Marketwatch report of June 26, 2008:

http://www.marketwatch.com/news/story/general-motors-shares-slump-after/story.aspx?guid=%7B8DE90DA3%2D2420%2D4C57%2D94C7%2 DE2AE3698285F%7D

Go Volt!!!

I think the price just reflects GM's revenues for the next couple years, as they transfer their production from SUV's to sedans. GM will be earning money a few years from now, as they offer several vehicles with the flex-treme / E-REV config.

Jason,

I like your optimism. One concern is that with negative press and evaluation from Wall Street analysts it will be very costly for GM to raise funds for continued operation and capital. They may be forced to borrow money under harsh conditions and from sources that we find unsavory.

The E-Flex product line will be in competition with Toyota (the king of efficient, low cost operation) and others. Excellence in engineering alone has never been very successul in the auto arena. GM's has abdicated its niche in trucks and SUVs. Of late, the small vehicle, low cost market is owned by foreign competition. Please prove me wrong.

Marketwatch report of June 26, 2008:

http://www.marketwatch.com/news/story/general-motors-shares-slump-after/story.aspx?guid=%7B8DE90DA3%2D2420%2D4C57%2D94C7%2 DE2AE3698285F%7D

Go Volt!!!

I'm surprised that Wagoner was only paid $20 million for his performance. He must feel like he was treated poorly.

The Volt will come too late. GM will fail. And with the collapse of GM, the Volt concept and all related data will be stored in big wooden crates in an Army hangar in the desert. :eek:

:: plays indiana jones theme ::

...dun dun dah-dunnn, dun dah-dunnn...

(BTW, that was a horrible movie. UFO? What the hell?)

GM will receive loans from the government that are funded through the sale of Green Bonds, so that GM's payments go to those who buy the bonds at a low interest rate.

GM leads way into downward spiral as auto anxiety soars

By James R. Healey and Sharon Silke Carty, USA TODAY

The Detroit auto industry appeared to be imploding Thursday.

Shares of General Motors (GM) stock hadn't traded so cheaply since the 1950s. Ford Motor (F) stock was at a 52-week low. Privately held Chrysler doesn't trade but still felt compelled to deny a rumor that it will file for bankruptcy protection.

STOCKS HAMMERED: Downgrades, spike in oil blister markets

GM led the way, hit hard by a downgrade to a "sell" recommendation from Goldman Sachs. The report set off a chain reaction that pulled down shares of automakers' parts suppliers as well. The entire industry — upon which 13 million jobs in the USA and 4% of the nation's GDP depend — took a beating.

Some of the ugliness was part of an overall stock market drop Thursday. The Dow was off 3%.

But most of the auto anxiety seemed be a reaction to bad news that's been building all week, combined with a kind of anticipatory panic — a stampede in advance of the June sales numbers due Tuesday.

That report's expected to be almost unbelievably bad, confirming fears that the spring plummet of the car and truck business in the USA has far from bottomed. Consultant J.D. Power and Associates is predicting June sales will calculate to an annual selling rate of 12.5 million, a breathtaking drop from a rate of 15.6 million in June 2007.

Edmunds.com, a respected auto information and shopping site, predicted Thursday that June sales would plunge 16.7% from a year ago. That would put June at an annual rate of 13 million.

The annual selling rate for the months so far this year has ranged from 14.3 million to 15.4 million, already almost guaranteeing a bad year. Full-year sales have been about 17 million most of the past decade.

A drop to 14 million from 17 million for the entire year would be the equivalent of closing a dozen big auto factories.

"There has never been a time in the auto industry like this," Van Conway, senior managing director of Conway MacKenzie & Dunleavy restructuring firm in Detroit, said Thursday. "Those are just shocking numbers."

Conway called current conditions "the perfect storm" for the industry. "The economy is in trouble, the credit markets are a mess, residential home values are destroyed, commodity prices are up, fuel prices are up and, in certain areas of the country, unemployment is up.

"Add that up," he says, "and you have to ask yourself, when in the past 30 years have we had all that happen at once?"

A litany of woes

Everywhere, it seemed, the boogeyman was popping out of the shadows.

Consumer Reports magazine said Thursday that its latest survey showed that 80% of Americans aren't planning to buy a new vehicle in the next year. Of the few who say they are, 0% — none, zip, nada — say they'll consider buying something much larger than they're driving now. That's bad news for Detroit, because it remains geared to build larger cars and trucks, even after recent scrambling to cut back on big ones and import or manufacture more little ones.

"You could say they should have built these smaller cars and more fuel-efficient cars, but nobody saw these gas prices coming a year ago," Conway says. "You can't create a car to deal with $5 gas in one year. The guys who had those cars kind of lucked out."

High fuel prices, he says, "pinch the pocketbook of America, and consumers are not going to buy any durables. No cars, TVs, houses, dishwashers."

Even though gasoline prices have drifted down a few cents the past week, to a U.S. average of $4.067 Thursday, three-quarters of Americans expect gasoline to hit $5 a gallon by Labor Day, according to an Opinion Research survey for a clean-energy group affiliated with the not-for-profit Civil Society Institute.

Why stop there? Look for $200 oil and $7 gasoline in four years, says Jeff Rubin, chief economist at CIBC World Markets. He predicts those levels would collapse sales of new cars and trucks to just 11 million in 2012.

Or maybe it won't take that long. Chakib Khelil, president of the Organization of Petroleum Exporting Countries (OPEC), forecast $170 oil this summer — which would translate to $4.90 gasoline.

Thursday, oil traded at more than $140 a barrel then settled at a record $139.64, up $5.09.

No automaker unscathed

Detroit's automakers' troubles are front and center but not unique. Toyota Motor (TM) told a shareholders meeting in Japan on Tuesday that it no longer is confident it can meet this year's scaled-back sales target of slight growth in the USA, its biggest market.

Toyota — even though it's a pioneer with the fuel-efficient, gasoline-electric hybrid Prius — isn't insulated. It has said it is cutting production of its full-size Tundra pickups and Sequoia SUVs at its factories in Texas and Indiana.

The industry's bad news in recent days included:

•Fitch Ratings, a major credit-rating service, cut GM's and Chrysler's bond ratings one step, to B-minus, which Fitch said is six levels below investment grade, or far into junk-bond territory.

Fitch said it is reviewing Ford's rating.

The worse the rating, the higher the interest rate investors demand. That makes it expensive, or sometimes impossible, for a company to raise money.

"The market has moved too fast for them to catch up," says Mark Oline, Fitch analyst. "The liquidity (strain) could pose problems for all manufacturers."

He believes the Detroit Three are moving to align their product offerings with buyers' new appetite for fuel-efficient vehicles. "But they need (cash) and time to do that, and both are becoming increasingly short in supply," he says.

"This is a very capital-intensive industry," says Kevin Tynan, an analyst at Argus Research. "To pump out hybrids, smaller cars and alternative-fuel engines, automakers must keep investing money, and that's going to get harder as they continue burning through cash."

GM CEO Rick Wagoner tried to reassure investors Thursday that GM can hold out through this period.

"We've got a very good, solid funding base under any scenario we see — solid through the end of this year," he told reporters after an event hosted by Democratic presidential candidate Barack Obama. "We have a lot of options to fund beyond that."

•The Goldman Sachs downgrade was a rare move for a Wall Street investment firm: flat-out advising investors to sell.

They did. GM's shares tumbled 10.8%, to close at $11.43, down $1.38.

That means the big automaker's market capitalization — the value of all its shares — fell to about $6.5 billion. That makes it by far the lowest market cap of the 30 companies that make up the Dow Jones industrial average. GM's been a Dow component since 1925. The next-smallest company is Alcoa, worth $28.8 billion. Biggest is ExxonMobil at $456.6 billion.

Ford shares, pulled down by the overall gloom, closed at $5.07, down 17 cents, or 3.2%. Its market cap is $11.4 billion.

Toyota Motor, Detroit automakers' chief rival, had a market cap of $148.8 billion at Thursday's close.

In his note to investors, Goldman auto analyst Patrick Archambault said he expects GM to burn through enough money in this period to cause "significant shareholder dilution and/or a cut to the company's dividend."

•Chrysler, privately owned, on Tuesday tapped a $2 billion line of credit, a move that ignited talk of a bankruptcy filing.

Chrysler said it had to use the line before August or lose it under terms of the contract that established the credit. Chrysler is 80.1% owned by private investment company Cerberus Capital Management. The rest is held by its former partner, German automaker Daimler.

"There is no basis for the rumor" of a bankruptcy filing, spokesman David Elshoff said Thursday.

Looking for signs of life

GM has given up on its original predictions that the industry will recover during the second half of this year. Now, investors are trying to figure out how much longer the downturn will last, says Tynan. "I think there's a realization that if this market stays weak through 2008 and 2009, there are going to be liquidity issues at General Motors and Ford," he says.

People are looking around, he says, for signs that things might get better, and not seeing any: "There's not a whole lot of upside catalyst."

GM ended the first quarter with $23.9 billion in cash and is likely to burn through about $6 billion of that this year. Without an end to the sales slump in sight, investors are worried, Tynan says.

"The industry can survive a 15-million-unit year," Tynan says. "But can it survive two?"

Now is the time to buy GM stock.
Or maybe not, we could wait a few days to see if it will drop to $6.00/share.

GM shares fall below $10 for first time since 1954 (http://biz.yahoo.com/ap/080702/auto_stocks.html)
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Yes, bankruptcy is not that far away. However, GM will continue with the Volt project because it’s one of the few bright stars that will help GM emerge from bankruptcy ready to compete. Bankruptcy is not the end of the world. I just worry that the Volt program is sold to Shell Oil or some government that is not exactly keen on bringing this technology to market in high volumes. Cross your fingers that the Volt gets completed, production gets underway and the car sells well.

I believe GM is on the right path. I also think they should work on everything related to the electrification of our transportation fleet. GM - transportation for the 21st Century and beyond. Heck, they might even get into the electrification infrastructure as well. Can anyone imagine the market possibilities for electrification technologies around the world as oil production heads south? Huge does not even describe it well.. GE and GM are very well positioned to take the global lead.

I wouldn't be surprised to see GM discontinue the GMC, Buick and Ponitac brands then sells the remaining large commercial truck buniness to some third party like they did their motorhome chassis division to Workhorse a few years back. AND... Nobody here will want to hear this, but it would not surprise me to see the E-Flex program sold as well, to any company foreign or domestic that might offer a good price for it. After all, GM will soon come to the realization, if they have not already, that they will have to sell the Volt at a loss to compete with Toyota, and while Toyota can afford to sell their hybrids at a loss for a long time to garner market share, GM can't. In the end the bean counters always seem to win the day at GM, and Toyota, or more likely some Chinese company will pay big bucks for the technology. And GM will soon need big bucks if it wants to avoid shutting its doors. We may see a Volt someday, but I'm getting very pesemisitc that it will have the bow tie on the grill. It will more than likely say Made in China on the door jamb. :(

I wouldn't be surprised to see GM discontinue the GMC, Buick and Ponitac brands then sells the remaining large commercial truck buniness to some third party like they did their motorhome chassis division to Workhorse a few years back. AND... Nobody here will want to hear this, but it would not surprise me to see the E-Flex program sold as well, to any company foreign or domestic that might offer a good price for it. After all, GM will soon come to the realization, if they have not already, that they will have to sell the Volt at a loss to compete with Toyota, and while Toyota can afford to sell their hybrids at a loss for a long time to garner market share, GM can't. In the end the bean counters always seem to win the day at GM, and Toyota, or more likely some Chinese company will pay big bucks for the technology. And GM will soon need big bucks if it wants to avoid shutting its doors. We may see a Volt someday, but I'm getting very pesemisitc that it will have the bow tie on the grill. It will more than likely say Made in China on the door jamb. :(

What you say isn't too far outside the realm of possibility, but it is more likely that GM will take on a Chinese partner, receiving a large capital infusion, etc. I doubt it will come to this, because the feds will just issue "green bonds" and lend the money to GM to stay solvent until they convert their fleet over to E-flex.

Hooking up with China would be a bad move. The Chinese government & business troops are not our friends. We are at (financial) war with them now - too bad so few realize this.

Hooking up with China would be a bad move.

Volkwagen didn't think so - they sell 3 of every 10 cars sold in China, thanks to being the first to go large scale in auto manufacturing partnerships there.

As to the economic war, it's a controllable one. China only sells a lot of goods to the US because the US is willing to buy it. Germany, however, enjoys a trade surplus with China by getting into their market rather than just being a consumer.

Hooking up with China would be a bad move. The Chinese government & business troops are not our friends. We are at (financial) war with them now - too bad so few realize this.

I agree with what you say. I just don't think that corporate America is bright enough to understand this. Over the past 20 years, we've given them our technology, sold them our factories, bought everything they make for us, then borrowed back our own money that we willingly sent to them in exchange for our Wal-Mart life style. It's too late for America now. If we aren't already we soon will be an economic colony of China.

Off the subject, but do you realize that as of 2008 China now surpasses the United States in CO2 emissions. Yup, we are now number two in the world in pollution too. Not only that, China is building 2 new coal fired power plants a month and they plan to continue this pace well past 2015. I was at a conference 2-months ago when were given this interesting fact: If the United States were to stop emitting CO2 today, the total decrease in atmospheric CO2 increase (not total concentration, the increase) would only drop by 4%! That's how insignificant the US has become. So while we look for ways to stiffle our own economy by reducing green house gas emissions, China, India, Russia and Brazil (the BRIC nations) are pressing full speed ahead with economic development and domination.

Volkwagen didn't think so - they sell 3 of every 10 cars sold in China, thanks to being the first to go large scale in auto manufacturing partnerships there.

As to the economic war, it's a controllable one. China only sells a lot of goods to the US because the US is willing to buy it. Germany, however, enjoys a trade surplus with China by getting into their market rather than just being a consumer.

Hi Manntis,

I should have been more clear. Selling product TO China would be fine. It's everything else that I am against. U.S. manufacturing and industry is almost non-existent these days.

Over the past 20 years, we've given them our technology, sold them our factories, bought everything they make for us, then borrowed back our own money that we willingly sent to them in exchange for our Wal-Mart life style.
So true pennor1.
But that money we borrowed back from China was'nt just for our Wal-Mart lifestyle, it was also to fund the war in Iraq.
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