Romney Was Right: GM to Make Electric Cadillacs in China

General Motors’ recently deceased, plug-in electric Cadillac ELR had not even officially been declared dead before word was out that GM has plans for another plug-in Cadillac for American markets; this one to be built in China. It seems that the brass at GM believe that the Chinese can succeed where American manufacturing has failed regarding being able to build electric Cadillacs that appeal to American consumers.

It has now been about seven years since taxpayers sunk about $50 billion into GM to fund the Obama Administrations’ auto sector bailouts which rewarded the Obama-friendly UAW while hosing less politically-popular classes like GM bondholders. That time span seems to be long enough for GM to feel that moving manufacturing jobs to China will not face criticism as the move to build Cadillacs in China follows earlier announcements that the Buick Envision SUV would also be built there.

During the 2012 …

Innovation Desperation: GM Overpays for Self-Driving Car Startup

The Wall Street Journal recently reported that General Motors has paid over a billion dollars in cash and stock to acquire Cruise Automation, a San Francisco startup company that designs self-driving software. The technological and regulatory obstacles facing autonomous driving development are huge, but don’t expect that to stop GM from throwing billions of shareholder dollars at the latest hyped wonder-technology.

Cruise Automation is a small firm that employs about 40 people and has no major sales revenue to speak of. That works out to GM paying about $25 million per employee. The billion dollar company, however, is reported to be growing quickly with plans to hire another ten people.

The idea of GM wantonly spending $1 billion for the start-up brings to mind the costly Chevy Volt folly which saw a multi-billion dollar investment in an infeasible technology reap no rewards for GM shareholders. Even with billions of dollars …

After Original Bondholders Stiffed, GM Issues New Debt

“Fool me once, shame on you; fool me twice shame on me.” That is a cliché that investors should keep in mind if they are considering buying into General Motors’ latest debt offering. In fact, holders of GM common stock should also assess the growing similarity that New GM has with the bankrupted Old GM.

GM announced last week that it will be offering an estimated $2 billion of unsecured debt to help prop up underfunded pensions with additional proceeds used for general business purposes. The move follows a contradictory continuing dialogue that proclaims the company is so cash rich that it can afford to buy back billions of dollars of common shares as it doles out $11,000 bonuses to UAW workers. GM share performance belies the notion that the company is firing on all cylinders.

Since GM’s public offering in late 2010, shares are down over 15% while the …

Justice Dept. Assails VW as Barra is Elevated to GM Chair

The Obama Administration’s Justice Department is now suing Volkswagen for “up to $90 billion for allegedly violating environmental law.” Politically-favored General Motors was fined $900 million, or 1% of that amount, for covering up an ignition switch defect that led to the deaths of at least 124 people. At last count, the number of people who lost their lives as a result of emissions' tampering by VW stood at zero.

Meanwhile, the GM board unanimously elected CEO Mary Barra as its Chairman, demonstrating that it is still not independent of political influences, even years after the 2009 bankruptcy process.

Barra was in charge of quality control during the time that GM was hiding its deadly ignition switch defect. She became CEO while the company continued to cover up the extent of a problem that was putting motorists' lives at risk. Barra repeatedly evaded and misrepresented in public statements, and in …

Did GM Get Sweetheart Deal on Homeland Security Vehicles?

A report by the Office of the Inspector General (OIG) for the Department of Homeland Security has found that the Department’s Federal Protective Service (FPS) division wasted about $2.5 million of taxpayer money in 2014 on an extravagant fleet vehicle program. It is not surprising that images show that the vehicles in question appear to be manufactured by crony company, General Motors.

A House of Representatives Subcommittee on Oversight and Management Efficiency, headed by Rep. Scott Perry (R-PA), requested the audit on the FPS’ fleet operation. The report unveils a fleet of 1,169 vehicles which were leased at an operating cost of $10.7 million. That’s over $9,000 a year per vehicle or over $750 a month. Would any taxpaying individual agree to a personal lease deal for that amount? Probably not, but the Obama Administration has no problem spending the taxpayers’ money to lease vehicles which apparently come primarily …

Will Underfunded VEBA Fund Enter Into GM’s UAW Negotiations?

The Wall Street Journal has reported that the UAW’s voluntary employees’ beneficiary association (VEBA) fund was underfunded by approximately $20.7 billion in 2014, which was the latest reported period. The shortfall has grown from the previously reported 2013 figure when the trust was estimated to be 93% funded. The latest funding figure, which was hurt by growing medical benefits costs, plummeted to 74% in one year.

The VEBA fund was established in order to transfer liability of retiree medical benefits costs from General Motors, Ford and Chrysler (now Fiat Chrysler Automobiles) to the UAW prior to GM going bankrupt in 2009. In fact, the fund was one of the primary driving forces of GM’s bankruptcy as the company agreed to fund the account with $30 billion as part of the agreement; money they didn’t have.

Total net assets for the VEBA trust stood at about $60 billion in 2014. …

Barra’s Rosy Proclamations Should Embolden UAW

General Motors’ CEO, Mary Barra, continued to project a bright future for the automaker during a recent presentation to shareholders. The prognostication gave a rosy appraisement for financial estimates as far out as 2020, when Barra says GM will have between $9 billion to $10 billion in free cash flow. Her crystal ball also shows that electric cars will compete with gas-powered vehicles by 2022 and that global car sales will increase by 50% to 130 million by the year 2030.

It is very difficult to predict future profitability in the very cyclical auto industry, but GM is desperate to give its shareholders some hope. GM share price has far underperformed broader markets since the company’s 2010 IPO and still trades below the $33 offering price.  The S&P 500 index has gone up by about 70% compared to GM’s decline since trading began. Putting aside the fact that 2020 cash …

Buicks Made in China – More Bad GM Timing

Rumors have circulated that General Motors is considering building Buick SUVs in China which would be sold both there and in the USA. The timing of the leaked plans could not be worse as China markets continue to collapse, spreading contagion to world markets. The timing also coincides with GM’s negotiations with the UAW, raising the suspicion that GM is using the rumor to leverage their bargaining power with the UAW.

Why is GM focusing so much on the Chinese market at the worst of times? Regardless of the weakening Chinese economy, it would be challenging to convince American consumers to purchase SUVs built in China given the perception of lower quality and safety standards. China also has not been the best of US allies considering ongoing computer hacking allegations, aggressive military build-ups and unfair currency devaluation tactics.

The UAW should call GM’s bluff on its Chinese gambit. If GM …

GM Gambles $5 billion of Dwindling Cash Hoard on China

General Motors recently announced that it will spend $5 billion on a joint venture with Chinese state-owned SAIC Motor to develop vehicles for emerging markets. The announcement came around the same time that GM reported results for 2015 second quarter earnings, which showed cash and cash equivalents decreasing $2.2 billion in the first six months of the year. Marketable securities also declined by $2 billion during that time frame.

The decision by GM to spend another $5 billion of its diminishing so-called “cash hoard” on Chinese ventures is a risky move (particularly given China’s shaky markets recently) reeking of desperation by a management team that can’t seem to maintain the company’s share price above the 2010 IPO price of $33. GM stock has been hovering around the $31 range, which reflects a drop in value of approximately 6% during a roughly five year period when the broader S&P 500 index …

GM Insiders Dump Another $2.8 Million Worth of Shares in June

It would appear that the insiders at General Motors do not have as rosy a view on the financial outlook for the company as they would have the rest of the public believe. The well-paid executives at GM sold out of another $2.8 million worth of shares in June according to Yahoo Financial statistics. Of course, the sales of shares are pure profits for the higher-ups at GM, considering that the elite group of executives receive millions of dollars’ worth of GM shares for free through stock options.

Heavy insider selling has been ongoing at GM since I wrote about a SIGTARP report in September of 2014 that unveiled excessive pay at GM. The report found that the top nine executives at GM saw income rise from $32,307,500 to $35,335,000 in 2013.

During the 12 month period from March of 2013 to March of 2014 eight GM executives sold …