GM to End Its Employee-Discount Incentive

[HenryTo]

It will be interesting to see how badly GM does (the question is how bad) once they end their employee discount incentives on Monday. Interestingly, Toyota just raised prices across the board yesterday - I guess they don't want GM to go down? Has anyone thought about GM as a shorting candidate?
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GM to End Its Employee-Discount Incentive
Wednesday July 27, 10:06 am ET
General Motors Plans to End Its Employee-Discount Incentive; Deal Fueled Huge Surge in Sales

DETROIT (AP) -- General Motors Corp. plans to end its highly successful employee-discount pricing program on Monday, a company spokeswoman said. The deal fueled a huge surge in GM sales in June and Ford and Chrysler matched it in July.

The program, which allows customers to buy GM vehicles at the employee price, has been in place since June 1. It was originally scheduled to end July 5 but the company extended it until Monday, and some analysts and dealers had suspected GM would extend the program through Labor Day.

GM spokeswoman Deborah Silverman confirmed Wednesday that the company will end the program Monday. She said the company doesn't plan to announce any other incentive deals on Monday.

The discount boosted GM's sales by 41 percent in June, and the company also is expected to report double-digit sales increases this month when it reports July sales next week. The program was so successful that Ford Motor Co. and DaimlerChrysler AG matched it in July.

Ford spokesman Dan Bedore said Wednesday that the company doesn't plan to announce whether it is extending the discount program until Monday, when the current discount expires.

A message was left with a DaimlerChrysler spokesman.

[HenryTo]

Just who are the actuaries for GM?
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General Motors Gets SEC Subpoenas

By TSC Staff
10/26/2005 8:06 PM EDT

The Securities and Exchange Commission has issued subpoenas to General Motors (GM:NYSE - commentary - research - Cramer's Take) in connection with "various matters involving GM that it has under investigation."

The Wall Street Journal's online version reported late Wednesday that GM confirmed the subpoenas, saying it has been cooperating with the SEC, which is seeking information concerning pension, other post-employment benefit obligations, and certain transactions between GM and Delphi (DPH:NYSE - commentary - research - Cramer's Take).

The news follows a report on Tuesday that DaimlerChrysler (DCX:NYSE - commentary - research - Cramer's Take) received a SEC subpoena in September in connection with accounting issues involving retiree benefits at GM, the Journal said.

[nodoodahs]

We interrupt this GM-bashing with some good news!

http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewmonthlyreleasedetail.do?domain=74&docid=19989

Of course, it is late to the party. For more than three years now, most mid-to-upscale vehicles have had 5 or 6 speed automatics, like the 2001 Grand Cherokee with a 5-speed and two different #2 gears based on accel/decel., and the 2003 Ford Explorer. Meanwhile GM was competing against these with the 2002-2004 Trailblazer that had a 4-speed automatic and cupholders that couldn't hold a 20-ounce bottle of Mountain Dew.

Darn! I can't even relate good GM news without bashing them!
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[nodoodahs]

http://www.businessweek.com/magazine/content/05_19/b3932001_mz001.htm

Oldie but goodie, nice take on how GM could possibly survive as a much smaller automaker, and the psychological blocks that prevent management from pursuing that course.

IMO they are headed for breakup or bankruptcy, or both, even if they sell part of GMAC - in fact, that sale might speed up the process for the remainder of the company. It might not bring as big a bag of assets to the bankruptcy as Mr. Welch thinks, simply because GM can destroy a lot of assets and burn a lot of cash in a year, and it may be years before they are done.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[HenryTo]

A (Motley) Fool's take on GM:

http://www.fool.com/News/mft/2005/mft05101732.htm?ref=foolwatch

[Goodfella]

Cheers nodoodahs. I'm a novice compared to you on this one!

I guess one should ask the question when shorting. Is there any more good news? significant Yuan revaualtion not on the cards. Health care concessions done. Kirk is maxed out on 9.9 ( he could not drum up the cash to buy the whole thing could he?).


One thing that worries me about shorts. Bernanke coming in and turning a blind eye/using rhetoric and phony figures letting these companies hike prices. One reason my gold is staying in my portfolio.

[nodoodahs]

It could be the joint ventures ... it also could be fear of U.S. "anti-trust" action.

During GM's zenith they were very careful not to exceed 50% market share in the U.S. for that very reason. Imagine if an already soaring U.S. market share for Toyota and Honda were bolstered by GM at 25-ish% of the U.S. market going under ...

I don't know the extent of GM joint ventures today. I know they used to (and still do) give Isuzu models to badge-engineer for the U.S. market, that GEO was badge-engineering with Toyota (Corolla vs Prism) and Suzuki (Tracker vs Sidekick), that the Aveo is a rebadged Daewoo model, and that their diesel development is international and shared with Isuzu, but other than that (much of which is ancient history) I don't know what is joint right now with Japanese companies.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[Goodfella]

My broker has never been able to get the stock when i wanted it.
Have traded the options though
The Japanese dont want GM to go under because of political pressures or they have joint ventures?

[HenryTo]

Looks like the opening morning pop for GM may already be fading here. Most probably short-covering, it seemed like.

[nodoodahs]

Just looking at older stuff. When we questioned whether GM was a good short, they were trading about $35-$36. Today, below $30.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[nodoodahs]

Has anyone thought about GM as a shorting candidate?

Um, well ... yep.

I would think that a good short candidate would have some combination of the following:
1. Unreasonable valuation
2. Poor earnings quality if earnings existed
3. Poor cash flow metrics
4. A dirty proxy statement
5. Insider selling that was beyond the norm and not otherwise explainable (see Maverick Steel post for large explainable insider selling)
6. Low short interest.

In other words, so far as items 1-5 are concerned, it should be the "evil twin" of a value investor's long play.

GM stacks up thusly based on Yahoo!Finance:
1. No TTM PE, no TTM earnings. Trading at 23-24 times '06 earnings. Trading below book. Price to sales is 0.11. Their cash/price ratio is about 0.65. Some metrics are high, like forward PE, but most are tending to low valuation. This is a wash.
2. No earnings - sign of a good short. Quality of past earnings is suspect.
3. Cash flow is horrendous. Good.
4. Can't say. I haven't read it.
5. They froze this. That's a good sign for a short.
6. Shorts have 5 days to cover. Worse than Ford's 4 days but nowhere near Calpine's astronomical 13 days. NVDA has 1.5 days to cover, and GOOG has 0.6 days to cover, by way of comparison. This is probably a little high.

So they have 2 or 3 (depending on how you view 5 days to cover) of the 6 good signs for a short, 2 are a wash, and the proxy statement may be good or bad, I don't know and I am probably not gonna check.

I talked with a bud at the Toyota dealership, they never did engage in the price war. Their feeling is, they have a superior product, with good demand and high resale value, and they are in perfect position to capitalize on the "high mpg" trend. They view the price war as a temporary squeeze. So if they dropped price, they would actually dilute the brand's quality in the U.S. I believe Honda feels the same way. That dilution of brand quality is why Toyota sells few cars to fleets and rentals, and Honda sells basically none to fleets and rentals, in the U.S. We have a Chrysler/Dodge/Jeep, a Ford, a Chevy/Cadillac, and a Toyota dealership in my town of 20,000 or so, and one of the largest combined superstores with Chrysler/Dodge/Jeep/Ford/Chevy combined is about 15 miles outside of town. The Toyota dealership has been slower, but not unreasonably so, and not enough to hurt, according to my source.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.