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GM and it’s IPO

Posted by Bill Sluben on July 5, 2010

In the hope of stabilizing its post-bankruptcy financial standings, General Motors (GM) will be unlocking 20 billion dollars (US) in initial public offering (IPO) by next month.

Although there have been no concrete announcements yet from the management, finance expects could still not figure out how much would be the prices of stock valuation.  Cutting the valuation of its IPO, General Motors will be able to establish a broader base of investors and reduce its dependence to government aid. General Motors declared bankruptcy last year and sought a federal protection by invoking Chapter 11 of the United States Bankruptcy Code.

More than 60% of the General Motors’ common shares are owned by the U.S. Treasury and will probably be selling twenty to forty percent of its current level. Currently, the estimated value of the government’s shares is around 11 billion dollars.

A number of banks are also likely to venture into a revolving credit line for the General Motors amounting to 5 billion dollars. As of press time, the Citigroup Inc, Bank of America Corp. and JP Morgan Chase & Co as well as Morgan Stanley have declared intent to provide the GM with 500 million dollars of credit from each of them. More banks are still to follow.

General Motors is not likely to pay the dividends to its shareholders but will plan to sell about 3 billion dollars of mandatory convertible securities to avail regular interest or payment to dividends that will sooner convert into shares in the near future. In this way, growth funds investors will definitely find interest to come in.  Two major shareholders, the United Auto Workers Healthcare Trust which controls 17.5 percent of the company’s total shares and the Motors Liquidation which holds 10 percent of stocks is yet to decide whether or not they will sell parts of their shares in the planned initial public offering.

The Government of Canada having sliced up an 11.7 percent of the General Motors shares has been planning to sell around 20 percent of its current shares.

General Motors’s IPO at 15 to 20 million will be a record-breaking venture under Obama’s government. It will surpass Visa Incorporated’s 19.7 billion IPO last 2008.

But the General Motors even with the huge IPO plan still have to convince potential investors that its recovery is already gaining ground. At the end of March, General Motors still have al outstanding debt of 14.2 billion dollars and 27 billion short of its pension funding obligation during the first quarter period. Certainly, the company can utilize its IPO earnings to pay its debts and end its standing pension shortfalls.

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Toyota: When a lack of a response is a response

Posted by Bill Sluben on February 6, 2010

Toyota’s struggles the past two weeks with real and (now perceived) quality problems have shook up the once impeccable quality record of the Japanese giant. Consider that it had been Toyota that has been the benchmark for quality in the industry the past 20-25 years. Consider that it is Toyota that has had a leadership position on the field of public perception, whether rightfully deserved or not. And consider that it is Toyota that has no clue or experience in managing a public relations bomb.

Toyota, and the Japanese, are notorious for just-in-time manufacturing and consensus management. It is the latter that is their Achilles heel with the current crisis. For it is highly unusual for a Toyota rank and file to speak up. That approach ahs established uniformity and efficiency with their manufacturing.

When the crisis first began to percolate two weeks ago, Toyota’s response was to ignore it. In hopes of it going away? In hopes that the claims were false? In hopes that a small margin of complaints was not enough to warrant a response? Who knows? When the crisis escalated, the leadership of Toyota was AWOL for nearly two weeks. The response was tepid (at best) from Toyota – “if there is a sudden acceleration, just apply firm pressure to the brake and shift the car into

neutral” OMG. Are you kidding me?

Now, Toyota is in a full blown crisis. This isn’ only about the electronic sensor to the accelerator. Now it has spread into quality defects/issues with the Prius brakes. And to their credit, Toyota has issued a moratorium on future sales and has rushed out parts to remedy the accelerator situation. The message that is rolling out of corporate is to hang in there, we’ll get you fixed up, we’re still Toyota – the best in quality. But where’s the response to how they will ensure that this will never happen again? Where is the response that restores the immense equity in the perceived quality of Toyota? That’s TBD…

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Electric Vehicles are here

Posted by Bill Sluben on November 2, 2009

2012 Nissan LeafElectric vehicle sales are expected to hit some 700,000 to 1 million by 2015.  With nearly 50 prospective manufacturers seeking capital right now, it will be a crowded and competitive field until many of them fail due to lack of scale and additional funding.

Ultimately, the technology will evolve, the supply side to re-charge these vehicles expeditiously will manifest and consumers will demand the vehicles.  Soon, the days of middle east powers and quasi-terror backers will end and our reliance on that part of the world will wane.  Think of the political shifts that will occur in the next 2-3 decades as the middle east is stripped of power and leverage.

Automakers worldwide will introduce 42 plug-in and electric models from 2009 to 2012, according to an estimate from PricewaterhouseCoopers. The autos include new entrants from Ford and Detroit-based GM, which championed full-size pickups and sport-utility vehicles in the 1990s.

Nissan is making the biggest electric-vehicle commitment. It is targeting its $1.6 billion government loan to build as many as 150,000 battery-powered Leaf hatchbacks annually and produce lithium-ion battery packs in Smyrna, Tennessee.

“We think that we are the only full-line maker that’s offering an electric vehicle as a mass-market vehicle,” said Fred Standish, a spokesman for its U.S. unit. “We don’t issue sales forecasts. We don’t know where this market will be.”

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Chevrolets in the U.S.A.

Posted by Bill Sluben on September 8, 2009

Could we all be turning more patriotic when it comes time to get a new car?

In a recent Consumer Reports survey of almost 1,800 adults, 81% of those in the market for a new car said they were likely to consider a domestic brand. That compares to just 47% looking at Asian brands and 46% in the market for European models.

“Ford has benefited the most from the recent turmoil in the auto market, with the largest gain in new-car buyers who say that they are likely to consider buying a Ford model — up 17 percentage points compared with a year ago,” Consumer Reports said in a statement on Wednesday.

Consumer Reports credited Ford’s aversion to accepting any federal aid with its appeal to consumers.

The number of those considering buying a GM model was up 6 percentage points.  Chrysler conversely was down 25-28% attributed to their court ordered bankruptcy and recent marriage with Fiat.

Troubling for the entire auto industry is the survey finding that showed only 9% of respondents expressed interest in buying any new car in the next year, down from 19% in a June 2008 survey. That’s hardly a surprise considering the big spike in sales the government’s clunker promotion had in August.

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Clunker program closing?

Posted by Bill Sluben on August 20, 2009

It seems that the bureaucracy and red tape of the government is holding up a significant number of cash for clunker reimbursements to dealers…and dealers are not happy about it.  For dealers, this timely reimbursement represents an infusion to their cash flow.  It is also a return on a hefty promise made by the Federal Government when they rolled out the program.

The problem is that no one (dealers, industry analysts, Department of Transportation officials) knows exactly how mush of the $3 billion is left, if any at all.  And that is making dealers squeamish to say the least. 

Questions abound from dealers at this point – When will we get paid?  How many of the claims will be reimbursed?  And should I still promote and honor the cash for clunker program at my dealership?

GM LogoGM, for their part, is taking a proactive stance and approach by fronting the money to dealers.  And Ray LaHood, Transportation Secretary, has said that an “enormous number of people on the task of processing the paperwork” and that “there will be no car dealer that won’t be reimbursed.”

The key to the continued adoption and support of the program will be how quicklythe reimbursement arrives to the dealers…and ultimately how much of the amount owed is paid.

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GM to significantly increase ad spending for 2009/2010

Posted by Bill Sluben on August 12, 2009

Read today that GM plans to significantly increase ad spending against their four core brands – Chevy, GMC, Buick and Cadillac – for the balance of 2009 and throughout 2010.

Ray Young, Chief Financial Officer, was quoted as saying “”It’s going to go up materially…The customers are telling us that you guys need to shout a lot more”.

Refreshing to say the least.  And timely.  This recession has restarted the competition, restarted the race and pursuit to own mind share of consumers.  Since ad spending has been cut dramatically across all manufacturers and dealership traffic decreased substantially, GM has a real opening here to reset consumer perceptions and reinvent themselves as a different company altogether.

Yesterday’s news that the VOLT will register 230 mpg was pretty shocking.  On Fox Business News last night, they equated the VOLT to the I-Pod, in that it has the potential to create a whole new category, shape consumer perceptions and behavior and really launch GM forward.  Prior to the I-Pod release, Apple was really languishing.  No better way to re-introduce consumers to GM than through face to face engagement with street teams and ride-n-drives.  Consumers need to see, feel and experience the exceptional product coming out of GM these days.

The article in it’s entirety – http://www.reuters.com/article/GCA-Autos/idUSTRE57B07K20090812

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What to tell Fritz?

Posted by Bill Sluben on July 20, 2009

GM has turned Fritzie loose!  Fritz Hernderson is in the chat room answering questions about GM and it’s future.  I like it.  The old regime at GM seemed invisible and untouchable.  Not this guy.  He is putting himself out there purposely to take some of the heat, engage and connect with consumers and maybe even restore some of the damaged reputation of GM along the way.

If I had to tell Fritz something, I’d probably instruct him to try to find a way, anyway at all, to offload the government as quickly as possible.  The government is looking for GM to spend countless millions of dollars more to produce vehicles that will match the new CAFE limits that are to be fully phased in by 2016.  However, it is clear that Americans are not interested in buying and driving shoebox 4 cylinder vehicles that are deathtraps at any speed collision.  Build the vehicles that Americans want.  You’ve got the opportunity now with the debt reduction.  Go make it happen!

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Detroit U-Turn?

Posted by Bill Sluben on July 16, 2009

So where does Detroit turn from here?  With near record levels of unemployment, record foreclosure rates, perceived lack of consumer credit and a general malaise in consumer spending, it does not appear likely that Detroit will witness anything close to a recovery with new vehicle sales.

That’s not stopping Detroit from coming out with new product that is built better than ever before.  Witness the new 2010 Buick LaCrosse.  A departure from the traditional styling of Buick.  A design that can stand up with the best of the imports, including BMW and Lexus.  Despite rave reviews, Buick is still faced with the task of appealing to a wealthy youthful audience that normally would never consider buying American. 

The ultimate success of Buick and the rest of GM is changing consumer perceptions about the quality and design of vehicles rolling off of the assembly lines of U.S. manufacturers.

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