General Motors Sucker Play or Escape from Socialism $GM $F

General Motors (NYSE:GM) popped nicely because the US Government is reducing its stake. Good for US tax payers but the US Treasury will not really notice; it’s that bad in DC.

But we all knew this was going to happen so why the excitement? Underlying fundamentals have not changed in the car business. The jail break from socialism was planned for some time. So what’s the fuss about?

Share buy backs are a favourite financial engineering tactic to manipulate EPS manufacturing perceptions of earnings growth. GM can really ramp it up now.

Dividends are anemic make that non-existent. By declaring dividends GM will create a class of buy and hold investors which will help stiffen the price.

The short sale position is about 8% of float. That’s getting rather bullish and it was time to sting them. Corporate managements as you know love short sellers.

Share price represents the future value of earnings. Nothing new has transpired; especially on a fundamental basis. The furniture has been re-arranged in a more modern motif.

George Gutowski writes from a Caveat Emptor Perspective.

 

General Motors Death Wish Comes On-Line Read how the seeds of tomorrows destruction are planted today. $GM $F

General Motors (NYSE:GM) plans to expand new online shopping tools enabling customers to bypass showrooms. GM went bankrupt once because it was an inefficient olde dinosaur. GM and the car business were propped up because Obama was terrified of what the economic impact of creative destruction would bring.

The world is going on-line for everything. Olde school car dealers who are hiding behind state franchise legislation want to kill this on-line. They want olde-school pedestrian traffic kicking tires.

If the dealer culture prevails and GM can’t get traction on-line someone else more nimble will. GM will watch as someone else eats their lunch again. This time Uncle Sam will not want to save the company. Chairman Mao will probably do it for America.

This is tomorrows crisis planting todays seeds of destruction. If the dealers succeed in blocking or delaying the on-line moves they will become a powerful cancer within the GM body-corporate.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

Toyota Motor Sucker Punch One Day Maybe Soon $TM

Toyota Motors (NYSE:TM) has a Black Swan paddling in some time soon. If you believe in independent directors this company is not for you. They simply do not have one. All the directors are senior level Japanese Toyota executives who have been politically savvy enough to climb the corporate rungs and sit at the upper levels.

The probability of group think is astounding. Corporate radicals need not apply. You can talk all you want about Japanese culture and Toyota’s track record but as we all know nothing goes in a straight line forever. This Achilles heel will cause serious damage to shareholder wealth one day.

By the way not to sound xenophobic but if you are not Japanese this board will not care about you.

It’s that simple.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or follow his evil twin brother who is writing a Wall Street Murder thriller at twitter@georgegutowski

Ford Will Be Sacrificial Canadian Lamb $F $GM #auto #CAW

Image representing Ford Motor as depicted in C...

Image via CrunchBase

Canadian Auto Workers are negotiating for their new contract. 5 days to go and the sabres are rattling. They may select one of the big three in Canada for strike action. My prediction is Ford (NYSE:F).

Why?

General Motors (NYSE:GM) is still weak after their bail out and building plants in China. The big plant on Oshawa is on borrowed time and probably will close in a few years. In the meantime the Oshawa Works are a shadow of their former glorious past.  GM is looking for reasons to padlock the place.

Chrysler is controlled by Fiat (LSE:F) which is run by the Agnelli family. The Agnelli family would just sip proseco and act like there was nothing wrong. Picket lines mean nothing. The Canadian Auto Workers would not know how to fight someone like the Italian Kennedy family.

lSo it would be Ford. Large presence. Public shareholders who would take pain. Just enough non government bailout fat to be abused. Like a shark to fresh red meat. Some unionists see the possibility for leverage.

But here are the problems. Managements are very aware of cost structures and the ease of moving offshore. So if its strike first be prepared for a long one with an eventual closure in favour of a right to work state or even something in an underdeveloped country that cannot spell mandatory union dues. Also Canadian foreign exchange advantages have long dried up. Canadian labour is very expensive.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter @financialskepti

Ford India Expedition Hedged or Unhedged $F

Image representing Ford Motor as depicted in C...

Image via CrunchBase

Ford (NYSE:F) announced $1 Billion factory in Gujarat India. In part to satisfy Indian demand for economic cars. In part to satisfy global demand for economic cars. A Globe and Mail article based on a Mumbai Reuters story also mentioned a new plant in Thailand and four in China.

No talk about the currency used to finance the facilities. Of course the local labour and contractors will be paid in local currency. But what currency was the source? Given the falling US Dollar the local currencies are becoming more expensive. You know the finance guys at Ford have it mapped out and they know when they have to pay bills.

The plants become fixed assets denominated in other currencies. Does Ford hedge or should we stop reading their statement because everything is converted back to US Dollar.

Lets assume Ford establishes foreign fixed assets of say $7.5 Billion and currency has a negative fluctuation of some 5% . That equates to $375 million in adverse valuation. In a cyclical business that can be a lot.

Ford has raised some $19 Billion this year. Probably almost all of it in US Dollars.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours. I do admire the Ford brand but I am not inclined to buy cheap sub compacts.

Ford Net Debt Fallacy

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Image via CrunchBase

Ford (F) announced stellar Q3 results. The street has become excited about the possibility of a Zero net Debt position in the next quarter. While it is an important milestone will this be enough to secure the future. Assuming approximately $24 billion Ford now has a negative spread on its cash of approximately $480 million per annum. That’s half of your quarter’s improvement from last year. 

“This was another strong quarter and we continue to gain momentum with our One Ford plan,” said Ford President and CEO Alan Mulally.Yes they are generating cash which is a refreshing change for a major American automotive company. When will the market trust management to use the cash in operations?

Disclosure: George Gutowski writes from a caveat emptor perspective. I do not hold positions in any stocks mentioned in this post.