GM Business news

[gnutruk]

If you own GM stock -- or worse, bonds -- you might consider re-evaluating your holdings soon. Another hit in the crucial North American market, this time a bad one. Even the vague threat of a downgrade to "junk" status is serious.

 

On the other hand, we may soon see a spectacular series of rebates offered on unsold 2005's. I wouldn't be surprised to see coupons in the range of $7,000 off loaded trucks. I doubt we'll see rebates as high as $10,000, however, because at that point GM would take a deep hit against both costs AND future sales, and that would trigger a bond down-rating for sure, and my even force GM into default on some of its short term obligations.

 

And yet, if Ford introduces steep rebates, GM may be forced to raise the ante. We live in interesting times.

 

 

GM Cut Earns Outlook; Stock, Bonds Fall - Thursday, March 17, 2005

 

By Michael Ellis

DETROIT (Reuters) - General Motors Corp. on Wednesday warned its 2005 earnings will be as much as 80 percent below its prior forecast due to slumping North American auto sales, sending its shares down 13 percent to a nearly 13-year low.

 

The warning from the world's largest carmaker, whose once dominant position in its key U.S. market has fallen to less than a 25 percent share on a steady loss to foreign automakers, spurred Standard & Poor's to caution that it could downgrade GM's debt to "junk" status at any time, which would likely raise its borrowing costs.

 

GM also said it will post a loss in the first quarter, compared with its prior forecast of breaking even or better, due to significant losses in North America.

 

The automaker's top money-makers in the United States, SUVs and pickup trucks, have been losing out to newer offerings from competitors.

 

"GM North America is, simply put, our 800-pound gorilla, and today's announcement shows how important it is that we get this business right," Chairman and Chief Executive Rick Wagoner told analysts and reporters on a conference call.

 

GM's stock sank as low as $29.00, its lowest level since October 1992, a year when GM lost $23.2 billion and nearly went bankrupt. GM's outlook, which would mark its worst performance since 1992, drove other auto stocks lower in morning trade, with Ford Motor Co. down about 4 percent.

 

GM said it now sees full-year earnings of about $1.00 to $2.00 per share, excluding special items, down from its previous target of $4.00 to $5.00 a share.

 

In 2004 GM earned $3.6 billion, or $6.40 a share, from continuing operations, including $2.9 billion from its financial services unit GMAC.

 

GM also said it now expects a first-quarter loss of about $1.50 per share, excluding any special items.

 

SALES FALL

 

GM's U.S. sales tumbled more than 6 percent during the first two months this year, and its U.S. market share fell to a record low of about 24.4 percent in February despite high incentives

 

David Cole, director of the Center for Automotive Research, said he expects similar difficulties for other companies in the automotive industry. "This will not be the only company where you're going to see this kind of comment," he said.

 

Automotive parts company Delphi Corp., GM's largest supplier, said earlier this month that it may have to restate earnings from 2001 onwards due to improper accounting. Parts maker Visteon Corp., which has continuously lost money since it was spun off from Ford in 2000, last week agreed to an aid package from its former parent company.

 

Merrill Lynch cut its rating on GM to "sell" from "neutral."

 

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Also: It looks like our vacations are going to get expensive. But there may be offsetting factors. If fewer people take to the road, then things such as motels, etc., may have to lower prices to attract clientele.

 

Oil New High $56.10 a Barrel, Account Deficit hits record

 

LONDON (Reuters) - High flying oil prices surged to set new records on Wednesday after the U.S. government reported a sharper than expected draw in gasoline supplies.

U.S. crude prices were up $1.05 to $56.10 a barrel, after striking an all-time high of $56.35.

 

gnutruk

[Wingnut]

Actually, it sound like it might be a decent time to buy GM stock.

[gnutruk]

Actually, it sound like it might be a decent time to buy GM stock.

 

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Might be, although sometimes valuations really do indicate underlying problems, not just buying opportunities.

 

Kinda like the patient dying of cancer. Doc comes into the room and hands the guy a prescription for an expensive medication. Also hands him his bill for services rendered. Doc says; “Please pay my bill as soon as you can. I want to buy stock in the pharmaceutical company that makes those pills.”

 

gnutruk