GM sees significant improvement in operating results

[Slowrider5]

DETROIT, Jan 17 (Reuters) - General Motors Corp (GM.N: Quote, Profile, Research) told analysts on Thursday that it expected to cut annual U.S. labor costs by $5 billion by 2011 and increase its revenues in all regions during 2008.

GM, in a presentation to Wall Street analysts, said it plans to reduce its annual U.S. labor costs by about $5 billion by 2011, mainly through the labor agreement reached with the United Auto Workers union last year.

"The most significant savings is the estimated $4-5 billion GM expects to gain in 2010 once it realizes the full-impact of the 2007 GM-UAW labor agreement," the company said in a statement.

But GM Chief Executive Rick Wagoner said the company will face some challenging headwinds in 2008, including weak U.S. auto industry sales, high fuel prices, high commodity and steel prices, and mounting regulatory requirements.

"This has been a turnaround so far without any tailwind from the industry so far," Wagoner told analysts in Dearborn, Mich. "Frankly the outlook for '08 is uncertain and a lot of people view it negatively."

http://www.reuters.com/article/rbssC...24629220080117

[megeebee]

GM sees big improvement in operating results


Automotive News
January 17, 2008 - 1:56 pm ET




DETROIT (Reuters) - General Motors told analysts on Thursday that it expected to cut annual U.S. labor costs by $5 billion and increase its revenues in all regions during 2008.

GM, in a presentation to Wall Street analysts, said it plans to reduce its annual U.S. labor costs by about $5 billion by 2011, mainly through the labor agreement reached with the UAW last year.

"The most significant savings is the estimated $4-5 billion GM expects to gain in 2010 once it realizes the full-impact of the 2007 GM-UAW labor agreement," the company said in a statement.

But GM CEO Rick Wagoner said the company will face some challenging headwinds in 2008, including weak U.S. auto industry sales, high fuel prices, high commodity and steel prices, and mounting regulatory requirements.

"This has been a turnaround so far without any tailwind from the industry so far," Wagoner told analysts in Dearborn, Mich. "Frankly the outlook for '08 is uncertain and a lot of people view it negatively."

GM expects industry sales to come in slightly above 16 million this year, while it projects global industry volume to reach a record high of about 73 million vehicles, up 2 million from 2007.

Despite this year's projected weakness, GM said it "sees the probability of a stronger U.S. industry in 2009 and beyond.

"It is estimated that a move of the industry back to trend levels by 2010 would generate additional pre-tax income to GM in the range of approximately $1 billion to $1.5 billion annually," the company said in a statement.



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[lam]

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[tgagneguam]

It certainly would be nice to see GM make a financial recovery to match its promising product renaissance. But it seems that a full recovery remains stubbornly elusive mostly because of GMNA, the largest single contributor to GM's performance. Even Wagoner expressed frustration in a recent Fortune/Alex Taylor III article that was posted on this site:

...While Wagoner has North America moving in the right direction - GM cut net losses from $4.6 billion in 2006 to just $400 million in the first three quarters of 2007 - he admits to frustration. "[If] I would have told you [a decade ago] that we would be pretty much head-on competitive [with Toyota] in labor productivity, very competitive in cost, doing products that are being acclaimed as these are, and have made a health-care breakthrough, I think you would probably have written that we would be highly profitable. And so you say, 'How does that feel?' I think that's a little disappointing."

You would think that with such solid gains in key areas that NAO would be posting some better numbers. It's not, or at least not in the way that is translating positively and significantly to the bottomline. Simply pointing to new, admittedly superior product as the per se evidence of a financial recovery at GM doesn't seem to tell the whole story. And I think that that's why, despite my own attempts to justify a purchase of GM stock as a good buy, I don't think it's so improperly priced; one isn't buying so low when purchasing GM stock nowadays. Actually, I think I've done better with DemandNotes, currently yielding a quite reasonable 5.75% APR. While at times the $2 dividend yielded rich 8.5% returns in the past, more recent cuts to the dividend have sliced the gain to a little over 4% annually (at current share prices; still not too bad). And really, a company as cash-strapped as GM might benefit from a further dividend cut.

Nonetheless, I hope Wagoner et al. stick to the long-term plan. Eventually(?) it should pay off with a healthier balance sheet. And all the clairvoyants who propose that GM stock is such a steal will be laughing all the way to the bank!

[jbernie]

Originally Posted by tgagneguam

Nonetheless, I hope Wagoner et al. stick to the long-term plan. Eventually(?) it should pay off with a healthier balance sheet. And all the clairvoyants who propose that GM stock is such a steal will be laughing all the way to the bank!

I think most of us doubted GM's ability to cut back on the fleet/rental sales long term, give them 4-6 months and watch them go back to old habits to get sales. I think we are about 14 months or so into this and we haven't seen them go back to the old habits yet.

Unfortunately as humans we tend to have very long memories for the bad things and for the most part short memories for the good that is done. GM has done a very good job to date of turning the ship around and getting it back on course, i guess we need another year or two for the public perception to start turning as well.

Certainly the signs are promising but i think we need another cycle of product updates to really see how true to their word GM is.

[JackDye]

GM is in an interesting position. They are 24 months from seeing all the benefits of the labor agreement, going through a downturn in the domestic market, and still paying for the past sins of Rescap.

However, they have some big things going in their favor (financially). Cash flow has stablized, GMAC said today they see a profitable 2008, they now have a 0% effective tax rate due to the deferred credit write-down last quarter, and can clearly see an incremental $5B a year coming from the labor agreement, plus Delphi finally looks to be coming out of bankruptcy. Oh yeah, they also have a pension that is about $20B overfunded and growing each year.

If you believe the car market will come back in 2009, you should be thinking about being long GM. But who knows, just interesting to watch.

[ericmvest]

Originally Posted by JackDye

GM is in an interesting position. They are 24 months from seeing all the benefits of the labor agreement, going through a downturn in the domestic market, and still paying for the past sins of Rescap.

However, they have some big things going in their favor (financially). Cash flow has stablized, GMAC said today they see a profitable 2008, they now have a 0% effective tax rate due to the deferred credit write-down last quarter, and can clearly see an incremental $5B a year coming from the labor agreement, plus Delphi finally looks to be coming out of bankruptcy. Oh yeah, they also have a pension that is about $20B overfunded and growing each year.

If you believe the car market will come back in 2009, you should be thinking about being long GM. But who knows, just interesting to watch.

General Motors' stock looks like a good buying opportunity to me!