$GM burns US tax payer for Ten Billion. Just what did America get for this?

General Motors (NYSE:GM) will finally shed the US Federal Government as a shareholder. The market expects Uncle Sam will take a haircut of $10 Billion. Roughly the cost of a small cheap aircraft carrier.

Assuming a population of 230 million that’s $43,478 per man women and child within the public debt which needs to be repaid eventually.

God Bless America. But the devil controls the treasury.

George Gutowski writes from a caveat emptor perspective.

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

General Motors Feds and UAW look to liquidate. Buy Sell or Hold $GM $F

Federal government is looking to sell some 30 million shares of General Motors (NYSE:GM). UAW Retiree Medical Benefits Trust will sell some 20 million. We all knew it was coming but apparently the market is surprised. The Federal government took a big risk and wants to cash out. Elections are coming and its time to get this sucker off the books. By the way the Federal Government could use the cash. Not sure for what but they always seem short.

Lets take a look at some of GM’s metrics and do a quick and dirty Buy, Sell or Hold.

  1. Stock is trading near its 52 week high. Range has been from $18.72 to $35.49. This would be the time to put it out.
  2. No dividend has been paid for all the obvious reasons. So if the dividend story starts to crank up that’s a plus.
  3. If the dividend story is not strong then we have a management signal about how strong the earnings are.
  4. The short position is some 8.95% of the float. If the stock weakens some shorts will cover and provide buying pressure. Hence the schizophrenic nature of short selling.
  5. RSI has been strong since mid April.
  6. Money Flow has been very positive since late Dec 2012.
  7. Momentum has been decidedly strong since mid April.
  8. Total amount under consideration is still less than the total short interest.
  9. The recent inclusion in the S&P 500 index means 85.4 million shares will be absorbed into index funds.
  10. Do you believe America is prepared to start buying cars? Little bit. Rising interest rates can snuff out the demand.

So on balance its a hold. Maybe write some call options. The next driver upward will need to be the reinstatement of the dividend. Obama will need to see this happen to prove his pro-market and economic savvy profile. to the extent that he cares about it. the stock is still highly politicized and will not always react to business metrics as other stocks will.

In the meantime Ford carries a 2.58% dividend yield, also trades near its 52 week high and is beholden to no one. the GM yield will need to be similar to Fords wink wink nudge nudge.

George Gutowski writes from a caveat emptor perspective. He also drives a Volvo S80 and is very happy.

General Motors Reverts to Bad Old Ways. Cadillac May Become 1% Loser $GM

Campbell Ewald logo

Campbell Ewald logo (Photo credit: Wikipedia)

General Motors (NYSE:GM) if the rumour mill is correct is close to awarding the $250 million per annum Cadillac account to Campbell Ewald. Campbell Ewald has had a relationship with GM since the Great Gatsby Years of the early 1920’s.  The Cadillac brand which used to compete neck and neck with Lincoln Continental well both are considered pedestrian compared to Lexus, Mercedes-Benz and BMW.

A recently former GM Chief Marketing Officer Joel Ewanick had moved the account to Minneapolis based Fallon Worldwide Inc in a supposed attempt to bring in some fresh thinking. Everyone agreed that Cadillac needed some; no lots of fresh thinking.

Problem was according to Fortune magazine some reps to the board about some promotional deals with Manchester United did not bear scrutiny. Sooo….likes gets whacked. Not sure what his side of the story was. Like how hard is it to convince a stodgy GM board but anyway they parted ways. And as is usual in the post apocolytic scenes the former decisions are reversed. Good or bad they must be expunged.

OK so like if you are very new to GM let me point out they have recently gone bankrupt and only by the grace of Obama at the behest of unions fearing huge job loses were they propped up and forced to survive. Just recently they still had to go to congress to get senior officer pay packages approved because Uncle Sam still owns some 20%.

You have to get the cleansing process. after you whack a senior guy you go back to what is safe. But the safe contributed to the bankruptcy. Cadillac lost its iconic status.

As is my way lets look at the Board of Directors especially the independent ones and see what influences there were to allow this course of events. Cadillac is a premium supposedly ultra luxury brand. So experience in marketing premium ultra luxury should be an asset.

Short answer no one on the board has this pedigree. Take a quick look at the career DNA’s and decide for yourself. Then think about the quality of future issues if you care to venture out so far.

Thomas Schoew 59, was EVP Walmart, before that exec with Black and Decker. Currently a director of KKR and Northrop Gruman. OK the Walmart pedigree tells all.

Theodore M Solso 65, Chair and CEO Cummins the Engine People. Also director of Ball Corp and Ashland. No luxury brand expertise.

Robert Knebs 69, Was chairman of Burlington Northern Santa-Fe and was chair of UAL. Infrastructure guy.

Phillip Laskawy 71, Chair and CEO Ernst Young and DNA pedigree in financial services. Essential a numbers guy and probably a damn good one. but nowhere on the Cadillac file.

David Bonderman 69,  Co-founding partner and managing partner of TPG, chair of Ryanair a low air fare discounter. Board seat on Caesar’s hints at high roller savvy but not quite.

Neville Isdell 68, Chair of Coca Cola mass consumer drink out of the bottle experience. not enough champagne to get the Cadillac brand and what it really needs.

Erroll Davis Jr. 67, Alliant Energy pedigree and more recently superintendent of Atlanta Public School System. Noble works but not exactly the gilded lifestyle experience.

Kathryn Marinello 55, Pedigree in Human Resources such as Ceridian, Senior Advisor to Providence Equity Partners and Ares Capital. Not to mention ten years as President & CEO GE Fleet Services.

Patricia Russo 59, CEO Alcatel-Lucent and before just Lucent. Director of alcoa, HP, KKR and Merck. OK so I cannot find the luxury brand experience in technology and pharma.

Cynthia Ann Telles 59, Doctor and member of faculty of UCLA Medical School-Psychiatry. A shrink with big peer respect. But Cadillac stuff does not show.

Carol Stephenson 61, President and CEO of Lucent Canada. Canadians you just have to watch them closely. They have health care and abundant energy resources plus decent education. Cadillacs not so big.

Michael Mulligan was a four star admiral and brings to the table geo-political insights.

James Mulva 65, Chair and CEO ConocoPhillips. Also director of GE Company.Big strategic stuff good. Fancy self-indulgent Cadillacs not there for it.

So basically no one on the Board gets Marketing much less the all important fat margin niche of luxury Marketing. The Cadillac account gets switched and good luck with that.

Much luxury growth will be in developing countries. Will a Michigan based advertising company with a few overseas offices get it.

Not the way I would place my bets.

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

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