GM Death Watch

[TRS]

http://www.thetruthaboutcars.com/editorials.php

GM is up about 19% in the last couple of weeks, BUT fundamentals IMO have not changed.

http://www.thetruthaboutcars.com/editorials.php

[HenryTo]

Wow - a Time Magazine article declaring that "GM is not dead yet." Translation: It is over for GM.

http://www.time.com/time/magazine/article/0,9171,1194041,00.html

[HenryTo]

Toyota to put the final nail in the coffin to GM here - upping capital spending this year from initial estimates of $12 billion to $14 billion. In the meantime, GM is only going to spend a lowly $8.7 billion - and they only spent $1.3 billion or so in the first quarter - meaning that they deliberately underspend during the first quarter in order to goose their earnings. Again, all smoke and mirrors.
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Toyota to Boost Spending,
Turning Up Heat on GM

By JATHON SAPSFORD
May 11, 2006; Page A3

(See Corrections & Amplifications item below.)

TOKYO -- Japan's Toyota Motor Corp., which is threatening to surpass General Motors Corp. as the world's largest car producer, plans to pull further ahead of its U.S. rival when measured by the amount of money it is pouring into new plants and equipment.

Japan's largest auto maker by volume, reporting a 39% rise in fiscal fourth-quarter net income Wednesday, said its current fiscal-year capital expenditure -- investment in product development, plants and equipment -- would reach 1.55 trillion yen, or roughly $14 billion. That would be a record and a slight increase from the 1.53 trillion yen spent the previous year, which Toyota had earlier said would be the peak.

The number was bigger than the $12 billion or so that the industry was expecting. President Katsuaki Watanabe described it as a response to "unexpectedly strong demand" for the company's cars. He noted that one of the toughest management challenges facing the company was to maintain its vaunted quality even as it ramps up production in Asia, Europe and North America.

Toyota, which produces such models as the Camry sedan, the Sienna minivan and the Lexus line of luxury cars, said its consolidated net profit for the three months ended March 31 was 404 billion yen. That compares with 291 billion yen recorded during the same period a year earlier. Revenue grew to 5.75 trillion yen, up from 4.88 trillion yen a year earlier.

For Toyota's full fiscal year, net profit increased 17% to 1.37 trillion yen. Operating profit for the fiscal year rose 12% to 1.87 trillion on a full-year revenue increase of 13% to 21.03 trillion yen.

Its spending plans illustrate the different fortunes of Asian-based auto makers and their Detroit rivals, even as they compete in similar markets. Toyota lacks the costs of pension and medical benefits borne by GM and Ford Motor Co. for union employees and retirees, a legacy of their previous labor agreements. In Japan, Toyota spends $97 per vehicle on employee health care, while the government covers retirees. That compared with $462 per vehicle for employees and $1,038 per vehicle for retirees for GM, according to consulting firm A.T. Kearney.

Toyota also has offered designs that have won over consumers, carry a perception of higher quality and are more fuel-efficient than many rivals' vehicles, giving the company some insulation against rising gasoline prices. The auto maker has begun making inroads in the profitable light-truck segments with models such as its Tundra and Tacoma pickups. Overall, its share of the key U.S. market has risen to about 14% so far this year from about 10% in 2000, while GM's share has fallen to about 24% from about 28% during the same period, according to Autodata Corp.

The continued high level of investment at Toyota is one of the most telling measures of the difference in resources that Toyota and GM bring to their global rivalry. Toyota is flush with cash and is expanding sales and production in countries all around the globe. GM, by contrast, while growing in some overseas markets like China, is suffering at home. The company restated its earnings after regulators allowed it to revise the way it accounted for a health-care deal with the United Auto Workers union, and now shows a profit for the first quarter of 2006. But GM has been unprofitable in its core automotive operations, closing plants, laying off workers and selling assets.

The $14 billion that Toyota plans to invest during its fiscal year through March 2007 compares with $8.7 billion that GM plans to spend during its current fiscal year through December. "We maintain a commitment to product development," GM said in its most recent annual report, "but our substantial legacy costs give us less available cash to invest relative to some of our competitors."

The difference in investment carries implications for the rivalry between the two car makers over who will hold the mantle of the world's largest car producer by volume. Toyota is increasing sales by roughly 500,000 a year and expects to sell 8.45 million vehicles during its current fiscal year. GM sold 9.2 million vehicles during 2005, up 200,000 from the previous year.

GM has said its world-wide sales rose 4.4% in the first quarter to 2.2 million vehicles, driven by a 16% increase in sales outside of North America. GM hasn't released a forecast for its current fiscal year. But despite its strong performance in China, few analysts think GM can grow enough to compensate for the share it is losing to Toyota and other Japanese rivals in its all-important home market, as well as match Toyota's growth abroad. Most analysts expect Toyota to surpass GM sometime during the next year or two as the world's largest car producer by volume.

Toyota's market capitalization, at about $200 billion, is already greater than those of GM and Ford combined. Toyota said Wednesday that it would ask its shareholders later this year for approval to buy back roughly 200 billion shares. The company also said it would boost its dividend for this fiscal year to 90 yen a share, up from 65 yen.

Toyota, releasing detailed full-year consolidated earnings forecasts for the first time, said that sales for its current fiscal year would rise 6%, to 22.3 trillion yen. But the company forecast a 4.5% decline in net profit to 1.31 trillion yen, because it expects a stronger yen during the year. A strong yen erodes the contribution of overseas sales to earnings, because profits earned in foreign currencies are worth less when converted into yen.

Toyota's consolidated global vehicle sales for the fiscal year ended March grew 7.6% to a record 7.97 million cars. Sales were little changed in Japan at 2.36 million, but rose 13% in North America to 2.56 million vehicles. Toyota's sales in Europe rose 4.5% to 1.02 million vehicles. Sales in Asia outside Japan rose 5.7% to 880,000 vehicles.

Write to Jathon Sapsford at jathon.sapsford@wsj.com


Corrections & Amplifications:

Toyota Motor Corp. plans to ask for shareholder approval to repurchase shares valued at roughly 200 billion yen, or about $1.8 billion. This article incorrectly stated that Toyota Motor plans to ask approval to repurchase roughly 200 billion shares.

[HenryTo]

The timing of these Delphi bonuses are definitely "unfortunate" - and will certainly not do anything to ease tensions between the company and the unions.

The latest revision of their quarterly earnings is nothing more than smokes and mirrors. If anything, this "strategy" may backfire in the near future - as all this talk about impending bankruptcy disappears - in which case, instead of backing down, the UAW may go ahead and strike. It is difficult to tell your members that GM will go bankrupt if you strike when the company just made a profit during the first quarter. Following article is courtesy of the WSJ:
----------------------------------------------------------------------------
Delphi Plans Salaried Bonuses
As Hourly Union Wages Are Cut

By JEFFREY MCCRACKEN
May 11, 2006

Auto-parts supplier Delphi Corp. disclosed in U.S. Bankruptcy Court that it will likely pay out $60 million in lump-sum, cash bonuses to its salaried employees and managers this summer at about the same time it plans to substantially cut wages of hourly workers.

Delphi's vice president of human resources, Kevin Butler, said that as many as 14,000 salaried workers are likely to get bonuses totaling $60 million if Delphi achieves certain financial-performance targets.

Without specifying amounts, Delphi testified on Tuesday that it posted $500 million more in operating income for the first quarter than it had projected.

Delphi, which previously sought court approval to pay out executive bonuses, didn't seek court approval for these salaried bonuses, arguing the court cleared them when it approved normal compensation and bonus programs upon Delphi's Chapter 11 filing in October.

Delphi's salaried workers received no bonuses from 2003 through 2005. Mr. Butler said these white-collar bonuses, along with $38 million in executive bonuses, would be handed out in July.

Delphi is asking the bankruptcy judge to terminate its labor contracts. If no deal can be reached with its unions, the Troy, Mich., company has said it will impose in early July wages of $12.50 an hour for its 34,000-employee union work force, down from an average wage around $26 an hour. The United Auto Workers union has threatened to strike if that happens.

"Obviously, the timing will be a concern to the unions, but the salaried workers have not received increases for the previous three years, while union members got cost-of-living adjustments and other increases," said Delphi spokesman Lindsay Williams.

During the first two days of testimony in Delphi's motion to void its union contracts, Judge Robert Drain at the U.S. Bankruptcy Court in Manhattan has been continually pushing the company and the unions to get back to the bargaining table and try to settle their issues outside court.

"I would strongly urge the parties to sit down and ask each other in a nonlitigation setting many of the questions you are asking now," said Judge Drain at the end of Tuesday's testimony.

Judge Drain has already scheduled two more days to hear the matter, May 24 and May 26, and told the parties to use next week to do more negotiation.

General Motors Corp. has a big stake in the case. Delphi financial adviser David Resnick said his estimate is that GM is liable for $8.6 billion to cover Delphi's postemployment benefit liability, a number that doesn't include the tab for pensions, early-retirement offers or other costs. Judge Drain has meanwhile pushed the Delphi unions, most of which haven't made counteroffers to Delphi's last proposals in late March, to do so.

"A union proceeds at its own peril if it doesn't respond" to labor proposals from a bankrupt company, he said late Tuesday. While the judge is urging both sides to negotiate, company and union officials familiar with talks between the UAW and Delphi say negotiations have bogged down since Delphi filed a motion to void its labor contracts on March 31.

Write to Jeffrey McCracken at jeff.mccracken@wsj.com

[HenryTo]

What car consumers are doing online. Seems like all this talk about how $3 gas isn't affecting SUV buying trends is just plain BS - probably all bought and paid for by GM and the like. Following is data compiled by Cars.com on over 8 million visitors - which would definitely be much more accurate than any surveys out there:

http://info.detnews.com/autosblog/index.cfm?blogid=93

My guess is that you don't even need $4 gas to kill the latest SUV and truck lineup from GM.

[HenryTo]

The auto price wars promise to heat up over the next few months. And GM is going to have a hard time moving the inventories sitting on dealers' lots right now.
--------------------------------------------------------------------------------
Automakers could face re-run of price wars
Thursday May 4, 2:33 pm ET
By Jui Chakravorty

DETROIT (Reuters) - A repeat of the costly price wars U.S. automakers hoped to avoid this year appears more likely, according to analysts, as the traditional Big Three confront sagging sales and nagging worries about gas prices.

General Motors Corp. (NYSE:GM - News) in particular has vowed to stay clear of big discount programs this year in favor of a simpler pricing plan and a marketing campaign that stresses the relative value of its Chrevrolet brand. But aggressive incentives from competitors will force the No. 1 automaker to up the ante, analysts said on Wednesday and Thursday.

"We anticipate pricing to remain very competitive, with pricing pressure across the board," CSM Worldwide analyst Joe Barker said.

"We'll see virtually every auto company turn up the dial on incentives as we progress through the spring selling period and the summer sell-down period," Barker said. "Over the next three to four months is going to be a very good time to buy a vehicle."

Analysts and investors closely watch such discount programs, which cut into automakers' profitability.

DaimlerChrysler AG's (XETRA:DCXGN.DE - News) Chrysler, which has outspent competitors on incentives and discounts this year, announced zero-percent financing for a range of models this week, including its Dodge Ram truck line.

Ford Motor Co. (NYSE:F - News) is also offering interest-free loans for a period of five years on some of its SUVs, including the Explorer and Mountaineer, and some analysts said it would have to step up incentives on its market-leading pickup trucks as well.

GM said it will offer $1,000 toward the purchase of a new vehicle and also offer interest-free loans of up to six years on 2006 models of full-size SUVs such as the Chevrolet Tahoe and Suburban and the GMC Yukon.

GM buyers can also break purchase or lease contracts that expire before April 30, 2007.

The offers, which will run through July 5, come on the heels of a 7 percent drop in monthly sales at GM, a 3 percent decline at Ford and a 4 percent drop for Chrysler.

"All automakers, including GM, will be forced to incentivize more in the summer," Argus Research analyst Kevin Tynan said. "They have to clear their inventory before the summer shutdown and the new model year."

CASH ON THE HOOD

So far this year, GM's average incentive spending per unit has been $3,050, while Ford has spent $3,189 and Chrysler has spent $3,769, according to Autodata Corp.

By contrast, Toyota Motor Corp. (Tokyo:7203.T - News), which is on track to overtake GM as the world's largest automaker, only spent $978 per vehicle and Honda Motor Co. Ltd. (Tokyo:7267.T - News) spent $682 per unit.

With gas prices at $3 a gallon in many areas, some automakers are offering rebates in the form of free gasoline cards.

Morgan Stanley analyst Jonathan Steinmetz said he expects high gas prices to keep the automakers "playing the incentives game," especially for vehicles sensitive to gas prices.

GM is offering a $1,000 fuel card with any new 2006 or 2007 Chevrolet and GMC vehicles equipped with FlexFuel technology in the Chicago-Rockford and Minneapolis-St. Paul markets through July 31.

FlexFuel vehicles are capable of using E85, a fuel made of 85 percent ethanol and 15 percent gasoline.

"You'll see more of these creative-type discounts through the summer months, but you won't see any massive blowouts like last year," Argus Research analyst Kevin Tynan said.

Last summer, U.S. automakers unleashed a flurry of discount programs, led by GM's sweeping offer of employee pricing for everyone.

Analysts expect the biggest discounts to be in the full-size pickup trucks and the mid-size sport-utility segments.

"GM is spending very little in that category right now, and other players are spending a lot of dollars to move their products," Barker said. "Ford is spending in excess of $10,000 on the Lincoln Navigator. At some point, GM is going to have to offer some incentives, just to compete."

[HenryTo]

This is history in the making - the final demise of union power in the U.S. private sector (half of all union members work for the government). Following is courtesy of the WSJ:
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UAW Asks Members to Vote
To Authorize Delphi Strike

By TERRY KOSDROSKY and JOHN D. STOLL
May 3, 2006 4:21 p.m.

DETROIT -- Delphi Corp.'s largest union, the United Auto Workers, is asking its members for a strike authorization vote as the company pursues a court motion to cancel its labor agreements.

The UAW has said before that a strike is likely if Delphi, which filed for bankruptcy protection in October, gets court approval and cancels its labor contracts. But UAW Vice President Richard Shoemaker told local union leaders on Wednesday to secure strike authorization by May 14.
"It is the vote by the membership to authorize senior leadership to strike if they see it as a necessary step," said UAW spokesman Paul Krell.
Mr. Shoemaker, who heads union negotiations with General Motors Corp. and Delphi, has said the UAW would call for a strike authorization vote when he deemed it necessary. "He obviously feels this is the right time to do it," Mr. Krell said.

The vote is the latest move in three-way negotiations involving Delphi, its unions and GM, Delphi's former parent and largest customer. A prolonged strike at Delphi likely would cripple production at GM and the auto maker has said solving the Delphi situation is among its top priorities. Another Delphi union, the IUE-CWA, already has authorized a strike in the event the company terminates its labor agreements.

One local union leader said the move is a formality and "doesn't mean we're going on strike and doesn't mean we're not going on strike." He said a strike authorization vote will easily pass.

Delphi on March 31 announced a sweeping reorganization plan that included closing or selling most of its North American plants and slashing as many as 30,000 union and salaried jobs. In combination, Delphi filed a motion for permission to cancel its union agreements for 34,000 blue-collar workers and 12,000 union retirees and to void more than $5 billion in contracts with GM.

The move angered the UAW, which had already agreed to major early retirement programs with Delphi and GM.

A hearing on the motion to cancel labor contracts is scheduled for May 9 and 10 in U.S. Bankruptcy Court in New York. A ruling is expected by early to mid-June.

Write to Terry Kosdrosky at terry.kosdrosky@dowjones.com <mailto:terry.kosdrosky@dowjones.com> and John D. Stoll at john.stoll@dowjones.net <mailto:john.stoll@dowjones.net>

[HenryTo]

Breakdown of April and YTD sales for GM:

http://yahoo.reuters.com/stocks/QuoteCompanyNewsArticle.aspx?storyID=urn:newsml:reuters.com:20060502:MTFH40496_2006-05-02_18-01-07_N02285529&symbol=GM.N&rpc=44

[HenryTo]

Prospects of a strike are still looming for Delphi - no new developments in the negotiations that I have seen so far:
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Delphi official says can't rule out US strike
Tuesday May 2, 12:48 pm ET

NEU ISENBURG, Germany (Reuters) - A senior executive at bankrupt U.S. auto parts maker Delphi Corp (Other OTC:DPHIQ.PK - News) would not rule out the prospect of a strike in the United States, but said intense negotiations are still going on.

"You cannot say that the danger of a strike is gone," Volker Barth, president of Delphi Europe and vice president of the group told reporters on Tuesday.

Barth, who is also a member of Delphi Corp's strategy board, said negotiators from Delphi, its union and former parent General Motors (NYSE:GM - News) were trying to find a solution that could include one-off payments to workers.

A U.S. judge is supposed to rule next month on whether Delphi can proceed with a reorganization plan that would let it cut pay and jobs and sell or close non-core businesses.

Delphi has said that steep wage and benefit cuts for hourly workers in the United States and significant cuts in facilities are key to its plan to emerge from bankruptcy protection in the first half of 2007.

Ultimately, Delphi expects to cut 27,000 of its 33,100 U.S. hourly workers by the end of 2010.

[HenryTo]

Next year sounds probable but there are tons of variables which could advance it into this year, such as a further spike in gasoline, a partial strike at Delphi, and yet higher interest rates which would not only put a lid on consumer spending, but will further drive down margins at GMAC as well.

Not to mention more foreign competition. Even as GM and Ford have pulled back on their incentives, others (such as Chrysler and Toyota) have increased them:

http://www.freep.com/apps/pbcs.dll/article?AID=/20060428/BUSINESS01/604280334/-1/BUSINESS07

For Toyota, this is an opportune time to stick it to GM and further increase market share.

[rffrydr]

It's not really a "run on the bank" if suppliers are running themselves into the ground doing so. Game of "chicken more to the point.

Sold my GMX and other GM bonds yesterday--just to remember what it feels like to ring the cash register.

I don't know about the next blowup--but I can't deny your instincts about GM. I think we have a few more rounds of pessimism/optimism though--rounds that may take us well into next year.

[HenryTo]

FYI, April sales numbers are due next Tuesday:

http://www.freep.com/apps/pbcs.dll/article?AID=/20060427/BUSINESS01/604270605

[HenryTo]

Make no mistake - GM's time is running out. They could only "channel stuff" their dealers and spin the accounting numbers for so long:

http://www.fool.com/news/mft/2006/mft06042120.htm

Quote: "And keep in mind that some of the rest of the "better" performance comes from nifty accounting. For instance, GMAC did 4.5% more revenues this quarter than in the year-ago period, yet the provision for financing and insurance losses dropped. That juiced the bottom-line results there by $186 million pre-tax, which may be appropriate, but it sure doesn't represent what I'd call "high-quality" earnings. And lest you think that number is peanuts, remember the reported net loss for all of GM this quarter was $323 million."

Given higher mortgage rates and a slowing housing market, I would not be surprised if GMAC's profit continues its decline going forward. In fact, it should be pretty much a given. And:

http://www.thetruthaboutcars.com/content/1146097124154135570/index.php

Quote: "The Financial Times reports that Tier One supplier Yorozu America recently threatened to stop making suspension components if the automaker didn't fork over $3.7m in disputed payments. More worryingly, Yoruza also demanded an irrevocable letter of credit for at least three times its average monthly turnover with GM, roughly $75m. Deep Throat reports that another, much larger US-based supplier is also demanding up-front payment from GM. As reported here, if this trend takes root, GM faces a "run on the bank" scenario that would capsize the corporate mothership-- whether they like it or not."

[rffrydr]

Domestic IS foreign. Making the front page in the Sunday Times:

http://www.latimes.com/business/la-fi-gm23apr23,0,4022771.story?coll=la-home-headlines

Radical idea: negative equity....just like our newfangled mortgages. But not this year.

[Prospero]

Isn't it normally the case that what's bad for one company is bad for the sector (broadly speaking?). That's certainly what GM's stock price suggested today (though maybe some 'profit taking' since yesterday too).
But anyway, interesting point Goodfella - in a battle for scraps maybe normal rules don't apply.

[nodoodahs]

any loss to F or GM north american market share is a gain for the Japanese, Koreans, and Chinese.

Long the foreigns, short the domestics (if you can find shares to borrow) ...
_________________
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