GM buys back all 500MM shares from the govt which increases their eps to over $5 without any increase in profits. Pension shortfall is just about gone and if the market continues to rise it will become an asset. Lowest labor costs in the industry. New products coming with higher margins. Europe will start to generate income by second half of the year. Europe will have pent up demand for years and years. China to double sales in 5 years. Interest rates near zero. etc etc etc etc etc
Come on the statement was made that the remaining shares would be bought back in 12-15 months. well time's a ticking. The first buy back generated over $2.5 billion for Gm's bottom line and that my friend is Sweet !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
I am curious why you would think this is sweet??? First, there is no obligation to buy back shares from US Treasury as Treasury can sell its investment on the open market. A GM (re)purchase, thus would only drain cash from the balance sheet to the tune of some $14B. Profits would not be impacted at all, but of course GM Management would be free to pay executives more (and possibly bonuses). Second, if GM does not know what to do with its cash hoard ($33B to $38B), it could gain a lot more from a PR perspective with covering retirees medical insurance, restoring vision and or dental benefits, or a special dividend (prior to the end of 2012 would have been perfect). Third, labor costs have not significantly decreased as part of the bailout deal was that GM had to hire back laid off UAW workers first (there were and still are a lot of laid off union workers to take care of). Fourth, per GM public statements, GM Europe is not expected to generate income till at least mid decade; as such why do you make such a misleading statement? Fifth, US market share is still dropping and inventory levels are quite high; thus many sales will require incentives to clear out old inventory. Sixth, there have been far too many executive changes (mostly departures) and hence, stability is not present in the managment ranks. So ask yourself this question? Why would GM just hand over $14B, when it does not have to?
FIrst, getting rid of the "government motors" moniker is a fairly high priority and is difficult to assign a value to that from a perception perspective. So, whatever shares GM can buy back to end "government motors" should be considered.
Second, GM DOES INDEED know what to do with it's cash hoard and you'll find out in good time. It goes without saying that spending on new programs & product developement won't stop. Don't forget that that sort of spending is global in nature and can consume quite a bit of cash and that it is absolutely necessary. Spending it on additional benefits for retirees and current employees ("restoring") would be DISATEROUS with respect to corporate governance and send a message to the UAW that GM is in a giving mood. Extremely bad plan that would be met with Wall Street retribution (and rightly so). GM CANNOT be uncompetitive in terms of labor costs & benefits ever again. The only PR gained would be for those getting "restored" - period...