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General Motors Has Profitable 2010, Hurray! But Wait, There's More...(UPDATED)
Yay, GM posted 2010 net income of positive $4.668 billion! Detroit is back, baby!
Oh, what's that? 28% of 2010 EBIT (earnings before interest &
tax) came from just the 3rd quarter of the North America segment? And
that number decreased 67% in the 4th quarter? GM Europe is hemorraging
money, too? And those are the red flags I found just on the FIRST PAGE
of their 8-page earnings release?!?!?!?
DON'T.TRADE.THE.HEADLINE.NUMBER.
Dig deeper. The truth is seldom as rosy as the headlines would have you believe.
UPDATE:
11.3% growth in 2010q4 versus the same quarter in 2009 is good.
Well, a good start. From the footnotes it looks like part of the
increase in GMSA is from transisitioning most of their South American
operations out of GMIO (which gained Russia). So, GM is doing good
things in China, but while vehicle sales in GM Europe were up 12.6%,
they still lost $568 million in just the last quarter from European
operations. On average, that means they're losing $1,300/vehicle in
Europe! The "we'll make it up on volume" joke comes to mind here...
Additionally, from the notes, emphasis mine:
(c) Vehicle sales data may include rounding differences.
(d) Certain fleet sales that are accounted for as operating leases are
included in vehicle sales at the time of delivery to the daily rental
car companies.
(e) GMNA vehicle sales primarily represent sales to the ultimate customer. GME, GMIO and GMSA vehicle sales primarily represent estimated sales to the ultimate customer.
Any
rounding differences, accounting for operating leases as sales, and
"estimates" on actual vehicle sales to the customer are no doubt made
to paint as rosy of a financial picture as possible...
Analyzing
market share #'s are far more complicated because I'd have to pull
comparable period/presentation sales for all of GM's competitors, not
all of which trade in the US. I find it interesting, to say the least,
that GMIO and GMNA lost market share - their two largest segments -
lost market share yet somehow across all segments, their global market
share rose slightly, although I suppose this could easily be explained
by "estimates," "rounding errors," and things of that sort previously
mentioned.
The financial statements certainly look better than 2009, but:
1. it's WAY too early to make any long or even intermediate-term forecasts based off 1 year of profitibality and
2.
there are still a few orange flags, e.g. inventory increased $2bn at
the end of 2010q4 v. 2009q4, for about a 20% increase, and that's just
at the parent company level. I wouldn't be surprised if there's a
little channel stuffing going on here, with dealers sitting on more inventory as well.
3. Accounts receivable increased 15.7 in 2010, yet the allowance for
bad debt only increased 0.8%. If this trend continues it is a major
cause for concern. Increasing credit sales as a % of total without
increasing allowance for bad debt suggests management maybe
understating bad debt expense.
4. If you watch any amount of TV you've likely seen the crazy and
often horrendously-produced local car dealer commercials hawking their
wares with huge incentives. A new lease on a cars similar to one that
I leased in 2008 is now about 25-30% less/month with the same if not
less down payment! How the dealers and automakers are accounting for
this is probably not as transparent as it should be (thank you FASB).
5. Accounts payable increased 14.8%. Sure, when you're increasing
sales (and COGS) its not unreasonable to see accounts payable rise as
well, if the trend continues, especially at a greater rate than COGS,
then management is probably taking longer to pay suppliers, i.e.
understating expenses and overstating net income.
It
was clearly the best year for GM in years (and years), but anyone long
the company is making a fairly risky bet. There's still alot of
pension and other legacy issues and revenues are largely dependent upon
credit availability and larger macroeconomic trends like unemployment
and interest rates.
- advertisements -
What happens to GM models when gas climbs to equivalent 120$ crude ?
Its a lose-lose situation for the car industry right now : @ 120$ the conventional models tank. @ 40$ the plug in electrical ones tank.
But, but, just wait till we start selling the VOLT. Cha-ching!
but,but just wait 'til you try to plug it in to recharge.............lol
Remember last year when the big ballyhoo was they were paying off the government's loans? The truth was they were taking money from the government in their right hand and paying off the money they owed from the left handed loan they took.
How stupid are these people?
Is there a class in Harvard that teaches this shit?
No shit. It's the same class dear leader went to. Tell everyone what they want to hear, do the polar opposite.
Anyone buying a GM product is not a patriot. I absolutely refuse to buy a government motors car and every American worth a shit should do the same. Unless of course you support the government taking over private industry.
Chevy Volt. A 42,000 dollar piece of shit. A plug in vibrator.
I, also, can't help feeling the same way every time I see a relatively new General Mortars car on the road. They may actually be decent cars, but the method by which they have been delivered scrapes across the grain of virtually everything I have ever believed about free-market capitalism. How a thinking person could even walk into a GM dealership with the serious intention of buying a car or truck from them is so far beyond me that it simply doesn't register.
We got screwed to death by this entity without even a little ol' reach-around, and people are actually saying "more, please!"
I'm so over it that I seriously won't even engage in conversation with the "Dancing With the Stars" fans who buy them. I am afraid I would end up punching one of them in the nose. Then there's posting bail, going to court, paying a lawyer, ... so I avoid them altogether.
Somebody please post a missive touting the virtues of buying GM. I really would like to hear a cogent argument to convince me I'm nuts.
Ive been holding on to my 2002 durango and almost slipped to buy an avalanche or tahoe until I just saw the new Ford Explorer, a sharp vehicle! Sorry GM, and I have relatives who own a GM stealership. I feel bad for them as they are forced to take on bloated inventory and pay the floor plan.
A taxpayer purchasing GM products and or stock is just another form of suicide. Better to BTFD in PMs and put a new fan belt on that clunker.
Wow ! $4,668 billion. I think that should be a decimal point unless you are from Europe.
Lighten up on the Doobees.
You wouldn't want him to be a "don't-bee..."
But I date myself.
Whoops, not wearing my glasses today, thanks, fixing now!
like all corporate balance sheets, this one is shrouded in confusion, fraud, and deceit....gm follows fasb i am sure and that organization is the fount of all accounting fraud....
as was said of bill clinton's bimbos, gm is not to be believed.
You are correct tony, GM's balance sheet is shrouded in confusion, fraud and deceit. I would also like to add obfuscation too. You see Obama and the govt. pushed that weird bankruptcy filing (which went against bankruptcy precedent going over decades) in order to keep GM intact. Because if GM would have went the regular bankruptcy it would have been torn apart and sold out to pay senior debt holders and the millions of workers and retires and retire survivors would have been out a pension and any benefits. They can't have 1.5 million people or more and the tens if not hundreds of thousands that where part of the supply chain to all of a sudden be out of a job and/or out of any type of benefits. The only people going long with GM is the ones that where given access to the IPO (which by the way most aren't americans).
Maybe they can con those people into thinking that the issues are different with this "new GM", it's not. GM still have the legacy costs and if they want to survive they have to shed it.
Bingo. With the suspension of fair value accounting and a variety of other accounting gimickry I'm sure these #'s are far more opimistic than reality. We'll see what happens the next few months/years...
great news from GM, figures look truly robust.... anyone know if there's a short for GM, just passing novel interest, not serious or anything like, great Company this!
Good thing they are using, what is in essence, tax payer dollars to pay profit sharing to scumbag union employees.
General Motors said it expects to give its 45,000 unionized hourly employees in the U.S. profit-sharing checks averaging at least $4,000 as it prepares to negotiate a labor contract this year.......bondholder can still use bonds as TP
Bought a new vehicle a couple of weeks ago..... It was not from the thieves @ GM!
right dealer inventories are up.......gm books them as sales........... nice to dump on your dealers.............. then claim them all as sales........ dealers ahve 5 months of inventory..
GM's inventories were up 20% y/y, too...like they expected sales levels from 2010q3 to continue forever...brilliant, eh?
At least dealer inventories were up another 7% sequentially domestically
what did you expect from garbage motors
These unions will hang themselves.
Hedge accordingly.
they'll hang the taxpayer out to dry first on the way down though!
..Compliments of the Washington money laundering system
How much can GM contribute to Obama's 2012 compaign?
The spending is unlimited now... there is no limit to how much money can be channeled through the PACs to fund attack ads and other spending. Corporate personhood.
caveat emptor
Cars or stock? Both I guess.
BTW? Great observations and analysis SSA!
(And yes I have removed the 'd' from the 'stone' part! :)
Thank you, it's much appreciated! I'd buy a Cadillac CTS-V coupe but I wouldn't get a Volt (or any number of their other cars) even with the crazy discounts/incentives the dealers are offering, nor would I consider the stock for anything other than a short or maybe a short-term straddle.
I'll buy a Volt at 10c on the dollar after the economic collapse later this year.