The Street
written by By Marek Fuchs
Friday February 17, 2012
General Motors (NYSE: GM) reported 4th quarter earnings, and would you know it? Much of the media focused on the company's record-setting full year numbers. The automaker's weak 4th quarter was subordinated or completely ignored. Worse, the reason for the late year fizzle in GM's business, which will impact the company going forward, was not even mentioned.
Sometimes, we catch the media in measured oversights. This was mammoth. The Financial Times, for example, ran a full-year centric headline: "GM earnings hit record $7.6bn in 2011." Remarkably, they mentioned GM's full-year net income, but nothing about the 4th quarter.
The Wall Street Journal also led with the flashy full-year number, but at least they got around to the troublesome fourth quarter, though the cause they trotted out was incomplete: European weakness. That's a half-story, at best.
Here's the whole deal: GM had an unrealistically easy first portion of the year. Tsunami related disruptions in Japan sent Japanese automakers like Toyota(TM) and Honda(HMC) reeling. For that small window of time, GM was playing against a reduced field of competition. But as Japan recovered as the year progressed, business at GM snapped off. Japanese automakers are now back to stay and wouldn't you know it? GM's management was maddeningly vague about 2012 forecasts.
The link is clear and it's pathetic the media is not making it. Don't be fooled.
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24/7 Wall Street
written by Paul Ausick
Thursday February 16, 2012
General Motors Co. (NYSE: GM) posted a record annual profit this morning of $7.6 billion for the fiscal year ended in December. EPS for the year totaled $4.58, up from $2.89 in the previous year. Annual revenue rose by 11% to $150.3 billion. Consensus analyst estimates called for EPS of $3.91 on revenue of $150 billion.
Those are pretty impressive numbers, but the disappointing news came on the fourth quarter numbers. Revenue in the fourth quarter totaled $38 billion, somewhat lower than the consensus estimate of $38.21 billion. EPS came in at $0.28 fully diluted, while the estimate from analysts sought EPS of $0.41. Perhaps worst, GM posted an operating loss of -$1.7 billion.
The culprit was Europe, where GM lost $562 million in the fourth quarter. The total annual loss in Europe was $747 million, indicating that things are getting worse in Europe, not better. Sales growth in the US and China made up for weakness in the rest of the world.
For 2012:
Looking forward, GM expects to increase its top-line revenue year-over-year in an expanding global automotive industry. In addition, GM expects continued pricing improvement with cost inflation well contained, while product mix and pension expense are expected to be unfavorable.
Yesterday the company announced changes to its salary and bonus structure and its pension plan. Even with those changes though, GM thinks its facing a tough year without the right products and with its pension obligations weighing on earnings.
GM’s shares are down about -2% in the pre-market at $24.50 in a 52-week range of $19.00-$36.84.
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Bloomberg news
written by David Welch
Friday December 23, 2011
General Motors Co. (GM), saved by the Obama administration with a $50 billion bailout, is making more money than it has in its history, adding jobs and gaining market share. It’s still a headache for Barack Obama.
GM closed today at $20.50 a share, less than half the $53 price that the U.S. Treasury Department needs to break even. The shares fell on Dec. 19 to their lowest price since the Detroit- based automaker’s initial public offering in November 2010. The stock needs to rally almost 50 percent to reach $30 a share, the minimum price the Treasury Department would consider for a secondary offering, said three people familiar with the matter.
That puts Obama in a quandary. When Republicans nominate a candidate in August, the government will probably either still own a substantial portion of GM or will have sold the stock at a loss that could be more than $10 billion. Obama’s opponents can criticize him either way, said Dan Ikenson, an economist at the Cato Institute, a Washington think tank.
“The administration is in a Catch-22,” he said. “They want to hold on and get the best price, but the longer they hold onto it, they come open to the scorn that the administration still has a horse in the race and could make policy that is favorable to GM.”
Investors are holding back on buying GM while they expect that the U.S. will be selling hundreds of millions of shares that may push down the price, said Adam Jonas, a New York-based analyst at Morgan Stanley. After the government sells, the shares should rally, he said.
Pension Costs
In Europe, GM’s operations will lose money in 2011, the company said last month, after assurances earlier in the year that it would break even. Now GM management is talking about possible restructuring plans for its Ruesselsheim, Germany-based Opel unit. That makes investors nervous, said Peter Nesvold, a New York-based analyst at Jefferies and Co.
With economic struggles in Europe, GM’s exposure to its car market makes investors even more concerned, he said. Ford Motor Co. (F), also exposed to European risk, has fallen 35 percent this year through yesterday, while GM dropped 44 percent.
GM’s pension plan is underfunded. The plan was $22.2 billion short at the end of 2010. Analysts will get an update when fourth quarter earnings are announced in the next two months. Investors probably will remain wary until then, Nesvold said in a phone interview.
Next year will also be a transition year for new models. GM is preparing to introduce new pickups in 2013. That means GM will temporarily lower production of its profitable Chevrolet Silverado and GMC Sierra pickups while retooling factories for the new models. That will lower profits, Nesvold said.
Loaded Lots
While GM built up its inventory of trucks in anticipation of that switch, a Bloomberg Industries analysis says U.S. automakers may increase cash discounts to clear out vehicle stockpiles and maintain market share as Toyota Motor Corp. (7203) and Honda Motor Co. run plants overtime to make up for production lost this year to natural disasters in Japan and Thailand.
GM’s profitability this year, as measured by earnings before interest and taxes relative to revenue, lags behind Ford, Volkswagen AG (VOW) and Hyundai Motor Co. (005380), according to an analysis by Morgan Stanley Investment Banking.
Chief Executive Officer Dan Akerson is trying to hold down costs to improve those EBIT margins, including by turning down heat in offices. The automaker hired Hackett Group to identify back-office savings at headquarters and throughout North America, including salaried job cuts, two people familiar with the matter said this week.
Stock Outlook
Nesvold expects GM shares to reach $24 within 12 months. The average of 13 analysts’ estimates issued in the last two months, including Nesvold’s, is $32.04. Selling at that price would add up to a $10.5 billion loss for the government.
The Treasury Department wants a minimum of $30 a share for its 32 percent stake and would prefer to sell above the IPO price of $33 a share, according to the three people, who asked not to be identified revealing private plans. If the analysts are right, GM shares won’t reach the IPO price before the election.
The Treasury Department has said that losses on the auto rescue are probably inevitable.
“We’re going to lose money in the auto industry on net, but we did this for the jobs we were going to save, NOT to maximize return,” Treasury Secretary Timothy F. Geithner said at a Detroit Economic Club event on April 28. “We’re not a private investor. Our job was to protect the country.”
Selling GM’s 500 million shares at today’s price would mean a loss of about $17 billion. That would create a political fallout that neither GM nor Treasury wants, said Morgan Stanley’s Jonas.
“It would be difficult to stand that big of a taxpayer loss,” Jonas said in a phone interview. “If Treasury were to sell at these prices, it would be a political issue and would tarnish GM’s commercial image. If we were the financial adviser to Treasury, we’d say, ‘Don’t sell.’”
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