pays doctors and hospitals billions of dollars to treat people who otherwise could not afford sky high medical costs are examples of politicians deciding on a sort of ‘societal benefit.’
Oh, and should we talk about government subsidies to agriculture?
Let’s start with the land giveaways dating back to George Washington’s days(he was a surveyor first, remember) and continue through the Oklahoma Land Rush. And we would end with the billions that today subsidize industrial farms and small farms(crop support pricing, milk supports, government extension agents).
We could all debate whether any of the above was proper, but my point is that it is all real, just like the government’s decision to prop up GM was made for what politicians believed, as they have for more than 200 years, was the ‘greater good.’
+2
Nov 18th, 2010 (8:33 am)Had to check the author’s name a couple of times but it still says Statik. I’m sure there is more in your mind on the downside but it’s good to see the upside unencumbered. While nobody is for bailouts, it’s good to see some of those ideological apposed to this one express open-minded opinions.
It would be interisting to read a more in depth analysis of GM’s long term prospects, especially the financial and contractural fundamentals. Like Jason expressed above, I believe keeping Opel was a good long term decision although short term it is a struggle especially since there has been little to no European support. Daewoo also appears to be an important cog for global operations, but China operations alone might suffice for this role in the long term.
It’s heartening to see this IPO occur in this fashion. With continued focus on the product, the customer, and the future things look bright for GM. One area that still could use some attention is the dealer network. GM could benefit from reinvigorating their sales channell. Products will help, but creating a more upbeat and engadged salesforce is also key.
Nov 18th, 2010 (8:34 am)So, maybe now would be a good time to invest in Goodyear Tire Co.?
Nov 18th, 2010 (8:40 am)GM will have an opportunity to “return” to the stock market and get a short-term chance to make a difference in the US and North America markets. We’ll see how they and the New World Economy can handle it.
Is GM going to ramp up production on this vehicle to lower economies of scale so that they can lower price and make the vehicle available to the general population instead of just a select 7%?
Will China and other Asian countries and companies honor GM’s Voltec patents long enough for this to happen? Will they start to “clone” the technology the first chance they get to snatch up a Volt and then begin reverse engineering GM’s technology? You bet!
Nov 18th, 2010 (8:40 am)How nice it is to make a profit and raise the stock market account, and pay back the debt incurred. The Volt is the deal that will make this happen.
Here it is November 2010 and it is time to get out in the world with the Volt. Even the dealers around my neck of the neighborhood know nothing about the Volt entrance into the outside world.
Lets get this task airborne and get a wheels up. This machine needs to be seen on the street. The idea of being patient is non-essential in consideration of the former EV1 project and well, just do it! people have been plenty patient.
+2
Nov 18th, 2010 (8:52 am)As Gsned57 alluded to as well in (#12), I really fought to not get into the more worrisome parts of the company too much here (Opel, Daewoo, Cadillac, accounting, product pipeline, accounting, etc). I am sure that piece would have had more of the original ‘flair’ of previous financial pieces.
Of course, if you get into the bad, you also have to get into the good, and there is a fair chunk of that as well (NA, China, Buick, exports/dollar, etc), …and the whole thing would have ended up as a small novel and gone way off course.
There is a real tug of war here between the expectations of the general public on GM, what GM is trying to represent here at the IPO, what the market sentiment is, and what is reality.
Looking past all that, the simple fact is that the company is healthy and viable, and I think for right now that supersedes the minutiae of how the company is trading today compared to the wider picture of what could have been at GM, its employees, and the country as a whole.
+3
Nov 18th, 2010 (9:14 am)__________________________________________________________________________
Statik: Great write up; thanks.
__________________________________________________________________________
+1
Nov 18th, 2010 (9:14 am)Excellent article, Statik —but then I’m not really one to judge, as a technoweenie. I’ll hopefully learn something about the GM IPO from your efforts & the comments of others more knowledgeable than I.
PS: Anyone know if Lyle is traveling? (He hasn’t yet posted yesterday’s Volt Driving Log data).
.
-12
Nov 18th, 2010 (9:47 am)(click to show comment)
+3
Nov 18th, 2010 (9:54 am)Here’s my advice on the GM stock offering (if the Volt is why you are reading this in the first place)-
Take the cash (you might have invested in GM) and buy solar PV. Return on investment grows steeper as utility prices increase and who honestly thinks that is not going to happen? Unlike the old days when a large system was planned for at the start, microinverter technology enables you to start with just ONE panel if you like. You can make the array larger over time, even to the ability to put panels on different roof planes.
Some are waiting for advancements in technology, lower prices, etc. If this reasoning was always relied upon, we would never get a new computer, or the Volt itself for that matter. I could make this a lengthy discussion on PV, but that is not the point. Investment in PV is not just a financial objective, it is an investment in the environment and its purchase is something that provides a visual testimony to anyone who can see your roof. The federal tax credit knocks a third of the price off the top and there is little that you can invest in that has a ROI that is also accompanied by physical manifestation of that ROI (your electric bill or even graphs of array performance ( https://enlighten.enphaseenergy.com/public/systems/3HnH2844 – although today appears to be a bit cloudy, you can see several previous days of nice solar output) . In our case, solar is now at the plus time of year for us, as we are banking surplus kwh every month. The most recent home bill was $7 and office $8.
I don’t want to belabor this, as some have no solar options anyway (shade, no roof to put it on, etc). Don’t let a feeling that a higher latitude prevents you from seeing a return. Longer summer days help offset the clouds of fall. See here for solar distribution http://www.seia.org/galleries/default-image/Solar%20Map–US.gif While FL may be the ‘Sunshine State’, you will see that my alternate home location in NY drops the number only a small amount (from 1700 to 1500- just 12% less).
An investment in ANY corporation has NO guaranteed ROI, but your monthly electric bill (especially after adding in approx 10 kwh per day for your new Volt) will provide a monthly indication of MEASUREABLE ROI. While solar may not be for everyone, at least consider this type of investment if you were thinking of investing in anything.
Nov 18th, 2010 (10:01 am)GM so far… open at $35 w/ intraday high of $35.99
DETROIT – General Motors Chief Executive Officer Dan Akerson and Vice Chairman and Chief Financial Officer Chris Liddell will host a media conference call on Thursday, November 18 from 10:00 – 10:30 AM EST to provide a brief update on GM’s public offering.
+4
Nov 18th, 2010 (10:01 am)GM will be fine. I’m looking for some ‘halo action’ now! With the success of the IPO, I would like to see the accelerator pressed on the production line. So far, only 3 of our first 12 orders have code 3000 or higher. In reality, that’s really great. I’m just hoping to deliver more than 2 or 3 per month in the first quarter. And I don’t want my customers to wait too long (like early Camaro days).
A lady came up to me in the showroom and asked about the Volt. I told her “soon” and referred her to our website for more info. She just smiled and said, “I’ve already read everything on your site and I’m ready for a test drive.”
After the LA Auto Show next week, they will be lining up to drive one!
+13
Nov 18th, 2010 (10:02 am)#24, Mark,
Yes, I am serious. A standard bankruptcy would have caused a cascade of bankruptcies through the supply chains used by many automakers, like Ford, etc., which would have led to supply problems to these OEM’s, shutting down production, etc. This would have devastated weakened automakers like Ford, forcing them into plant shutdowns, and perhaps even bankruptcy for them as well.
Yeah, sure, stock and bond holders would have been better compensated, but the American auto industry would have fully collapsed, and the American economy with it. Investment involves risk – if you can’t afford to lose it, you shouldn’t be risking it.
+1
Nov 18th, 2010 (10:05 am)You mean the glass is half empty.
+3
Nov 18th, 2010 (10:10 am)COME ON GM!!!
ECON 101:
Economy of Scale-Reduction in cost per unit resulting from increased production, realized through operational efficiencies. Economies of scale can be accomplished because as production increases, the cost of producing each additional unit falls.
+3
Nov 18th, 2010 (10:10 am)Yes, well said, +1.
Nov 18th, 2010 (10:15 am)Frig.
Also true…poor typing/communication skills.
Nov 18th, 2010 (10:22 am)Its suprising to learn that China has such a large role in this GM IPO:
http://news.yahoo.com/s/ap/20101113/ap_on_bi_ge/us_gm_ipo_china
+4
Nov 18th, 2010 (10:27 am)Unregulated derivatives caused the mess we’re in now, so I find it very hard to accept your position.
Nov 18th, 2010 (10:27 am)Congrats to GM, its management, employees, and new owners. May the wind and the Volt take you down the highway of success.
+1
Nov 18th, 2010 (10:33 am)Very nice column, Statik.
+1
Nov 18th, 2010 (10:33 am)“COME ON GM!!!ECON 101:
Economy of Scale-Reduction in cost per unit resulting from increased production, realized through operational efficiencies. Economies of scale can be accomplished because as production increases, the cost of producing each additional unit falls.
—————-
Don’t forget the economies of recall.
If there is any little problem with Volt requiring work at a dealership, having 10,000 cars to deal with is better than 200,000.”
This is an entirely new platform for GM and for the auto industry as a whole. Yeah, a lot of stuff seems to be ‘off-the-shelf’, but in reality a lot of this car has never been seen before in production.
If there is a problem, I’m thinking software. The rest of the car is pretty straight-forward mechanical stuff.
A slow roll-out is entirely reasonable.
+5
Nov 18th, 2010 (10:35 am)
Nov 18th, 2010 (10:51 am)Thanks for the link. This is just one more example how the return of the electric vehicle will generate new business and jobs.
Happy trails to you ’til we meet again.
+1
Nov 18th, 2010 (10:56 am)I guess I am forced to agree with you. I realize this is a reality that GM, Toyota and all the other car manufacturers are very familiar with. I am just frustrated by this vehicle’s introduction price.
I have to say that I feel GM’s Volt and the Voltec drive train is doomed in North America unless the price can be lowered and marketed to middleclass Americans. The Catch 22 is that the vehicle is being produced in North America but not affordable by those same workers. Is this going to become another product that is only viable if production is exported to Chinese and other Asian producers and then imported back into the US? How long before Walmart and Sam’s Club start selling Voltec-based vehicles off the shelf? 5 years, 10?
Let’s not forget the example Ford set with the Model T just over 100 years ago. The Model T’s success was based on mass production and marketing to the middleclass.
+2
Nov 18th, 2010 (11:06 am)I just read this morning that the average transaction price for a GM vehicle is $33K (up from pre-bankruptcy). Sounds like average American’s CAN afford a Volt.
+5
Nov 18th, 2010 (11:10 am)Getting out of the way lead to anarchy in the financial sector. Which lead to the current mess.
We need reasonable regulation and protection for the little guy. The CH11 changes that favor banks over customers is one small example. You cannot easily go CH11 and save your own bacon (house and car) any more. It is way more difficult. The unintended consequence is that it’s better to just walk away and use someone else’s credit until your’s is clear again. Instead of credit-card companies getting 20% they get nothing.
At the same time, we can’t have the government making judgment about financial investments. The government is a huge cost center. If we let it, it will suck the life out of business with this tax and spend agenda.
Government is needed to do the big things like building infrastructure, defense, and protecting US companies from foreign interests. This includes doing things better like patent protection. The EU does a much better job.
Policies that promote moving jobs to foreign countries is short-sighted and just wrong. We need policies that encourage (heck, even force) foreign companies to build factories in the US, not the other way ’round.
In my opinion (not being a financial guy) the government should sell their shares of GM quickly and get out of the automobile business. Just rip that bandaid off and move on. It’ll be better in the long run than sitting on the fence.
+1
Nov 18th, 2010 (11:19 am)At $30/hr they can afford it.
+1
Nov 18th, 2010 (11:21 am)The lack of regulation of the derivative market allowed derivatives to be created that combined good mortgages with subprime mortgages. The rating agencies didn’t rate them correctly because the details were hidden from them because of the rules created by congress.
The subprime mortgages were created because congress and Fannie Mae and Freddie Mac made rules that allowed people to buy houses that they could not afford. If those subprime mortgages had not been issued, the derivatives would not have caused the problems that they did. The root cause of the recession was that people bought houses that couldn’t afford the payments…..thanks to government bureaucrats meddling in things they know nothing about.
+3
Nov 18th, 2010 (11:29 am)Your narrow minded gibberish shows what little you know. Common stock owners are not protected under bankruptcy laws. Only preferred stock owners are entitled to protection. The Union has conceded much under the bankruptcy. You seem to blame what happened on the Unions. The downfall of old GM happened because of a synergy; economic conditions, business decisions, etc.
As for the rest of what you said, it all falls into the abyss. If you have any argument for your pent up anger, we might have listened to what you have to say. But that isn’t the case since your statement is full of falsity and anger. Get out of the past and get a new start on life. Ride the tide of change and new economic engine known as Green Technology.
Happy trails to you ’til we meet again.
Nov 18th, 2010 (11:49 am)#12
I agree. +1 Great job Statik. Very encouraging.
Nov 18th, 2010 (11:54 am)One more distinction. We tend to generalize in our arguments. If you are talking about government, you need to differentiate between how the government functions and who is the controlling party. I angers me when I have to listen to all the talk about how our government isn’t working. Our form of government has served its citizenry for generations and has been one of the most successful forms of government. On the other hand, our history is a collection of different Administrations and Congress’s; a mix of different representatives from political parties having different ideology. Some of them have served the citizens of the national well while others have not been as successful. Some have favored the middle class, some the rich, some business, some the military, and a combination of all of them to varying degrees.
So to bash government doesn’t quite mean much to me if the situation isn’t adequately described. We can all find fault with government without paying any attention to how complex this nation has become. And today it more complex than ever; we live in a global world with foreign competition; terrorism is a major problem that wasn’t as big in the past as it is today. All we have to do is look at all the issues our government has had to address over the last two years and compare it to the past. I hate all the negativism spouted each day. It does nothing to improve the current conditions; it only detracts from focusing on the problems and finding solutions. Everyone who says, “Government is failing” is really failing themselves by not working in a positive way to make the situation better. Having knowledge is important but if that knowledge isn’t used, it is meaningless. For those who complain but don’t offer any suggestions, I can only point out that you are meaningless. Complaining without putting forth suggestions to improve conditions shows how meaningless your words are. Ideas to solve our economic problems need to be discussed, scrutinized, debated, and acted on.
JMO!
Happy trails to you ’til we meet again.
-1
Nov 18th, 2010 (12:12 pm)This is complete crap. Exactly WHAT rule created by Congress are you referring to? Please please please provide the language of the statue. (Of course you won’t be able to because it’s a figment of your obviously fertile imagination).
Let’s just get down to it. Capitalism failed and governments around the world had to intervene to save capital market from their own inventions. That’s just a fact. If you think subprime mortgages caused the financial meltdown you’re dumber than a post. Subprime mortgages were such a puny part of the capital markets that the most they could have caused was a hiccup. But multiply their effect 100,000,000X by derivatives and you have a problem, particularly since most of these derivatives weren’t covered.
Just as a FYI, the reason why capital markets have always failed, and why they doubtless will fail again, is that the only way to really make money is to bet with money you don’t have. If you bet $100 and double that, you’ve got a nice 100% return. That’s great but you can’t do it all the time, so it won’t make you rich. To get rich you have to do better. And to do that you have to bet with money you don’t have. So you put up $1, borrow $99, and then place the same $100 bet. Now when that bet doubles you pay back the $99 you owe, plus say $10, and you keep your original $1 plus the $90 you’ve just made. That’s a 9000% return, how you get rich, and how you get to be a master of the universe.
Of course the downside is that while leverage is a great thing when the markets are going up, they’re a killer when the market turns down. If you’ve bet your own $100 and your bet goes to $50 you’ve lost $50. So sad but no big deal. But if you’ve borrowed $99 and your bet goes to $50, you now need to find $59 to pay for your bet. And if you can’t borrow the money to pay off your debts that’s a problem. Multiply by many players and every player in the market starts worrying about going bust and the markets freeze — and that means they go bust.
Derivatives were just the most recent device Wall Street came up with to bet money they didn’t have. No doubt after those are more tightly regulated we’ll see something else. Never underestimate the capital market’s drive for quick wealth and self destruction.
+1
Nov 18th, 2010 (12:18 pm)I don’t understand why a higher price would make the Volt “doomed”. Is anything with a high price “doomed”? What’s your definition of “doom”? Lower volume doesn’t necessarily translate into failure just as higher volume doesn’t necessarily translate into success either. Things are more complex than you seem to think. By that logic, other companies like Apple for instance are also “doomed”. Yeah, I’m trembling all the way to the bank!
Now if you had said “we are doomed” (as in humanity) “if the price isn’t lowered” then I’d tend to agree with you. But that doesn’t necessarily mean the Volt’s price has to be lowered, more lower cost EV alternatives will also do the trick. We really need to get EVs into the hands of more people if we want to survive as a species. GM on the other hand will do just fine selling high cost, low volume EVs … that is at least until we’d all be doomed.
-15
Nov 18th, 2010 (12:18 pm)(click to show comment)
Nov 18th, 2010 (12:35 pm)Another POV.
http://www.thestreet.com/video/10925743/gms-audit-flubs.html#679340826001
Statik
R U gonter buy a Leaf?
+2
Nov 18th, 2010 (12:42 pm)A normal Ch. 11 requires DIP financing. And the credit markets were frozen. It probably would have been ch. 7. And that would have been a disaster for the US economy.
Aside from that, I’m not entirely sure why everyone thinks that the union would have been history in a ch. 11. That’s rarely the case. The contracts would have been renegotiated. Not nullified. The unions probably would have taken a bigger hit, although there’s no guarantee of that. But there’s no way they would have dissolved the union, or GM would have been able to switch to an unionized workforce.
Delphi, GM’s spun off supplier went though a regular ch.11. And the UAW is still very much in the picture.
http://www.uaw.org/story/delphi-agreement-brings-hope-future
+2
Nov 18th, 2010 (12:45 pm)Since governments in so many countries (Japan, China, you name it) intervene – rather than interfere – in the markets, I don’t see how the US of A can do otherwise and keep a competite edge.
You’re doomed to failure if you don’t give at least the same amount of help to your industries as the foreign governments do. It’s just common sense.
+2
Nov 18th, 2010 (12:52 pm)Right. If your definition of success in America is “Leave all the place to China”, you’re absolutely right.
Nov 18th, 2010 (12:57 pm)Volt wins “Green Car of the Year” Award from Green Car Journal at the LA Auto Show this morning.
+2
Nov 18th, 2010 (12:58 pm)Agreed. Completely. In order to have a functional economy, there has to be government management. The government has always been involved in the economy, and it probably always will be. There’s no way around it. The government can’t “stay out of things” even if it wanted to. And trying to generally makes things worse, IMHO.
-2
Nov 18th, 2010 (1:02 pm)I guess one could call it “against accounting principles.”
Another way to put it would be tax evasion with a promise of no prosecution…
+2
Nov 18th, 2010 (1:08 pm)I hope folks pondering the purchase of GM stock don’t think buying it, post-IPO, will benefit the company in any way. The truth of the matter is it would only benefit those who bought it at the IPO price of $33/share or less than what it’s being sold for. I suspect when the Government starts selling its share, the price will drop or at least level off. If you really want to help GM buy or lease a Volt – the 2011 Motor Trend Car of the Year.
NPNS!
-15
Nov 18th, 2010 (1:08 pm)(click to show comment)
+3
Nov 18th, 2010 (1:10 pm)Government regulation increases transparency. Period. The disclosures that most companies make are primarily those required by the SEC. They don’t make them because they’re fun. They do the filings because they are required to by law.
As far as the rating agencies not rating them correction–you don’t think that getting paid by the companies who created the collateralized mortgage securites might have influenced their opinion just a little bit?
-13
Nov 18th, 2010 (1:12 pm)(click to show comment)
+2
Nov 18th, 2010 (1:16 pm)Just a note Mark, the GM bankruptcy was a Chapter 11 reorganization just like any other. The only difference was the government was the lender. Using section 503 of the code was innovative but not by itself unusual or special.
As for the notion that all that all problems will be solved if the government steps out of the way, why not put the crack pipe down. We live in a world where governments promote their own industries. Right now the Chinese government is giving illegal subsidies to PV panel makers, which is stressing the Silicon Valley based thin panel producers. Absent the subsidies, those companies, which have better technology, would be doing very well. The only thing which will happen if the US government “gets out of the way” is that the US companies will get run over by the Chinese government and we’ll lose more high paying jobs.
Time to wake up and smell the coffee brother.
-12
Nov 18th, 2010 (1:18 pm)(click to show comment)
+1
Nov 18th, 2010 (1:29 pm)This whole discussion about the union getting too good a deal in the bankruptcy is beyond stupid. They got what they got because they had the leverage. You can’t use Section 503 as a quick rinse unless the union agrees since they can invoke special protections in Chapter 11. So not only did you need the Union coming out of the bankruptcy, you needed it in order to come out of the bankruptcy. And what did you need from a bunch of hedge and vulture funds looking to make a quick buck in a bankruptcy — notta which is what you gave them. It was just a rational decision.
The other point which is always missed is that another group came out even better than the Union — customers. The bankruptcy could have killed off any and all warranty claims. But that didn’t happen at all. In fact, the bankruptcy made customers 100%+ whole. Why? Cause a car company with a bunch of pissed off customers sin’t going to survive. Again, groups got what they got based on their leverage. It’s just the way it works, and all this drivel about the union is just stuff you get from people who haven’t a clue about how a restructuring should work.
Nov 18th, 2010 (1:34 pm)What I mean when I say “doomed” is that a business model based on high-priced, low-volume, high-profit units of any type is highly susceptible to market fluctuations and demand. GM, as an example, became very unstable when the derivatives market caused the current economic down turn resulting in loss of damnd and GM bankruptcy. That’s what I mean by “doomed.”
Where are all those high priced, high profit, low volume Hummers now?
-13
Nov 18th, 2010 (1:44 pm)(click to show comment)
+2
Nov 18th, 2010 (2:00 pm)Today GM will have repaid the U.S. almost half of the $50 bil or so bailout. A monumental achievement. A few minutes ago, GM broke just under (~34.85) its opening $35. A sign of equilibrium between demand and supply.
The Street has mixed feelings about GM management.
http://finance.yahoo.com/tech-ticker/article/535627/Rick-Wagoner%3A-The-Unsung-Hero-of-GMs-Turnaround%3F I agree that Wagoner got a raw deal from Obama. I also think present Leadership can rise to the task ….
You know, there isn’t any comparable tune – “…See the USA in your Chevrolet…”
+2
Nov 18th, 2010 (2:18 pm)Hey GM!! Listen to your customers. Respond to market demand. Build more Volts.
+2
Nov 18th, 2010 (2:24 pm)Now Lyle, a number of our (decent) posts end up in ‘moderation’, but something like the crap of #66 (‘f’ word and all) make it through?? Something is wrong here.
And to ‘skrachy’, go back to whatever porn site you came from with that language. Your points will never be made with anyone here. Keep typing like that (I am surprised you can actually type at all) and your keyboard will catch on fire.
+2
Nov 18th, 2010 (2:33 pm)It appears that it will be tough to get Opel turned around any time soon.
At the same time, however, the decision to keep Opel isn’t measured by the balance sheet. The importance of their engineering contributions won’t show up there. They carry the expertise for the mid-size and compact cars that are crucial to North America (and globally). And don’t forget their role in the development of the Volt itself.
In my opinion, keeping Opel was Whitacre’s best move. The negative effects would have been have huge and would have surfaced only years later.
Nov 18th, 2010 (2:34 pm)I think I can hear Joe Walsh, ‘My Maserati does 185…I lost my license, now I don’t drive’. That was from 1978. Yet this LUDICROUSLY expensive vehicle continues on and now they even have a webite http://www.maserati.com/ or maybe your more a handbag type http://www.dooney.com/OA_HTML/ibeCCtpSctDspRte.jsp?section=12681
It is hard to believe your keyboard let you keep typing without laughing at you. The Volt may seem overpriced to some, but the market is FILLED with items that are INSANELY priced yet people keep buying them.
Nov 18th, 2010 (2:48 pm)30/hr (+ot) is easily $70k/year. If you live in Detroit, and make $70K/year and cant afford a $33K (or a $41K) car, you’ve got bigger problems.
+1
Nov 18th, 2010 (2:53 pm)Overpriced by some, hmmm??? Suggesting a Volt is comparable to a Maserati and a designer handbag, double hmmm….
I guess I need to step back into my humble middleclass socioeconomic stratus for at least 10 more years. I have accidentally stepped way out of line here by thinking I could ever feasibly become the owner of such an exotic and high-end vehicle as the Chevrolet Volt. My most humble apologies to you and your fellow “members”
+2
Nov 18th, 2010 (3:02 pm)http://en.wikipedia.org/wiki/Community_Reinvestment_Act
So you think history’s largest housing bubble and financial crisis were not caused by the CRA combined with low interest rates and lending requirements that fueled a fake housing bubble that created lots of sub-prime loans that were then ensured by Fannie/Freddie to become toxic assets that were treated like gold assets and re-loaned, thus multiplying in a macro-economic sense until it all collapsed?
Instead you think the cause was a mysterious greed bubble that only more government intervention could prevent?
What color is the sky on your planet?
Nov 18th, 2010 (3:27 pm)Having the benefit of one nearly one day’s worth of hindsight I can see that GM stock did not increase at all after the open…in fact it has decreased by a percent or two.
By definition anyone selling their stock one day after the IPO (which was yesterday) is flipping it and THEY made a handsome 3-5% one day profit.
But for the rest of us GM better be a buy and hold stock that will slowly increase in value as the company continues to recover.
And as pointed out earlier buying “used” stock in the market does almost nothing for GM. If buying raises the price a little that is helpful but the profit goes to whoever purchased the stock originally and GM gets none of it.
Nov 18th, 2010 (3:35 pm)It’s at $34.04 and been on a slow decline most of the day. Not performing like Tesla. I’m just saying.
+1
Nov 18th, 2010 (3:58 pm)I think its more interesting that the volume on a $30+ share company is almost 1/2 billion. WOW!
(also interesting, Ford is down 3.5%)
+1
Nov 18th, 2010 (5:53 pm)I am very happy that GM is back as a automobile business. I am a GM for over fifty years:
As a child riding in my uncle’s white Convertible Cadillac (with the big tail fins) for the first time
As a modeler having built many AMT, Lindberg, and Revell scale model cars
As a young driver in my Dad’s green Chevy Malibu, my Dad’s yellow Olds Cutlass Supreme, my brother’s blue Buick Regal, my sister’s boyfriend’s gold Chevy Corvette, a brother-in-law’s blue Chevy Camaro, and a friend’s bronze Cadillac Eldorado
As a buyer with my copper Vega Kammback, gray Olds Ciera, white Buick Regal, and my wife’s blue Chevy Equinox
And as a passenger enjoying the ride in many other GM cars (Chevy, Pontiac, Oldsmobile, Buick and Cadillac)
I missed the Daewoo, Saab, Saturn and Hummer!
I will ride or buy the Chevy Volt, and I plan to drive and take more rides in future GM vehicles
I maybe lucky enough to be taken to my last resting place in a brand new black Cadillac Hearst!
Raymond
+2
Nov 18th, 2010 (6:11 pm)Look, normally I do not respond to name calling…because in my experience, when someone has to resort to this tactic in an attempt to prove their point, they have already lost credibility. I dont think I can convince you sir. It would take a respected economist like Stan Liebowitz to do so…. but alas, I dont think he would be interested in talking to you. You would have to do some research on your own to come to an understanding of what happened, but I suspect you may be too blinded by your ideology to study the matter. Just in case I am wrong, here is a link to a newspaper article by Mr. Liebowitz in the NY Post. This is just an overview of what happened….but armed with what is revealed here, you would have enough information to find out the truth yourself. Personally, I dont think you want to know. You have an agenda and NEED to believe the way you do. Thats ok, it’s still a free country. I hope it stays that way. All I know is that my friends in the banking industry knew what was going to happen long before the bottom fell out…because of what they were made to do.
http://www.nypost.com/p/news/opinion/opedcolumnists/item_Qjl08vDbysbe6LWDxcq03J;jsessionid=A65B49E3A514F57546A7BB271B73B483
My apologies to everyone for going down this “off topic” road. The brilliant engineering of the Volt itself is why I am here. All the name calling in the world will not get me down this road again.
Nov 18th, 2010 (7:36 pm)What a stupid thing to say. Listen better to your own video link. Your just another Obama hater!
Happy trails to everyone but you.
+1
Nov 18th, 2010 (8:02 pm)Unregulated? Really?
I guess if you consider the situation where government sponsored monopolies, that is, Fannie Mae and Freddie Mac, bundle up horribly performing mortgages that were created for people horribly unprepared for responsible commitment, bundle them up and give them a stamp of approval of “yes, people, this is good stuff” from the… Government… if you consider this “unregulated capitalism” then … I guess it’s the fault of unregulated capitalism.
+1
Nov 18th, 2010 (8:08 pm)GM received much needed cash infusion on this IPO to increased its assets by building new plants. The Brownstown battery pack plant currently won’t be able to produce enough packs for the coming demand. GM will have to invest in expansion of the Brownstown plant or even build another plant in some other location. And for additional tooling it will need for production of new designs, hopefully more Voltec vehicles. The current owners of the GM stock will benefit or lose on their investment depending how GM does in the future; hopefully they will increase their market globally, and the stock will rise in value; and hopefully we will recover the rest of the $50 billion GM received in its restructuring.
The way it looks now, GM’s future looks fine. As Statik stated GM still has some problems particularly at Opel. Much of the competition is situated in Europe where the automotive market is much different than here in the U.S. We may never give up our huge SUV’s and trucks as “passenger” commuter vehicles until the high price of gasoline forces us to.
Would I buy GM stock now No, not at this time. They need to establish five straight years of increased profitability before I engage in their stock. I look more toward the newer industries behind the scene that are involved with the renewed electric industries. Utilities, power electric equipment manufacturers, solar and wind industry, charging infrastructure industry, anything electric related to the EV has my attention now.
Happy trails to you ’til we meet again.
-1
Nov 18th, 2010 (8:40 pm)In defense of DonC, the use of the word “Crap” is not name calling. The word referred to what was being said which I agree is crap. I have used the word stupid in reference to what someone said about President Obama. You would probably call me a name caller too and be wrong about that. It appears to me that you infer too much. Not so, sir. Intelligent people can and do say stupid things but that does not make them stupid. You owe DonC an apology!
Happy trails to you ’til we meet again.
+1
Nov 18th, 2010 (9:15 pm)It’s great that GM has shown good progress… and I feel they are poised to do even better….but I do not think anything has changed… GM is a global company competing in a global market that is rigged against them. Try to buy a VOLT in all our major competitors markets .. Japan Germany Korea…. while we give them $7500 for each car they sell in our market they put huge tariffs on our products… tell me how any American company will compete in this rigged global market?
+1
Nov 18th, 2010 (9:57 pm)Yes.. I bought some GM stock today.. I like to support companies that build products like the VOLT.
-1
Nov 18th, 2010 (10:06 pm)I remember when the free market discovered derivatives, and absent regulatory demands of transparency, the credit bubble led to the most recent crisis.
-4
Nov 18th, 2010 (10:13 pm)You have been reading too much repub/libertarian BS. Fannie was a domino that collapsed along with home values. The unregulated derivates market was the fire. Just look at the amount of of Liar and Heloc and non federal underwriting standards loans that the derivatives induced credit bubble funded.
Nov 18th, 2010 (10:35 pm)I think you’ll find that there are many many economists who disagree with him.
He’s right that the government did try to encourage minority home ownership, and that did contribute to the crisis. They did not, however, suggest that people lie on their loan applications. nor did they require lenders to leverage themselves at 30 to one.
+1
Nov 19th, 2010 (1:58 am)Just a note about what some of those shares are connected to.
A press release from the 18th says that GM has 54 manufacturing facilities operating in the United States and each one will be holding their own open house sometime before the end of next year.
More than the operations, I’d like to meet some of the individuals earning a paycheck building cars and trucks in this country every day. Who would be more gratified in a handshake?
Nov 19th, 2010 (12:42 pm)You do have a point, but the situation’s not quite the same as it was with Hummer. I think Hummer flopped well before the downturn, due to the oil spike. Volt is on the other side of the equation when it comes to oil spikes – it should help increase sales rather than decrease them. If there is another downturn in the near future Volt should do ok, as long as the downturn is not caused by something other than oil spiking again. Besides this low volume thing is temporary anyway, it will increase significantly in the coming years. There’s always the risk of a downturn in the meantime but they’ve got to start somewhere, you can’t expect them to sell in the millions for a first generation product.
-2
Nov 19th, 2010 (1:45 pm)Who’s the Stupid that objects to EricLG’s TODAY’S POSTS?
Nov 24th, 2010 (10:28 am)Random update on an old thread: Tesla did get a nice bump from all the new money looking at the auto sector, and has moved over 20% over the last 6 days. I think the high today/price now of $35.97 is probably maxed out, so just for laughs I have bought a small position betting against the company. /we’ll see how it works out
Dec 3rd, 2010 (1:52 pm)Just to close it out (to the nobody in attendance)
Tesla has dropped down from the $35.97 6 trading days ago, to $31.50. Which moved my Dec Puts (35 strike) from $2.70 up to $4.00, and I think a 45% is about good enough, (=
Dec 6th, 2010 (11:13 am)And why not bet the tesla position profits against the wider market for laughs? Less reckless than a 1 month though, have to be somewhat sane when the gov’t is so involved nowadays…3 months, lol.
/free money…away