The trumpets sounded this morning as General Motors reported its 2014 fourth quarter earnings. GM’s bottom line earnings exceeded expectations (although revenue missed and was down from last year) and the pre-market share price of GM immediately jumped over a dollar a share. Despite the victory laps being taken by GM and its friends in the media, it would be wise for individual investors to think twice before jumping on the GM bandwagon.
GM management often exhibits a political DNA which was implanted at the company as a result of the 2009 auto bailouts when the Obama Administration manipulated a bankruptcy process to benefit UAW allies. GM’s main goal now seems to be to give the appearance of financial strength while ignoring the fact that the auto industry is highly cyclical as well as brutally competitive. The strategy has not worked to date considering that, since GM’s IPO in late … Read More ➡
General Motors recently announced that it bought back preferred stock from the UAW Retiree Medical Benefits Trust and the Canadian government. The deal closed in December of 2014 and supposedly will result in a reduction to GM’s fourth quarter earnings to the tune of $800 million. GM had the option to redeem the shares at face value after December 31st of 2014. The timing of the deal brings into question the motivation behind the move and also leads us to reexamine a previous preferred share buyback that occurred in late 2013.
The 2013 deal seemed to have been designed to benefit the UAW rather than the shareholders that GM has an obligation to serve. Reuters reported on the deal in September of 2013 with the following:
General Motors Co (GM.N) said on Monday it would buy back just under half of its preferred shares held by the United Auto Workers
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Sound the trumpets! Here comes the next best, all-new, electric wonder-car from General Motors. The dust had not even cleared from the rollout of the new and improved 2016 Chevy Volt when GM CEO Mary Barra announced the newest Tesla-killer from GM, the Chevy Bolt. Let’s hope that the engineers working on the Bolt put more thought into the design of the vehicle than the GM executives put into naming the car.
Seriously, the Bolt? The name sounds like something out of a Disney animated movie. I wonder if the names Ratchet or Socket were in contention. Whatever the case, the name may be new, but the hype is all too familiar.
Barra has touted the new Bolt as being “a real game changer” for GM, just like the previously-hyped Chevy Volt was. Anyone who has paid attention to the Volt debacle would know that the car has been … Read More ➡
President Obama traveled to Michigan this week to declare the auto bailout a success. Interestingly, he toured a Ford plant. The company did not participate in the bailout.
GM is still trying to shake the Government Motors moniker, and that was certainly the reason for Obama’s nonvisit.
Earlier this week, General Motors Company boasted that sales for December were the strongest in seven years. A review of the facts shows that this is not exactly true. You see, GM Co. has not been in existence for seven years. While GM points to this technicality when trying to weasel out of liability claims from the past, it continues to act as if the company is a stalwart 100 year-old American institution.
GM described December’s sales as follows in its press release, “General Motors Co. (NYSE: GM) dealers in the United States delivered 274,483 vehicles last month for the company’s best December … Read More ➡
The death toll for General Motors’ faulty ignition switch victims continues to rise with the last reported number being 42. There has been speculation that the death count is significantly higher, as safety advocate Clarence Ditlow has written to GM to request an expansion of efforts to uncover victims of accidents resulting from defective GM vehicles.
GM has known about the ignition switch defect for years and failed to recall the deadly vehicles for almost five years after the Obama Administration took over the company in June of 2009. President Obama’s Auto Task Force guided the company through a manipulated bankruptcy process that favored political allies like the UAW over other creditors as new management and board members were appointed by the Administration. We now must question the perceived “success” of the GM bailout and ask if a conventional bankruptcy process could have saved some of the lives that were … Read More ➡
The evidence continues to mount that General Motors has been less than transparent, if not outright culpable, regarding its ignition switch recall fiasco. As the death toll mounts (from the original 13 casualties reported by GM to the just revised 32 deaths) for victims involved in crashes of GM vehicles with defective ignition switches, new evidence has emerged that GM actually ordered replacement parts for the defective switches a full two months before they even reported a problem.
A Wall Street Journal article published on Sunday unveiled the damning evidence that GM placed an order for half a million replacement parts for defective ignition switches in mid-December of 2013. GM’s timeline of events points to February of 2014 as the time when they decided on recalling the vehicles. Mary Barra has stated that she was not aware of the issue until around that time, when GM notified the National Highway … Read More ➡
Every so often a General Motors’ truck owner forwards me their story regarding problems with brake line rust, a problem that executives at GM refuse to acknowledge. One recent such correspondence tells of one of the highest repair bills that I have heard of relating to corrosion and failed brake lines. Repairs were made to the vehicle after the owner narrowly avoided an accident as a result of failed brakes due to the corroded brake lines.
Marsha Joiner from Virginia sent me a copy of the invoice from her Manassas GMC dealership for repairs to her 2005 GMC Yukon. The whopping total for repairs directly related to corrosion from brake lines was a staggering $3,600. Her ordeal (along with other examples) has also been recently reported on by Consumer Affairs as they continue to be one of the few media outlets and consumer advocacy organizations that question the safety of … Read More ➡
It must be difficult for the Mom and Pop investor to make sense of General Motors’ recent earnings announcement and subsequent drop in share price. On Thursday morning, GM reported earnings that were trumpeted as being “impressive” by one major financial TV network. In fact, early in the day, headlines at the network stated that the entire market was being driven higher by strong earnings at GM and Caterpillar. That hyperbole came into question when GM share price dropped about 3% on a day that the broader markets were strong.
It was unfortunate for many investors who bought into the early hype and drove share price up pre-market. As is often the case on Wall Street, the little guy was at a disadvantage to the big guys who are more astute at filtering through the hype to get a clearer picture of the financial condition of publicly-traded companies. And when … Read More ➡
Environmentally conscientious, wealthy car enthusiasts are in luck! The much-hyped “D” unveiling came last week as Tesla CEO, Elon Musk, presented what appears to be a very impressive version of its plug-in Model S electric car called the P85D. Boasting 691 horsepower, 687 ft/lb of torque, AWD and a blazing 3.2 second zero to sixty time, the new rich peoples’ toy is expected to cost in the neighborhood of $120,000. In fact, the car is so darn impressive that the only obvious question is why in the world do we need to give the affluent purchasers of cars like this a federal tax credit of $7,500 each?
I can see why General Motors would need subsidies to sell such cars as the Cadillac ELR (which lumbers through a zero to sixty time in a laborious 9.4 seconds) at a price of about $75,000. The car is essentially a gussied-up Chevy … Read More ➡
Cadillac sales continue to sputter at General Motors. In fact, the brand is the only make at GM that has seen a year over year sales decline for the period ending in September at a time when the auto industry was booming. Specifically, Cadillac has logged in 127,837 sales for the first nine months of 2014 compared to 133,414 in 2013 for a sales decline of 4.2 percent. GM will now offer frequent flyer miles to help spur sales at the division.
The marketing move at GM follows a decision to relocate Cadillac’s sales team to New York City. That move, along with the renaming of Cadillac models, was criticized by Automotive News as follows:
It is most disappointing that the new head of Cadillac had this decision thrust on him without any chance to evaluate the situation or get some wise advice from outside the company — from
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