[steinravnik]

GM Declines After Citigroup Cuts Shares on Higher Energy Costs

May 27 (Bloomberg) -- General Motors Corp. fell after Citigroup Inc. cut its rating on the largest U.S. automaker to ``hold'' from ``buy,'' citing higher energy and commodities costs as well as continuing credit constraints.

``Auto fundamentals are poised to deteriorate beyond 2008,'' Citigroup analysts wrote in a note. GM faces ``reduced earnings power and cash burn risks.''

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aFnW44IVGYlU

 

[JVal14]

Let's not forget, CitiGroup stock has tanked 62% since the beginning of 2007 because they did not have the foresight to see the real estate crash coming. Maybe they're not the all-power seers of economic future that they make themselves out to be.

 

[mgescuro]

Unfortunately, that is the correct move by Citigroup.
This isn't going to be a very good market for carmakers.

 

[VCDJ]

Now Let me here everybody here defend rick and lutz how they are doing superb job. GM will burn through 7b in cash and gm already sold everything that was there to sell. So what now?

 

[Buickman]

what will analysts say when they realize Yukons, Suburbans, Tahoes, Trailblazers, and Envoys etc... in the lease portfolio have dropped another $3,000 - $5,000 minimum in the last 2 months? GMAC already takes a substantial hit on residuals, this is a massacre in the making!

keep wondering how bad it has to get before the Board of Bystanders pulls the plug on Red Ink Rick?

 

[tgagneguam]

This nicely contrasts to the article by Dodge & Cox in which their analysts suggested as late as last week that GM stock hit its nadir in the 19's. For reference, GM closed at about $17.20 today (05/27/08). Yes, I'm aware that stock price isn't necessarily correlated with the true performance of a company; one should understand the fundamentals of the company to determine if the stock is something to buy. But with a weak balance sheet and a falling stock price, it sounds like Citi is calling the shot correctly, at least for now.

 

[joemac]

Now Let me here everybody here defend rick and lutz how they are doing superb job. GM will burn through 7b in cash and gm already sold everything that was there to sell. So what now?

I'd say you become CEO of GM and then we can come in here and talk negatively about your performance in a seriously down market. Since you've got all the Monday morning quarterback answers, it would be a great thing to behold.

 

[joemac]

what will analysts say when they realize Yukons, Suburbans, Tahoes, Trailblazers, and Envoys etc... in the lease portfolio have dropped another $3,000 - $5,000 minimum in the last 2 months? GMAC already takes a substantial hit on residuals, this is a massacre in the making!

keep wondering how bad it has to get before the Board of Bystanders pulls the plug on Red Ink Rick?

OMG and the other manufactures are immune to this same thing right? Yea, there's no vast quantities of Armadas, QX56s, Pathfinders, Explorers, Expeditions, Sequioas, 4 Runners, LX570's, GX470's, Durangos running around with the exact same issue. It may become as a shocker, but Toyota's growth in the US over the last 10 or so years isn't from itty bitty fuel sippers, but trucks and SUV's.

 

[Buickman]

the banksters blow GM into oblivion and reorg the pieces having dished legacy costs and union pay scale production. they privatize and refloat after having milked the cow down to nothing but a skeleton. how many Billions do you suppose are gone to the likes of Morgan, Deutsche, BOA, Merrill, and Sachs in interest and investment banking fees?

who could ever have imagined Olds closing, GMAC being sold, Buick being starved to death intentionally, our ratings tanked, our dividends slashed, dealers shuttered, employees cut loose by the tens of thousands, retirees screwed out of their security, and customers leaving in droves? who could ever have imagined Toyota outselling Chevrolet in the USA and on pace to eclipse all of GM within the next two years? meanwhile, Red Ink Rick and the Board of Bystanders go about their merry way.

I say throw the bum out and NOW!

 

[AMERICA 123]

Unfortunately, that is the correct move by Citigroup.
This isn't going to be a very good market for carmakers.

Yea, Citigroup...... who are up to their eyeballs in the securitized/mortgage failure and the follow up 'we're going to fleece the sheep with an oil bubble - to cover our losses program'

Is that the same one ?

Tell me do they have a position of any sorts in regards to hybrid powertrains and other automakers - say from Japan ??

Speaking of ratings and disasters waiting to happen, how do they look themselves - allowing for what we don't know - of course.

 

[jbernie]

Now Let me here everybody here defend rick and lutz how they are doing superb job. GM will burn through 7b in cash and gm already sold everything that was there to sell. So what now?

Wow, what a surprising comment from you.

How about we be realistic and say that the car market in general will not perform well because of the economic conditions. Although Toyota can benefit from sales of cars they are also heavily involved in selling SUVS & trucks and like GM they enjoy very nice prodits from the sales of these vehicles. Toyota would love to sell more of the fullsize suv/trucks as they can make more money there than on the smaller margins they get on small vehicles like Corolla or Yaris.

Yes GM will feel financial pain, so will everyone else who has any reliance on SUVs & trucks. That being said, the positive is that the current climate is making the Domestics focus more on economy than they have in the past, and this along with their improvements in quality and interior/exterior styling is leaving us with a better product than we had been receiving previously.

When I arrived in the USA in 99 the only GM product I regarded as desirable was the Corvette & the 2dr Tahoe. Now there are very few products in the GM stable that I find undesirable.

GM has been continually improving, I fully admit they still have a lot to do, but I am very well aware that no company not even Toyota, can redo a complete line up of vehicles like what GM needs to do in a short space of time. It doesn't mater how much $$$ you have, change takes time, you can't go and spend $$$ at a time bank to speed things up, platforms need to be tested for durability and crash worthiness etc. It isn't like computers where you can throw in a new graphics card, the latest processor and an extra stick of ram and hey presto, a hot new line up.

 

[steverino]

In the 4th qtr Citigroup was downgraded from a buy to sell by 4 analysts (who were probably from Bear Stearns)

 

[Hoboken Tim]

Yea, Citigroup...... who is up to their eyeballs in the securitized/mortgage failure and the follow up 'we're going to fleece the sheep with an oil bubble - to cover our losses program' ?

Is that the same one ?

Tell me do they have a position of any sorts in regards to hybrid powertrains and other automakers - say from Japan ??

Speaking of ratings and disasters waiting to happen, how do they look themselves - allowing for what we don't know - of course.

Yes, How much of the price of oil is due to the big money moving from real
estate to oil futures?

 

[AMERICA 123]

what will analysts say when they realize Yukons, Suburbans, Tahoes, Trailblazers, and Envoys etc... in the lease portfolio have dropped another $3,000 - $5,000 minimum in the last 2 months? GMAC already takes a substantial hit on residuals, this is a massacre in the making!

Correct - for the entire industry not just GM.

There are currently more effects like that, and there is going to be more fall out as we go along.

Not just from the oil - but from all the other as well.

There is a certain amount of damage thats now in the pipe and can't be avoided - even if and when 'restoration' ( oil prices ) occurs.

 

[AMERICA 123]

Yes, How much of the price of oil is due to the big money moving from real
estate to oil futures?

That too. And with that - remember we have plenty who buy high and sell low - repeatably until depleted.

 

[Buickman]

Correct - for the entire industry not just GM.

There are currently more effects like that, and there is going to be more fall out as we go along.

Not just from the oil - but from all the other as well.

There is a certain amount of damage thats now in the pipe and can't be avoided - even if and when 'restoration' ( oil prices ) occurs.

yes but our competitors can absorb the fallout whereas GM is on it's last legs financially. soon we will be mortgaging the remaining assets we have and it's not very much having already pledged plants and even equipment. there isn't a lot Red Ink Rick hasn't collateralized.

 

[AMERICA 123]

In the 4th qtr Citigroup was downgraded from a buy to sell by 4 analysts (who were probably from Bear Stearns)

Its interesting who says what ( negatively ) about GM stock and then how it goes for them just a bit later.

 

[AMERICA 123]

yes but our competitors can absorb the fallout whereas GM is on it's last legs financially. soon we will be mortgaging the remaing assets we have and it's not very much having already pledged plants and even equipment. there isn't a lot Red Ink Rick hasn't collateralized.

Some of our competitors - right now for sure.

Others - nope - not really in a better position - or not enough too matter with big wind and waves.

That can change - quickly.

Still, I do share your concern in this regard.

Last legs ? I don't think so.

There are out of the box options available.

 

[AMERICA 123]

Let's not forget, CitiGroup stock has tanked 62% since the beginning of 2007 because they did not have the foresight to see the real estate crash coming. Maybe they're not the all-power seers of economic future that they make themselves out to be.

Which suggests GM is at least a usable amount ahead of their own performance as well.

 

[steinravnik]

yes but our competitors can absorb the fallout whereas GM is on it's last legs financially. soon we will be mortgaging the remaining assets we have and it's not very much having already pledged plants and even equipment. there isn't a lot Red Ink Rick hasn't collateralized.

Buickman's got a good point. This is definitely a down market not seen in a while, and GM is pretty weak financially. If you pit Toyota with their hoards of cash against GM, Toyota's got a clear advantage. I'm rooting for GM, and things are definitely improving for them product wise, but I'm afraid it may be too late. If they can get the Volt to market as promised, that may be the last hope. Time will tell.