# General Motors



## pastorash (Feb 3, 2014)

Wondering if anyone has their eye on this stock lately, depressed for a few years now. Is the ignition switch thing going to keep it depressed for awhile or perhaps when oil jumps up and their vehicles are no longer the rage. Good dividend right now though.


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## CPA Candidate (Dec 15, 2013)

I've held the stock for a couple years. It's probably one of the most hated stocks out there. The company has been making money had over fist and raising expectations for earnings, raising the dividend and buying back stock but the market takes any opportunity to pound it into the dirt. At times it can trade around book value with P/E of 5, and a good ROE. 

It's one of those situations were the market seems only to care about perceptions and the positive reality is dismissed almost as a fluke. If you are interesting in holding the stock you need patience and a long term horizon, which I have.


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## sags (May 15, 2010)

I suspect investors shy away from GM because of the pension plan liabilities, both in the US and Canada.

In the US, GM borrowed $2 Billion to contribute to the US plan. In Canada, GM opted to use the one time 10 year pension contribution deferral option.

The option ends in a couple of years and GM will be forced to direct significant amounts of capital towards the pension fund shortfall.

As of 2015.......the US plan shortfall was $21 Billion and the Canadian shortfall was $3.6 Billion.

http://seekingalpha.com/article/3976982-general-motors-pension-problem


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## dotnet_nerd (Jul 1, 2009)

GM? Are they still in business?

I shorted that stock back during the meltdown and made a truckload of money (not a GMC truck). I kinda forgot about them since.


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## pastorash (Feb 3, 2014)

They're close to the #1 spot in global sales, that surely has to bode well short term, and hopefully long term.


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## CPA Candidate (Dec 15, 2013)

Patience on GM is starting to payoff. The stock has surged recently along with some auto parts stocks. I think this is due to revision of expectations. The peak auto drum that has been banging for several years is fading out. A strong US economy bodes well for continued strength in auto sales.


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## pastorash (Feb 3, 2014)

I agree that the short term outlook looks rosy for this stock, but long term, we shall see.


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## Oldroe (Sep 18, 2009)

It IPO at a very high level. As a retired employee I had opportunity to buy the IPO and declined . Didn't see any money to be made.

Generally all the auto company's have the same problem , billions to set up manufacturing facility and years on the break even. And that include Toyota Honda Kia and all the others.


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## Drauss (Nov 29, 2016)

^^

but can't we argue that those billions to setup manufacturing has been amortized mostly.


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## Oldroe (Sep 18, 2009)

Oh and millions to run. Have never invest in Auto industry.

It's what keeps Bombardier at $3.


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## Drauss (Nov 29, 2016)

Well BBD is a different story but yes the gigantic CAPEX are ever present, but that is not unique as you say. You are stuck with it.
so as long they keep showing expanding margins, sales building up and helpfully crude oil recovering ... (i know ... lots of if) ... it can be good investment.IMHO 
let's see how the investor day tomorrow turns out tomorrow.

PS: I actually worked there for some years on the regional jets before leaving


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## Oldroe (Sep 18, 2009)

GM and all the others would only be a get in good and get out.

I did make a little on BBD 15 years ago but it was just painful. They sign contacts for a billion and the stock does nothing.

I'm holding my cards until Trump is making decision.


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## OnlyMyOpinion (Sep 1, 2013)

I see the union is  making it easier  for GM to decide where they don't want to make future investments.


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## AltaRed (Jun 8, 2009)

Of course short sighted unions dont understand $8B in profit in 2018 might be required to keep their earnings and D/E ratio on their balance sheet healthy enough to re-invest in new product to stay relevant. Vicious race to the bottom otherwise and then for sure there will be even less jobs, or none. 

A simple failure to understand economics. The union should want then to make even more profit.


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## OnlyMyOpinion (Sep 1, 2013)

Economics is not their strong suit.

Union leadership comes from the ranks of union workers, and union workers are 'graduated' from high school.

There is a reason the industry has seen so much automation - not a lot of brain-power is needed on the line.

Legalizing pot was a gift to workers on the assembly line.


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## sags (May 15, 2010)

GM has been unionized for a long time, and the workers have fared pretty well, averaging $90,000 US plus benefits.

It appears that unions understand economics pretty well, in fact probably a lot better than people working in non union jobs for half the money.

Like I have said before, if you want good wages, benefits and a pension get a unionized job.

Union envy, pension envy..........branches off the same tree.


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## AltaRed (Jun 8, 2009)

An article that came through my monthly Wheels newsletter today https://www.nytimes.com/2019/09/16/...fb5c3c3d2d73650ee59763d53cf9&regi_id=87595367

A good read but these few paras represent the dilemma for GM


> Aside from keeping the Hamtramck plant open, the biggest issue for strikers is the tiered wage system, which leaves some workers making significantly less than others for comparable work.
> 
> Workers hired before 2007 make about $31 an hour, and can retire with a lifelong pension. Those hired after them (now more than a third of the work force) start at about $17 an hour and can work their way up to about $29 an hour over eight years. They also have to rely on 401(k) retirement accounts instead of pensions.
> 
> In addition, G.M. uses temporary workers (about 7 percent of the staff) who earn about $15 an hour, and do not have vision or dental benefits. The system has helped G.M. compete with Toyota, Honda and other foreign automakers operating nonunion plants in Southern states where hourly wages tend to range from $15 to $18 an hour.


At the end of the day, GM, Ford and FiatChrysler have to compete with the imports and they can't really do so and re-invest huge amounts of capital and stay relevant if they have to pay out sized wages. It's a no-win.


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## sags (May 15, 2010)

Wages are a small part of overall costs and customers are already paying a little bit more per car to buy GM products.

It is like buying a Nike shoe or buying a Reebok shoe. They are both shoes but people will pay more to wear the Nike swoosh.

GM products now rank high in consumer comparisons and awards. GM was named #1 in the customer loyalty category in 2019.

https://www.autodealertodaymagazine.com/355558/gm-wins-top-prize-in-loyalty-awards


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## sags (May 15, 2010)

Wages are a component of costs, but they are only one factor and they are tax deductible. Pay wages or pay taxes......is a consideration.

One big factor for the ability to pay higher wages is that GM produces and sells mostly high value products. 

Their profit margins per vehicle are much higher than the imports, which is why GM has abandoned most compact car production.

A full size SUV or pickup truck can have a $25,000 profit per vehicle compared to a small foreign compact with a $2,000 per vehicle profit margin.

Assembly line speeds and employee competency levels are another factor. 

The GM lines may operate at a higher speed with less disruptions and line shutdowns than other manufacturers.

There is more to the story than a simple dollars per hour calculation.

The closing Oshawa plant is the highest rated assembly plant in North America, but it is closing and the work is moving to the US.

It doesn't appear that GM is too worried about US worker wages.

GM shares have done well since 2012.......more than double returns in 6 years. (as of Nov 30, 2018)

_All the same, an investment in GM in 2012 — two years after the company officially came out of bankruptcy and began recovering from the major financial crisis that hit the auto industry — would have made you a profit. A $1,000 investment then would be worth more than $2,200 as of Nov. 30, according to CNBC calculations, including price appreciation and dividend gains reinvested._


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## OnlyMyOpinion (Sep 1, 2013)

Original idea from union trash - once you've screwed the company and they pull the plug, sidle up to the government trough and ask for money. GM workers ask Feds for nearly $2 Billion.

_The proposal to preserve auto manufacturing in Oshawa calls for a federal investment of $1.4 billion to $1.9 billion to transform the existing facility into a plant that would produce electric vehicles for government agencies.

"If this were really feasible, if this were really possible, wouldn't GM be doing this itself?" asked Wolf, who studies the auto industry and vehicle manufacturing._


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## sags (May 15, 2010)

I guess you missed these parts of the article.

_The study says the transformation would preserve around 13,000 jobs in Oshawa, leading to sales of 150,000 vehicles over the plant's first four years at a value of approximately $5.8 billion. _

_While Wolf was skeptical of the plan, electric vehicle researcher Olivier Trescases called the idea an "interesting and timely opportunity."

Trescases, who runs the University of Toronto's Electric Vehicle Research Centre, said the project could succeed if it maintains a strict focus on producing vehicles for government use.

"I think that aiming for government owned EV fleets and electrified public transportation is strategically very important and more logical than trying to produce passenger cars though a Crown corporation," he wrote in an email._


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## OnlyMyOpinion (Sep 1, 2013)

Oh yes, I read all the bullshit in the article.

Of course the study and supporters paint a positive picture. They're at the trough for $2 billion after all.

I posted only the sensible stuff.

Sorry to take you away from CNN.


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## cainvest (May 1, 2013)

sags said:


> I guess you missed these parts of the article.
> 
> _The study says the transformation would preserve around 13,000 jobs in Oshawa, leading to sales of 150,000 vehicles over the plant's first four years at a value of approximately $5.8 billion. _
> [/I]


So simple question then ... how long would it take for them to pay back the 1.9 billion dollars?


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