Automotive News [sub] reports that GM has sold $1b worth of preferred stock in Ally Financial, the bank holding company that emerged from the wreckage of GM’s former in-house lender GMAC. GM will book $300m on the deal, which will take its ownership stake in the lender to 9.9 percent. GM will likely continue to reduce its exposure to Ally, which is 74% owned by the US Treasury, as its new CFO seeks to rebuild its in-house lending capabilities. GM’s move away from Ally has intensified competition between the financial firm and GM’s new financing arm, which has been built on the acquisition of subprime lender AmeriCredit. This mounting competition has been criticized by the TARP Congressional Oversight Panel, which rapped GM for failing to find a win-win solution for its own financing needs and the viability of the taxpayer-owned Ally. Amman’s strategy for avoiding further conflict: sticking with subprime and floorplan lending, leaving prime auto lending to Ally. But, argues analyst Maryann Keller
Floor-plan lending is about building an individual relationship with a lender. To get them to switch, you need to get people on the ground and get out and talk to dealers and build those relationships.
Meanwhile, with its stock struggling to achieve the value projected for it by several analysts, GM has approved a second quarterly dividend of $0.594 per share on its Series B mandatory convertible junior preferred stock. More cash and a new dividend seem likely to pump up GM’s stock price a little, but it is unlikely to reach the $55-ish price needed to pay back the government’s equity investment in the short term.
Whoooooooooooo! A 60 cent dividend! So how much do I get? You know as an American taxpayer/shareholder. (crickets chirping)
By paying a dividend, is GM signaling that they don’t need the funds, that all their product development projects are adequately funded? Or, is the dividend just a way of keeping up appearances?
GM’s share price can only go up, it has been stuck in the basement for too long and no good news seems to be able to jump start it.
Why should it go up? Give good reasons for it to go up. Just because it’s down doesn’t mean it has to go up. We’ve been through this before, like in 2008. The stock went down and never came up. There are still a lot of people who don’t understand that what is down doesn’t necessarily go up.
Jeffer,
GM’s trading at a P/E of 10.6 and Ford is trading at a P/E of 8.6. I’m not sure I believe that GM is 18% better at doing its business than Ford is at doing theirs.
Further, GM still sells a lot of low-MPG vehicles. They’re doing better than in years past in the small car segment, as far as apparent desireability of product and fuel economy achieved, but do they sell those things profitably? High oil prices are not going to do GM’s SUV business any favors.
I don’t think $28 for GM is at all out of the question in the near future, with a further slide in prices likely if a change in sales mix (trucks/SUVs to small cars) erodes profits.
I really don’t think it should go up, but there seems to be very little discussion of why it has stalled. I thought the IPO was too high, and there are many reasons why the stock could go even lower. Much of the “good news” is smoke and mirrors. I really miss RF when it comes to unearthing the story behind the story with GM.
GM shares will go up, but it will take some time, potentially a long time. GM is in a really good position financially and their product portfolio is pretty good. What is keeping the price down is GM mix of sales, which have been too truck, SUV, and CUV heavy (but this is only a small part of the problem). Big parts of the problems are the job slashes in Europe which are going to cost a lot of money, rising gas prices (see sales mix mentioned earlier), and people reluctant to invest in GM again.
Look at the telecom sector. There are some good companies that make a killing every quarter, but their stock price stays pretty flat. Why? People don’t want to invest in telecom again after the bubble burst. The same thing is going to happen with GM, and is probably already happening. As a company right now, they are severely undervalued. But, being undervalued doesn’t mean that the price will go up.
Meet the new boss, same as the old boss.
The beancounters are back in charge at General Motors. Daniel Akerson comparing GM cars to cans of Diet Coke – that the car is something to commoditize and production should not be engineering driven (seriously, I would love to see TTAC view on this).
Akerson believes the road to success lies in volume and cutting corners, not building competitive products (e.g. just about everything that Maximum Bob laid his hands on and the last few vehicles he guided are trickling into showrooms now).
When Liddell left I thought it was because his desire to be a CEO somewhere someday was not going to be met at GM, and I saw it as a favorable thing for Liddell, bad for GM. He brought them to IPO, profit being made, mission accomplished, time to move on. I now suspect as Akerson surrounds himself with yes men that the hatchet job we’ve been seeing on GM brass is only to reinforce his position.
GM has no gas in the tank for yet another arrogant CEO obsessed with counting the beans, decontenting, and keeping the factories running by pushing deep incentives. The worst part of all of this is they have competitive products in a number of segments now that could actually, gasp, be sold on the merits of the product itself.
I no longer see a potential happy ending for GM, I think we’re now facing the inevitable.
(surveying GM situation, reaches the conclusion of…) facepalm.
I wouldn’t call an auto company the perfect business model applying micro/macro Econ 101 to them. They run more like an agency that produces income. Think of a distant hand of the government where there I really little new competition but heavily regulated at every facet of thru business.
Just think of the dividends as cash on the hood. GM has always been generous but if you need to move some shares just juice them up!
Put a hundred shares on the hood of every car you sell, the ultimate incentive program.
They’re doing better than in years past in the small car segment, as far as apparent desireability of product and fuel economy achieved, but do they sell those things profitably? High oil prices are not going to do GM’s SUV business any favors.
high oil prices is circling above our heads! Is just a matter of time when Colonel get tossed out.
Corporate culture still a mess – check
Too many GM lifer’s still in leadership roles – check
Reputation still perceived as below Asian competitors and Ford – check
GM leadership still ignoring reality with needed product warranty to instill buyer confidence – check
Gee, why is the stock not going up?
1. The dividend is on the preferred stock, not the common. It is more or less mandatory — being cumulative. That is, they can NEVER pay a common dividend before the preferred is current.
2. Americredit was a very solid sub prime lender before purchased by the General.
3. The fact that TARP oversight doesn’t like it means it is probably a good deal for GM.
4. I don’t like Ally. Period. Ditching them is a solid idea.
5. The future for GM profit is global X US. Especially China.
Having said all that, I have no idea about the value of GM common stock and whether it is over or under valued. It is pretty cheap as a firm — but if it can’t make a profit, then it is worthless.
I’ll leave investing in Auto companies to the smart money guys. Global capacity glut — tough business.
Remember Ditech mortgage loan advertising from back in the Day? It was GMAC.
It is a huge, complex mess and frankly I don’t think it worth the effort to try to sort it out. The main point being that whatever is going on, it isn’t simply a rerun.
back in the 20’s Morgan and duPont took Billy’s stock after betraying him in their Wall Street syndicate. eventually the duPonts were made to divest but the Morgan influence has remained over time, including the eras of Ellmore Patterson and Sir Dennis Weatherstone. also of note has been the interlocking Morgan directors like Walter Fallon of Kodak and Edmund Pratt of Pfizer, both Morgan men of sorts…along with the ever Hon. George Schultz. even today we see more of the same…Morgan men in positions of financial control at GM and other large corporate institutions. like their predecessor old JP himself, these men continue to diligently and loyally serve their European banking masters, much the same as do Federal Reserve Chairmen. like they say…it’s good to be the Bank.
see The Buickman on FaceBook
http://www.Generalwatch.com
back in the 20’s Morgan and duPont took Billy’s stock after betraying him in their Wall Street syndicate. eventually the duPonts were made to divest but the Morgan influence has remained over time, including the eras of Ellmore Patterson and Sir Dennis Weatherstone. also of note has been the interlocking Morgan directors like Walter Fallon of Kodak and Edmund Pratt of Pfizer, both Morgan men of sorts…along with the ever Hon. George Schultz. even today we see more of the same…Morgan men in positions of financial control at GM and other large corporate institutions. like their predecessor old JP himself, these men continue to diligently and loyally serve their European banking masters, much the same as do Federal Reserve Chairmen. like they say…it’s good to be the Bank.
see The Buickman on FaceBook
http://www.GeneralWatch.com