Should General Motors Investors Be Concerned About Guidance?

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Thread: Should General Motors Investors Be Concerned About Guidance?

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    Should General Motors Investors Be Concerned About Guidance?

    Should General Motors Investors Be Concerned About Guidance?

    Perhaps General Motors is just providing more insight with its Monday "Office Hours" conference call -- but should investors prepare for something more?

    Daniel Miller (TMFTwoCoins) Jun 23, 2017 at 2:52PM

    When management speaks, investors listen. It's about as simple as that. And when General Motors (NYSE:GM) calls an "Office Hours" conference call -- Monday, June 26, at 3 p.m. EDT -- investors would be wise to tune in and hear what the company has to say. If you're thinking, "Didn't GM just have one of these calls?" you'd be correct: on April 6, as a matter of fact. So, what's going on here, and should investors be concerned?

    A trip down memory lane
    Much of the focus of GM's April 6 call was on the company's risks and opportunities, the sale of Opel/Vauxhaull in Europe and the details that went into that development, and clarification of its rising inventory and incentives. We're likely to get more insight into those same developments this time around, but it's also possible that the peaking auto industry has put more pressure than we realize on Detroit's largest automaker. It's possible we're about to get a warning about GM falling short of its quarterly guidance, or more insight into used-car pricing pressure and if it's pressuring General Motors Financial (GMF).

    We've already seen some moves from General Motors that hint toward a coming slowdown. In late January, GM canceled the third shift at its Lordstown, Ohio, small-car factory as sales of the Chevrolet Cruze sedan took a turn for the worse. The reason is simple: Consumers want SUVs and trucks, and GM wants to avoid using fatter incentives and discounts to sell sedans, so production cuts are necessary. In fact, GM has laid off more than 5,000 workers in 2017, and more will take extra temporary time off during the typical summer shutdown.


    What's going on?
    However, there's more to the bigger picture than consumers switching from sedans to SUVs and trucks. As that consumer preference switched and new technology drove prices higher in larger vehicles, consumers opted to lease vehicles at a higher rate. When all of those leased vehicles come off lease, it will flood the used-vehicle market with a surplus of vehicles, which is beginning to pressure prices.

    One example was found this week in CarMax's (NYSE:KMX) earnings data. Despite CarMax's sales mix of vehicles increasing toward SUVs and trucks, rather than less profitable and lower-price sedans, its average selling price (ASP) of used vehicles dropped nearly 2% to $19,478. That drop accelerated sequentially from the fourth quarter, which posted a 1.6% decline in ASP.

    Bank of America Merrill Lynch analyst John Murphy explains why this matters: "If the industry is not large enough to absorb the 3.5 million units coming off lease this year, we may see significant pressure on used-vehicle pricing ensue this year in a very material way and spike down the cycle faster and more furiously than even we're expecting."

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    Re: Should General Motors Investors Be Concerned About Guidance?

    Noteable story, much of what I've been saying for a while.

    FMC got burned by excessive leases and "generous" residuals a couple years ago, no doubt having your own financing arm is beneficial, and usually profitable...............

    GMF has been using higher than realistic residuals, on top of lease rates higher than the industry averages, IMHO this has been the primary driver of GM's "retail gains".

    Remember folks; technically GM still owns all those cars.............
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    Re: Should General Motors Investors Be Concerned About Guidance?

    GM will announce they will stop making sedans and increase production and development of CUV and SUV.
    No more v8 (cancellation of any new and present v8) ..just I4 turbo and electric vehicles.
    Corvette and Camaro will become new brand (Camvette) and will be human powered (like in Flintstones)+ i4 turbo.
    Top of the line Cadillac will have Turbo inline 4 .There won't be any V series (no sedans and coupes for Cadillac on SUV and CUV)

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    Re: Should General Motors Investors Be Concerned About Guidance?

    Quote Originally Posted by Ed753 View Post
    Noteable story, much of what I've been saying for a while.

    FMC got burned by excessive leases and "generous" residuals a couple years ago, no doubt having your own financing arm is beneficial, and usually profitable...............

    GMF has been using higher than realistic residuals, on top of lease rates higher than the industry averages, IMHO this has been the primary driver of GM's "retail gains".

    Remember folks; technically GM still owns all those cars.............
    So are you saying I should consider leasing a GMC product?

    Quote Originally Posted by asrapid1 View Post
    GM will announce they will stop making sedans and increase production and development of CUV and SUV.
    No more v8 (cancellation of any new and present v8) ..just I4 turbo and electric vehicles.
    Corvette and Camaro will become new brand (Camvette) and will be human powered (like in Flintstones)+ i4 turbo.
    Top of the line Cadillac will have Turbo inline 4 .There won't be any V series (no sedans and coupes for Cadillac on SUV and CUV)
    Hotline from Croatia NAILS IT AGAIN!!

    Well, except it will be called Cormaro, not Camvette. Too many schlubs would mix Camvette up with Camry. Plus Toyletta would sue.
    Last edited by Neanderthal; 06-25-2017 at 04:04 PM.
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    Re: Should General Motors Investors Be Concerned About Guidance?

    Quote Originally Posted by asrapid1 View Post
    GM will announce they will stop making sedans and increase production and development of CUV and SUV.
    I do think that all future generation Cadillac and Buick sedans may be made in China.

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    Re: Should General Motors Investors Be Concerned About Guidance?

    Also in the analyst warnings on Carmax and other big purchasers ATP reduction was the bubble of the luxury leasing market. While GM has exposure here with Caddy and Buick, the real exposure is to the German brands. Lexus and Infiniti have the same issues as GM's luxury brands, but it won't kill them either as like GM they have other divisions that still sell cars.
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    Re: Should General Motors Investors Be Concerned About Guidance?

    If you look at GM and F stocks from the last 12mos, GM is up 20% and F is down 10%. Who is worried?

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    Re: Should General Motors Investors Be Concerned About Guidance?

    I suspect Opel is coming back to GM

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    Re: Should General Motors Investors Be Concerned About Guidance?

    [QUOTE=mbukukanyau;6800138]I suspect Opel is coming back to GM[/QUOTE

    GM can't help Opel, and can't afford to continue to bleed cash trying to!

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    Re: Should General Motors Investors Be Concerned About Guidance?

    I was under the impression that many of the current Buicks and Cadillacs are made in China. GM may just become an importer of cars and back away from being an American car company

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    Re: Should General Motors Investors Be Concerned About Guidance?

    Many are made in China for the China market. Only one model is being imported to the US.

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    Re: Should General Motors Investors Be Concerned About Guidance?

    Maybe GM is getting ready to sell the Janesville plant.....or move the medium duty trucks back there?????

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    Re: Should General Motors Investors Be Concerned About Guidance?

    Quote Originally Posted by rustywrench View Post
    If you look at GM and F stocks from the last 12mos, GM is up 20% and F is down 10%. Who is worried?
    Looking at it that way; GM has farther to fall?


    Quote Originally Posted by rustywrench View Post
    Maybe GM is getting ready to sell the Janesville plant.....or move the medium duty trucks back there?????
    Don't confuse this with a Press Release; "General Motors Company will host an “Office Hours” conference call for analysts and institutional investors on Monday, June 26th at 3:00pm EDT"
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    Re: Should General Motors Investors Be Concerned About Guidance?

    Quote Originally Posted by Mingo View Post
    Quote Originally Posted by mbukukanyau View Post
    I suspect Opel is coming back to GM
    GM can't help Opel, and can't afford to continue to bleed cash trying to!
    Of course, but the deal was on shaky grounds with German unions last I heard. They could always shut it down, but hopefully those have been resolved. GM cannot afford it.

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    Re: Should General Motors Investors Be Concerned About Guidance?

    This is literally an article that was written during slow news days, they gave no new information on what will be coming up with the conference call. It was literally a call of what if....

    Though as far as un-related to the conference call I had no idea that Ford finance was so big (and even bigger then GM finance). Company owned finance companies tend to deal with those who for many different reasons are considered risky loans. So if Fords finance arm is bigger then GM then this suggest that Ford has a larger percentage of their retail sales in sub prime auto loans.

    Really there are two trends that should concern, the amount financed has risen which is being driven by the trend away from cars to CUVs (which is why automakers are only too happy for this change). The other trend is that while these loans have grown the poor and middle class havn't seen their incomes rise with no real sign that this will change.

    Ultimately what we may see happen are car consumers going back to sedans when they are tired of paying such huge rates for CUVs and they can get a great deal on a CPO sedan that is 2-4 years old.

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