With GM’s share price slipping below $30, the cries are going up again around the internet about the government’s stake in the bailed-out automaker. Thus far the Treasury has remained mum on its exit strategy, only indicating that it would emphasize speed rather than maximum return as it charted the course for its sell-off. But now, Reuters reports that “a big chunk” of the government’s 33% remaining stake in GM could be sold “in the summer or fall.” With the government’s shares “locked up” until May 22, that could mean the government is bailing as quickly as possible at a time when GM’s stock is hitting post-bankruptcy lows, and its CEO offers little in the way of explanations beyond blaming the Japanese tsunami and rising fuel prices. The Wall Street Journal figures taxpayers would lose $11b on its “investment” in GM equity if the government sold at today’s prices (the stock must hit $53 for break-even), but reports that political motivations outweigh fiscal considerations. The White House does not want “Government Motors” to be an issue in the next election.
Ask an industry-watcher to name an automaker that seems to be doing things right, and chances are one of the top choices would be Ford Motor Company. And though Ford is enjoying favorable perceptions in the media, according to the company’s own internal goals, it’s actually underperforming. And in a key metric, no less: retail market share. Bloomerg reports: (Read More…)
That’s right folks, for the first (and likely only) time, Fiat will be putting cash on the table for Chrysler’s equity, as Reuters reports that Fiat’s new credit facility will include $1.5b with which to exercise the 16% call option in its agreement with the US Treasury. At that rate, Chrysler’s market value would be under $10b, considerably less than the nearly $13b spent on Chrysler’s rescue (not counting assistance to Chrysler Financial). But what is Chrysler actually worth? Hit the jump for a look at what Chrysler’s Shareholder Agreement says about valuation in a Fiat Call Option scenario. (Read More…)
The South Norfolk Regional Growth Fund has denied Lotus’s request for a £27.5m loan intended for expansion at its Hethel headquarters, reports Autocar. In a statement the sportscar firm, which is in the midst of a major turnaround, said
Despite the clear synergies between Lotus’s growth plans and the fund’s objectives to enable private sector organisations to invest in projects that would create jobs and secure long-term growth, the bid team decided that the money was better invested elsewhere
Now why would that be? After all, even Lotus’s own adviser, Bob Lutz, gives the firm a 60% chance of success. What investment could possibly offer better odds than that? But don’t cry for Lotus. The firm’s parent company, Indonesian automaker Proton, has secured some £270m in private loans from six banks with which to fund the brand’s turnaround. The only question now: will the funding shift from British taxpayers to Asian bankers mean a shift in production away from the UK, as Lotus had threatened might happen if the RGF loan didn’t come through? There’s no word on that yet, and based on Lotus’s desire to loft its brand into Porsche/Ferrari territory, we’d have to argue against leaving the country that birthed the brand.
With Fiat flying towards taking a majority stake in its Chrysler subsidiary, Reuters reports that the necessary private loans are very close to being arranged.
Goldman Sachs Group Inc, Morgan Stanley, Citigroup Inc and Bank of America Corp are in advanced discussions with Chrysler to finalize a deal that will replace all of its roughly $7 billion government loans with term loans and bonds, these people said on Thursday.
In addition, the banks will also arrange a revolving credit facility for the automaker’s future liquidity purposes that will remain undrawn, these people said. The revolver will not be used for paying down government loans.
Look for Chrysler to wrap up a deal sometime after it reveals its Q1 financial performance next month.
Back in November of 2009, when GM announced that it would repay its government loans, it didn’t take much investigation to realize that The General was simply shuffling government money from one pocket to the other and that true “payback” was still a ways off. The New York Times asked me to write an op-ed on the subject, and I took the opportunity to point out the reality of the situation and note
G.M.’s global interests are far too diverse for it to serve its taxpayer owners faithfully, and it can’t afford to subjugate its business prerogatives to the political needs of its major shareholder in the White House. So, unless Americans develop a sudden obsession with G.M.’s $40,000 Volt electric car just in time for an I.P.O., taxpayers will be stuck with tens of billions of dollars in losses.
Afterward, while our government contemplates its runaway deficit and getting rid of its 8 percent of Chrysler’s equity, perhaps we’ll get an admission that General Motors still owes the American people. Without one, the relationship between the public and the automaker, and the Obama administration as well, may never be the same.
And now that our government finds itself “contemplating a runaway deficit and getting rid of its 8 percent of Chrysler’s equity,” would you believe that a similar federal money-shuffle is under way? Believe it.
Saab ended last week with “no solution in sight,” but after a busy weekend it seems that the Swedish brand has found a way to keep rage, raging against the dying of the light. Bloomberg reports that
The Swedish government has agreed to let Saab free up collateral now used to back the EIB loan, of which Saab so far has drawn 217 million euros, the people said. The freed-up collateral allows Saab to sell property to Antonov’s company. The property to be sold would include at least parts of Saab’s factory in Trollhaettan in southwestern Sweden, where the carmaker is based.
Saab (technically still called Spyker Cars) also recently sold its Spyker sportscar business to Antonov who continues to be the only major investor involved in Saab and its ongoing rescue. And though Antonov continues to be happy to pour his money into the firm, it’s not as simple as just writing a check: Antonov keeps offering support and governments keep shooting them down. Where’s the private capital love?
Saab’s inability to pay suppliers led it to request a release of some of its debt collateral by Sweden’s National Debt Office, reports Reuters. The NDO has loaned Saab €400m, but with its Russian backer Vladimir Antonov still unable to inject cash into the company, Saab was forced to ask for some of its NDO loan collateral in order to cover its supplier debts. But, according to another Reuters report, NDO spokesfolks say
It is clear what the problem is and everyone possible is trying to solve the problem… a solution to the problem had seemed in sight, but that in the end it did not work out.
The NDO says it will keep working with Saab, and the automaker predicts a resolution by next week (without offering any further details). After a year of independence from GM, the Swedish brand could well be reaching the end of the line.
Earlier this week we learned that Saab can not pay its supplier bills until its Russian sugar daddy, Vladimir Antonov, gets Swedish government approval to buy into the company that owns it. Now, suppliers are speaking out, telling Automotive News [sub] that the brand and its owner, Spyker Cars, owes “tens of millions” of Swedish crowns (10m crowns equals about $1.6m). A representative of the Swedish suppliers association explains
There is a perception in the media that there are discussions on extended credit times and such. But it is not about that, it is about the fact that Saab must pay its bills. If they cannot sort out their financial situation, things look very bleak.
With a “desperate” hunt for investment underway, Saab’s only hope appears to be Antonov, who says he has $71.5m to invest, an amount that should cover the $4.7m+ supplier debts. Meanwhile, work at Trolhattan has been stopped for at least the rest of the week. But even if Antonov gets Swedish government approval to invest, another, equally dire problem appears to be materializing: a dispute over the use of the name “Saab.”
HYPE! Yes, according to a pimptastic Morgan Stanley report [via BusinessInsider], Tesla is about to become “the 4th American Automaker,” despite the fact that it hasn’t actually built a car in any kind of volume. The report enthuses
The confluence of structural industry change, disruptive technology, changing consumer tastes and heightened national security creates an opportunity for significant new entrants in the global auto industry. California dreaming? We don’t think so. In our view, the conditions are ripe for a shake-up of a complacent, century-old industry heavily invested in the status quo of internal combustion. The risks are high. So is the opportunity. Enter Tesla.
Did you just throw up in your mouth a little? Don’t worry, there are highly convincing charts to help you learn to stop worrying and love the auto industry’s answer to Apple. After all, when it comes to Tesla, charts always tell the whole story.
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.
Reuters reports that Saab/Spyker partner Vladimir Antonov has questioned whether Saab will hit its ambitious 80k unit global sales goal this year, saying
This means that the company could face capital problems
Thelocal.se provides a little more detail quoting Antonov as saying
I’m not involved in how the company is run so I don’t have access to the numbers. But according to earlier versions of the business plan, they have to sell 80,000 cars this year to stay with the plan. From my point of view, I think that’s a bit too optimistic.
If the goal isn’t reached it would be nice for Saab to have €50-70 million ($69-97 million) as a little something extra to lean on. We’re ready to provide that money if we’re allowed to do so by the [European Investment Bank].
Antonov went on to say that bringing in outside investors would be difficult and that if the EIB loan fell through, something he does not foresee, Saab could be bankrupt “in days.” Needless to say, Saab’s Chief Optimism Officer Victor Muller didn’t take kindly to Antonov’s remarks and is firing back in the press.
General Motors has announced that Chief Financial Officer Chris Liddell will be leaving the company on April 1, “having completed the largest public offering in history and stabilizing the company’s financial operations.” CEO Dan Akerson has denied that Liddell’s departure has anything to do with GM’s first-quarter financial performance or his relationship with the departing CFO, saying “we could finish each others sentences.” The former Microsoft man was brought into GM in January of last year, and helped guide the automaker through its IPO and eliminated its material weaknesses in internal financial controls, apparently the two tasks he needed to complete before riding off into the sunset.
According to Steve Rattner, Chrysler was such a sick puppy in the immediate pre-bailout period that it would have only generated about $1b had it been liquidated in bankruptcy. Thanks to around $14b in government assistance, however, Chrysler is now worth a whopping $4.8b according to a Reuters analysis of its filings. But wait, you say, how does Chrysler have a valuation if it hasn’t yet launched an IPO?
Chrysler arrived at the valuation to set pay for its top executives, including Marchionne. Senior executives are paid partly through so-called deferred phantom shares, which will convert to shares in the company at a later date.
In June 2009, each share was worth $1.66, according to the filing. By the end of 2010, the value of each share was $7.95.
In an extended interview with Reuters, Nissan-Renault CEO Carlos Ghosn talks about the balancing act of leading two global automakers while maintaining their unique identities, a balance Ghosn says he wants to try to preserve even as the alliance looks to restructure its capital. Renault’s 44.3% stake in Nissan has caused some trouble with financial analysts because, as Ghosn puts it,
we are challenged (by financial markets) over how much capital we have imprisoned into the structure of the alliance. It’s a fair challenge. We are going to be studying and analyzing this with outsiders also, what are the ways to respond to these expectations from the financial markets without challenging the operating model which consists of keeping the two companies vibrant, motivated, engaged and keeping their identities
Does that mean a full merger? A new corporate structure? Where is Ghosn looking for answers as he attempts to give the markets what they want while maintaining the delicate balance between the needs of his two firms?
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