Why can't GM get it together?
General Motors is in hot water once again with their announced recall of nearly 3.4 million vehicles yesterday for faulty ignition switches that have been linked with at least 13 deaths. GM is expected to appear in front of a congressional committee this week to discuss internal issues within the automaker's factories. An investigation into GM claims that
In total, GM has placed recalls on over 20 million vehicles since the start of the year. "There was a lack of accountability, a lack of urgency, and a failure of company personnel charged with ensuring the safety of the company's vehicles to understand how GM's own cars were designed"
My question to you is: would you ever buy a vehicle from GM after all of this?
Overall thoughts monkeys?
At least Mary Barra is taking responsibility for theses issues even though they happened before she got there. Regardless, I never liked GM and will definitely not be buying any time soon.
They definitely can, but you need a cultural transformation, look at Mulally at Ford.
I agree, it's a cultural problem and I think the firm still needs a lot of heads to roll. Everyone who just ignored the problem and said it will cost too much and should not be addressed needs to go. They were obviously not thinking of the damage and consequences to come. If any of those folks are still there, I could not trust this company and certainly will not.
I wouldn't buy a vehicle from GM before this.
The question is stupid to begin with. Lets take the Toyota problem with the pedals that stuck. If people actually knew what to do and didn't panic no one would have cared. The small issues generally turn into large problem because people are idiots.
Inefficient shitty companies get bailed out and they do inefficient shitty things. It's called moral hazard.
This is what happens when you don't let economic Darwinism run its course.
What are the implications of this same perversion of capitalism on Wall Street's bailout, I wonder.
agreed. this is why GM should stick with trucks. the Silverado is the longest lasting pickup in the US, but their cars have always been shit. the only issue is the mpg mandates by fleet, frickin EPA.
edit: to answer your question directly, no I'd never by a car from GM, but I will buy their trucks. japanese or German car, and american truck, seems pretty simple to me. ideally a GMC Sierra Denali pickup, smoothest ride I've ever experienced.
How come there's a big Ford vs Chevy truck rivalry if GM makes the best trucks? Serious question. I know nothing about trucks.
I think a better question is, "would you invest in GM, F, or any of the other big players excluding TSLA"? Tsla is not comparable....
Thanks for that. Will have to look at fords pipeline and vet
What would you expect of a company that should've gone bankrupt a long time ago?
Everyone saying that GM should've closed shop should know that the automakers, including GM, have done incredibly well and seem to have gotten their shit together, at least to some extent. Look at their numbers. These recalls do not necessarily mean that they are doing badly. Look at their financials. Toyota, probably the most successful automaker in the world, had a similar problem with recalls. Doesn't mean it's not a successful and profitable business.
And I have a preference for Euro cars, but I wouldn't mind buying an Impala, the new CTS or a GM SUV.
So well? We the taxpayers took a $10B+ loss to bail out GM.
$10 billion is nothing..the government spends that every ~22 hours.
Yes I would still buy a GM car. If you're afraid of GM cars because 13 people out of the 10 million (a complete guess) who drive GM cars died, you shouldn't be driving ANY car by ANY manufacturer.
It's like saying the people who lent to Lehman deserved to lose their investment because they made a poor investment decision. It very easily could've been any of the financial institutions, just like it very easily could've been any auto manufacturer going through this crisis. Do you really think GM has a company wide problem with disregarding safety? I don't. The economics of the situation are such that it is generally not worth it to do a recall.
I would bet anything there are other recalls out there that should have been done, but weren't to save money, and some people have likely died as a result
It will be really hard to recover from an event like this. Barra can prove herself by turning the company around like when Iaccoca did with Chrysler but I think it'll be a tough run.
Yes, people will soon forget about this incident if it was simply a fault with the car. This is not the case since several GM employees knew about the faults and have been trying to alert their supervisors to recall the cars, but they were quickly silenced by the higher-ups for years and years. Employees who refused to do so lost their jobs, and those who stayed had no career prospects. This has gone far beyond a simply faulty make-up of a car. It's a political and corporate issue going on inside GM, where nobody is supposed to speak up and that everyone must conform to the "GM nods." Over 20 million cars recalled with 13 deaths and 54 injured so far. That said, you think people won't remember something like this when they're in the dealership shopping for a new car? This is a big blow to GM and one that is definitely deserved.
something along the lines of "Take the number of vehicles in the field, A, multiply by the probable rate of failure, B, multiply by the average out-of-court settlement, C. A times B times C equals X. If X is less than the cost of a recall, we don't do one. "
something along the lines of "Take the number of vehicles in the field, A, multiply by the probable rate of failure, B, multiply by the average out-of-court settlement, C. A times B times C equals X. If X is less than the cost of a recall, we don't do one. "
@"DBCooper" It was worth spending $10B to save America's auto industry, a significant contributor to the US economy and industrial output. Not to mention millions of jobs. It's not the same as wasting trillions on crusades and bombs and tanks.
@"brooj14" Well why are we ignoring Toyota? That is a perfect example of a very successful car business that faced a major recall issue but was and still is successful.
Merican cars used to suck, no doubt. But GM (and other 2) have done a great job correcting their mistakes. Look at their new products developed post-bankruptcy and the rave reviews they are getting. Look at the new Cadillac CTS. Many auto publications and reviewers have said it is better than all Euro and Japanese mid-size sedans.
@"techie674" Well Toyota also did not take billions of dollars from the US Gov in order for it to get back on it's feet. Are you accounting for the billions in fines, wrongful death claims, injury compensation claims they will be paying over their recall issues? In the end, Toyota has around $60 billion in cash reserves so they will be fine. Do you think GM has the kind of cash reserves to deal with the fines, wrongful death claims, injury compensation claims they are bound to have in the upcoming months and years? I would venture to guess no, and if it does, it is because the US Gov gave the money to be able to.
Personally, I think point to the CTS as an example of GM success is like a student getting mostly C's and below but pointing to the one A that they have and saying that they are a good student. By the sheer number of cars they make, they are bound to have a few successes along the way.
@"brooj14" Are you suggesting that GM will not have the cash to stay solvent in the face of these legal troubles and will go under? This is an easy one. GM WILL NOT go under and will in fact survive. Don't believe me, just live another year or 3 and see it for yourself.
Saving GM was the right thing to do for the US economy.
If a student goes from getting all D's and C's to gradually getting B-'s and then B+'s and then getting an A+ in advanced thermodynamics ahead of the class' best students (hyper competitive midsize luxury sedan segment with competition from Mercedes, Audi, BMW, Lexus, Jaguar, Infiniti and Acura), that is not a fluke. That shows potential, determination and steady, gradual improvement. What you are suggesting is that the student in question is a retard with no hope of becoming a good student. That US management talent and GM are simply incapable of building good cars and creating a successful business. I just do not buy that.
@"techie674"
Here I was saying that they simply do not have the kind of reserves that Toyota and be fine. There is a huge difference between not being fine and being bankrupt. My previous comment about Bailout 2.0 was in reference to GM losing consumer trust and having bad sales. Which I will be a man and admit that for the meantime, I am wrong as GM recently reported it had its best month/quarter/something like that since 2007 in terms of sales. This is possible because people going in with their recalled cars to have them fixed might elected to get a new car instead of dealing with the old.
Apple is also not in the automotive industry. Apples products are not cars that start at 15k and thus are more expensive to recall/ fix and do not have the ability kill consumers if ignition problems exist. Apple doesn't need large cash reserves to deal with recalls, death and injury lawsuits.
I acknowledged that GM went through restructuring as part of their bailout. I simply believe that financial institutions both in the US and outside of the US could have came to GM's aid at the very last moment simply because waiting it out would have made GM more desperate for funding and thus the institution would have been able to secure a deal that was even more in their favor. Also, private institutions would have been more of GM's ass for changes than the government was.
You can argue how great GM is but I will never agree or side with you simply because I look at other car company's that are doing far greater things than GM. Oh and btw, you prized Cadillac CTS is part of the bunch that GM just recalled in this new recall of 8 million more cars...
There was a report on Bloomberg about a whistleblower who was systematically shushed within GM since 2003. Mary going up there and saying sorry doesn't do much for me. There isn't enough space in the market to accommodate inefficient suppliers.
Why own GM at this price? (Originally Posted: 05/29/2009)
Currently GM is trading at about $0.88. Why would any equity shareholders remain in the stock if its almost indisputably heading to zero?
Thanks
Zero? This thing is a 10 bagger, you are crazy if you think the equity holders are going to get wiped out in a pre-pack. Im kidding of course. I wanted to go short awhile ago but there were too many unknowns (i.e. UAW, government intervention, bondholders, etc).
yesterday's "surge" was a lot of investors thinking that the bondholders being amenable to a pre-pack meant that the equity was worth something. Traders and specialists who know better are happy to make their spread.
I think the world learned a lesson from Lehman. GM will be mostly a pre-pack - otherwise, professionals fees, examiners, etc. would suck up a lot of (taxpayer) cash, and the Company would be tied up for years and operations would lag. Since they're not liquidating, most of the terms are probably laid down.
You need a buyer dont you? Can't get rid of something nobody wants.
Currently up >20% on a
the June 1 puts still went out .55 x .56 and the June 1 calls went out .10 - .12, ...the real story here is it's got to be mega HTB
Look at the June 1 rev-con the market there is going out 1.17 x 1.21, meaning you will get paid .17 to carry short GM stock (would you sell that?)
forward price is the strike + call - put = 1.00 +.11 - .555 + = $.55
forward stock is trading app .54 x .56 or so
Would you sell that market?
Go eat a Taco dr_sean. No one understands what you just said (myself included).
"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.
Haha, the only thing I understood from dr_sean's post is that put options were priced at $0.55/0.56, while the stock was trading at $0.81 throughout the day, which implies a forward stock price of $0.255 = 0.81-0.555. "Would you sell that market?" means would you go against the options traders and go long GM stock? which is what was basically happening with the stock up 10% throughout most of the day until the final minutes before closing.
Lol! Did I get anything right dr_sean?
I had to edit mine so pls re-read and edit back your post.
Strike - Fwd Stock = Put - Call
Fwd stock is what we're curious about, bc we know everything else. so,
1.00 - Fwd Stock = .555 - .11
Fwd Stock = 1.00 - .555 + .11 = .555 (same price as put coincidentally)
What I meant by "would you sell that market" is would you sell short not the screen price, but the forward price? BC you will have to pay the difference in borrowing rates given that this stock is shorted to snot.
options traders are paying up for the puts so if you want to go against them that means you will SELL those puts for say .55. Now you have long exposure you need to SELL short GM stock collecting, say 0.75
Now what price have you sold the call for? not using rates, .20 But the real call market is .10 - .12. What's the catch? GM's fwd price is much lower than the real market for it. WHY? What Mr. Market is saying is you have to pay up something like .20 to carry that stock short (very high rate on the short stock).
Thinking about it another way, just check the rev/con market, like I said it's like 1.17 x 1.21, meaning you can get paid .17 to get short stock, but that will be used as a deposit against what borrowing rates you'll have to pay.
So what is the real play here? If you want to get short stock, you have to short a much lower fwd price, no matter what product you use, which makes the trade far less appetizing. If you are in the bullish mood, rather than just buy stock, instead SELL the 1 put and BUY the 1 call, as you get a better fwd price. Key is you have to be bullish (and nobody is!)
General Motors (+GMAC) Credit Default Swaps =~$102B (13,367 contracts), Market Value=~$466 million, net oustanding CDS=~$2.3B. Swap holders win with Chapter 11.
Oh man I can't wait to see this get written about in management and MBA textbooks.
One word: Bureaucracy. GM's is almost as bad as the federal government...hell just look at how badly they screwed themselves with pensions, or the utter POSs they tried to pass off as competitive products for decades..their culture is shockingly bad from everything I've heard, and they need a top-down reboot. This is just one more example.
GM stock price and bankruptcy (Originally Posted: 06/01/2009)
Why is GM still trading around $0.80 per share? Shouldn't this stock be down to $0.00 by now?
Since the stock is up 8.0% today, who is buying it and propping it up?
i have no idea! i asked the same question two days ago
The stock will be delisted by the end of the days but still trade on the pinks. Tremendous opportunity today if you were wreckless enough to step in between $.27 and a buck.
junkbondswap, I am still not sure I understand why people are willing to own this stock.
Since GM is planning to issue new shares following bankruptcy, why is anyone willing to hold on to these and even trade them on the pinks?
Also, what is propping its price right now? Price manipulation?
Yeah I'm also curious what the deal is with the stock. I don't really know how bankruptcies work, especially when the government is involved, but is there any potential upside to buying the stock so cheap? Or will it disappear?
anyone?
I am also interested in this. I'm sure some has to do with shorts covering their positions although you'd think they could cover at the inevitable .01 a share price. Anyone have a good response as to why it was up big yesterday?
see this thread
http://www.wallstreetoasis.com/forums/why-own-gm-at-this-price
And all your questions will be answered
http://www.bloomberg.com/apps/news?pid=20601087&sid=aanPqTlhazxg&refer=…
[quote=furiousgeorge86]And all your questions will be answered
http://www.bloomberg.com/apps/news?pid=20601087&sid=aanPqTlhazxg&refer=…]
I don't quite understand that argument. Stock rally's because people need to cover their shorts. I get that, but they cover shorts to return the shares to the people they borrowed from right? Well, wouldn't these people have recalled their shares by now? Surely people who lend out their shares aren't legally bound to keep them lent out are they? Why would these people not have recalled, and sold those shares by now ...
Who are they returning shares to 2 weeks after the companies been disolved?!
Looks like Chrysler may be having the same problems:
http://fortune.com/2014/06/18/gm-chrysler-investigation-ignitions/
GM IPO (Originally Posted: 08/12/2010)
So the GM IPO should be going live soon and I was wondering how you guys think the market will react to this? Wittacre will be stepping down on September 1st and this can be seen both positively and negatively.
1.3 Billion in 'profits'
Lets see how long this lasts... GM equity holders were fucked once before... what makes anyone think it won't be the same this time
To do the same thing twice and expect different outcomes is the definition of insanity (or something like that)
Better products this time. For those of you who actually like cars, GM has been putting out some nice stuff. I'm still a Ford fan though.
Well, we can expect the government to continually sabotage Toyota.
This may be an unpopular opinion but I feel companies at which design and engineering are central to your core business do poorly when they have the type of "diversity" GM has. I'm specifically referring to ideas; GM is a microcosm for what happens when the most useful people in the room can't do their jobs because they get drowned out. Call it bureaucracy if you like. I know it's a slippery slope but I wonder what effect politics, income disparity, gender and cultural diversity have had in this phenomenon too. Face it, some people have terrible ideas and they make great cars terrible as a result.
See; Pontiac Aztec, Hummer H2, Saturn, even Cadillac and Oldsmobile diesels over 30 years ago had this problem.
GS offers GM a 0.75% IPO fee (Originally Posted: 08/16/2010)
http://www.businessweek.com/news/2010-08-16/goldman-sachs-undercuts-riv…
Somehow I have a feeling that some news source will spin this into a story of wall street profiting at the expense of the good American taxpayer. They should have done it for free as their patriotic chore.
how the hell did this post draw the tag 'boobies'?
The Turnaround of GM: A Feat of PE Wizardry or Something Else? (Originally Posted: 11/17/2010)
As you may have heard, Dealbook reported today that GM is likely to raise the number of shares on sale in its imminent IPO by 31 percent -- to an expected 478 million shares. The projections surmise that shares will be priced between $32 and $33 and that GM could raise over $21 billion in their IPO, potentially making it the largest stock "debut" in American history. It is because of these (projected) numbers that GM is currently enjoying (at least for now) being one of the most successful turnaround stories in recent memory.
But, as you may remember, when Steven Rattner was chosen by the Obama Administration in 2009 to be the overseer of the Fed's auto bailout, he wasn't a popular choice in Detroit. Auto execs were looking to see an insider be the man-in-charge, yet they were instead given a Wall Street guy -- an outsider. Controversy, lobbying, name-calling ensued. Rattner had been at Morgan Stanley, GP at Lazard Freres, and co-founded Quadrangle. He's a PE guy through-and-through and -- in spite of protestations from Detroit -- he made GM's story one of unprecedented victory for the private equity industry.
In his recently released memoir, "Overhaul," Rattner takes a victory lap, describing his successful efforts at turning GM's sinking ship around, and basically making the case for his tenure as Overhaul Czar as "a case study for when and why the private equity and restructuring business can work," according to Ross Sorkin.
However, in a review of Rattner's book for the New Yorker, "Blink" and "Outliers" author Malcolm Gladwell makes the case that, in fact, Rattner (and PE) may not be the ones who deserves credit for the turnaround -- that due should instead go to the unlikely candidate of former GM CEO Rick Wagoner. Without Wagoner's ability to put quality cars on the ground, Gladwell suggests, Rattner's acts of financial engineering wouldn't have meant diddly.
"The mythology of the [private equity] business is that the specialists who swoop in from Wall Street are not economic opportunists, buying, stripping and selling companies in order to extract millions in fees, but architects of rebirth," he explains, implying that PE financiers are never really good at anything beyond financial engineering. A true turnaround, Gladwell might say, stands on the delivery of a good product, which simply can't be done on PE's timetable -- that PE specialists like Rattner are given all the credit for massive turnarounds when, in reality, data-manipulation, book-rewriting etc etc wouldn't sit if that company didn't have a sound structure and product to build on in the first place.
Thus, as GM's course-reversal is being touted as one of the biggest accomplishments of the Obama Administration to date, it's an important case study for the future, especially in re to how governments and companies should architect the rebuilding process. So, I'm hoping you guys will weigh in with your own thoughts -- Is Gladwell onto something? Or is he simply a guy who looks startlingly like Sideshow Bob?
@"heister" You must be trolling. Stupid stuff like that happens everyday. It doesn't mean people will forget about the GM incident. And the substance of those events don't even hold up to the one we're talking about. Saying that some Kardashian scandal could erase people's memories overnight about GM is ridiculous and unthoughtful. Among the most important criteria people look for in a car is safety, which GM has miserably failed to deliver. Prospective and future buyers will keep in mind what happened to GM vehicles and they wouldn't risk putting themselves and their families in faulty cars. People can change their perception toward GM over time if their products proved to be of better and higher standards, which not only takes time but also confidence. Time will tell. But saying that an event like this will be clouded by some buzzfeed headlines is completely ludicrous.
I say GM had a solid product before and after the turnaround, therefore my answer to your question is PE Magic.
To oversimplify and overpersonalize, GM has a solid product lineup now because Bob Lutz bet the company on a bunch of product redesigns. That gave GM a vanity product (Volt) and a bunch of really good cars that could compete with anything.
And Lutz lost the bet. The new designs hit the market in 2008 and GM couldn't recoup the cost to re-design and re-tool. (Seventh generation Malibu is a great car; nobody was buying.)
Making cars is a capital-intensive business. If you wipe out tens of billions in unsecured debt and offload and cap the legacy costs then anybody can look like a genius. Heck, you can even bring in a guy like Whitacre who doesn't even know how to drive and make him look good.
If private equity did anything, it was the modest sweep through the 14th floor to get rid of people who thought the GM way was ordained by God and the rules of physics. That had been going on for a while, but Wagoner - at least as a symbol - needed to go. (As did Fritz Henderson. Plenty of folks still think that he was the right guy for the job going forward, but the "out with the old guard" fetish prevailed - necessarily.)
Motor Trend's car of the year? on the up today? GM is back baby. Greed is good, right? and so the cycle starts again...
Can't stand American cars myself. Maybe that's just me.
People die in cars all the time. Just like people die falling in their showers all the time. It has yet to stop people from driving or showering. Not to mention that speed has been cited in many auto related deaths. That doesn't stop people from speeding.
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