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Berkshire Hathaway Inc. Message Board

strat58cat 10 posts  |  Last Activity: Sep 18, 2014 4:28 PM Member since: Apr 18, 2007
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  • Reply to

    When To Consider Buying GM

    by strat58cat Sep 16, 2014 5:00 PM
    strat58cat strat58cat Sep 18, 2014 4:28 PM Flag

    LOL. GM sells a $72,000 Camaro. The Corvette starts at $54,000. GM apparently recognizes the problem of selling two relatively low-volume models in the same space. GM has leaked plans to move the Corvette substantially upmarket as a mid-engine design, possibly with a more contemporary powertrain. We'll see. What's clear is brutal competition in the automotive market and imho little moat with GM, which underinvested or misinvested for so many decades that GM squandered its brand equities. I won't be buying GM at this time but I'll keep an eye on possible consolidation that would create a more investment-friendly oligopoly market structure again.

  • Reply to

    When To Consider Buying GM

    by strat58cat Sep 16, 2014 5:00 PM
    strat58cat strat58cat Sep 16, 2014 5:07 PM Flag

    Third, why does GM make two performance products that are right nearby each other - the Camaro and Corvette - on totally different platforms? Sure, they share some truck engines and transmissions, but the platforms never were rationalized. Why? History and fiefdoms, the story of GM. Zora Duntov had the Corvette going well when GM brought the Camaro to compete with a Mustang. At the time, the Corvette was intended to be a halo product similar to European sports cars while the Camaro was intended to be low-tech and cheaper. The Camaro actually went away for a while, and when it returned it had to compete in its segment, bringing Camaro tech up to IRS and other old differentiators. Why is a Corvette fiberglass and totally separated, just because it was in 1963? If GM used a single platform for the Corvette, Camaro, small high-performance Cadillac sports sedan, etc. it would make a lot more sense. Possibly they could all share modern engine designs as well, instead of the Camaro and Corvette being stuck with pushrod truck engines. There's no rationalization of products at GM at all. Certainly, the Camaro can have fewer features and seating for 4, but a Corvette based on a heavy-investment platform that's shrunk for the 2-seater might be substantially cheaper and better, resulting in big sales. The 2015 Mustang, in full high-tech performance form as a GT350, will arrive in a year or two and will give up nothing to a Corvette while seating 4 and costing much less. The Camaro also is performing on-par with the Corvette. For GM to run different platforms for these low-volume products while also trying to find investment for competitive small Cadillac sports sedans - it boggles the mind. Everything there is fiefdoms and history.

    I need to see rationalization before I join BRK in GM.

  • I know Warren or his assistant bought GM. Look, Warren and his assistants are very smart about financials and see GM's clean post-bankruptcy financial position, and earning power. However, GM had great financials in 1984. Poor operations tubed GM's earnings, and the financials followed down the drain. GM has a low price based on earnings power potential over a multi-year recovery if we have one, and clean financials, but I want to see a few things from GM before I pull the trigger on buying stocks. I want to see clear, rational analysis reflected in GM products.

    First, why does Chevrolet have three small cars, two simply imported under the Chevrolet brand, and none of which are readily identifiable by consumers. GM should follow Ford's lead with a micro and a small that are actually GM products. When a rational product lineup is fiercely competitive in the segment, then GM may be operationally competent. Ford's Fiesta and Focus routinely are rated highly, if not at the top, of the segment, while GM's entries are laggards. The small car segment is important because it's a knife-fight with every car maker on Earth and shows what they can do. GM fails.

    Second, why does Buick have all those middling entries that all seem to be the same. Small, medium, large seems to be the ticket. Nor rocket science. Still Buicks lineup remains a jumble. Rumblings about a slew of crossovers from Cadillac suggest another muddled division and the dilution of the excellence Cadillac just had begun to recover.

  • Reply to

    Value Investing, Ford and GM

    by strat58cat Sep 12, 2014 3:39 PM
    strat58cat strat58cat Sep 12, 2014 9:49 PM Flag

    I think GM has gotten some of the message from generations of Americans rejecting them that Americans demand the best and we will vote with our feet. Organizations are very difficult to change though. I see a lot of the same anonymous no-good small cars at Chevrolet. I see the same eternal V8 with the cam in the block, even while they ditched their 32 valve V8. Ford's moving on to direct-injected flat crankshaft legitimate competitors of the best engines from BMW and Ferrari, and GM seems still to be committed to avoiding retooling costs, which is the same old story. I guess I'll wait and hope for the best from them. If I see signs of life I will jump in.

  • Reply to

    Value Investing, Ford and GM

    by strat58cat Sep 12, 2014 3:39 PM
    strat58cat strat58cat Sep 12, 2014 9:44 PM Flag

    I was thinking it was one of the other guys, but then it looked like it had gotten up to Warren levels. A small Warren one I was guessing?

  • Reply to

    Value Investing, Ford and GM

    by strat58cat Sep 12, 2014 3:39 PM
    strat58cat strat58cat Sep 12, 2014 9:43 PM Flag

    If Europe recovers decently and Japanese politicians continue to infuriate the Chinese. It may work out great. I'm on the fence, as you no doubt can tell by my series of posts examining every facet of the decision. As a long-time car buff, I watched GM fiddle away its financial strength at the beginning of the 1980s on a series of disastrous decisions, most spectacularly starving engine development and look-a-likes, followed by recovery in the 1990s that was followed by poor labor contracts, and extreme concentration of profits in giant SUVs that tanked in the first recession, even while technology continued to lag and quality was uneven. My 1991 Firebird Formula was a classic GM product, with a lot of attention to the exhaust note from outside the vehicle but little to how it sounded within, squeaks, an elevated rear-light that blocked the rear-view mirror, a rattling jack, poor ergonomics, a hood bump that limited forward visibility - and a nice small block, handy 5-speed, good reliability, stable handling for a cheap car with a live axle . . . and our Cadillac is just beautiful to drive. Everything about it makes sense, and it has no key to cause a problem. Still on the fence.

  • Reply to

    Value Investing, Ford and GM

    by strat58cat Sep 12, 2014 3:39 PM
    strat58cat strat58cat Sep 12, 2014 8:12 PM Flag

    I know that Warren bought a bunch of GM stock, and then trimmed, and then bought more. As mentioned, GM financially looks okay, and the cost of the recalls won't change it. Moreover, like Warren I bought a Cadillac last summer - although it was a CTS not the XTS his daughter chose for him. Also, I love it and it has a great motor. Moreover, like Warren we had a tremendously positive experience with our local dealer. I doubt I'll ever escape buying Cadillacs for my wife again. It's not a question of whether GM can execute, but the difficulty is that so often they do not execute, especially in the crucial Chevrolet division. Reference the use by GM of pushrod-rocker valve trains, it's limiting what can be accomplished with these motors. At least they now are limiting the use of such old-school valve trains to large-displacement performance engines and trucks. Pushrod-rocker valve trains are prone to valve float at high rpm due to inertia in the high-mass valve train. In trucks, it's not a problem. In the high-performance engines, it is a problem because to compete against modern designs they are expected to rev high. For GM, this ship has sailed because they probably will not justify investing in a new family of large-displacement engines on the assumption that they will go the way of the dodo bird. However, they haven't done so yet and may never go. The more electric vehicles hit the road, the cheaper the gas for my 5.0 Mustang. Lexus just launched a new high-technology 5.0 that like Ford's Coyote is using tooling from a 1990s original and is comparable to Ford's Coyote, and generations beyond GM's large displacement 6.2 liter. Maybe the market won't care about the tech in GM's V8s. It's possible. GM is investing in small-displacement motors and ultimately may create a V8 out of two 4 cylinders. Buffett is betting on the CEO. He is betting GM management will end the embarrassing lapses and exploit massive design resources. Hmm . . . WWWD? Buy.

  • Reply to

    Value Investing, Ford and GM

    by strat58cat Sep 12, 2014 3:39 PM
    strat58cat strat58cat Sep 12, 2014 4:11 PM Flag

    In sum, operationally Ford looks substantially healthier. By investing in technologies such as world-class engines, strong global platforms and the aluminum F-150, and maintaining its Ford Credit division, Ford operationally appears to be positioned for long-term health. However, not having gone through the bankruptcy rinse, despite progress Ford appears to be saddled with too much debt from the bad years for a cyclical company.

    Financially, GM looks like it's in the pink. Operationally, however, GM still seems to be sleeping. Shilling pushrod engines and anodyne platforms that few even can name is not a road to success. Everyone knows the Corolla and Focus, and they have loyal followings. Who even can name GM's small-car lineup? Renaming substandard solutions every few years has built zero brand equity. Continuing difficulties in manufacturing high-profile products like the Corvette that have led to high-profile failures, as much as the much-discussed raise questions about GM's competence, relative to global competition, in its core business.

    Conclusion: Buy neither. Cyclically, we're too far out of the global recession. In Europe, cutthroat competition will continue. In Asia, the big Japanese firms can be expected to persist while new competitors emerge. In the next recession, buy a consumer-durables ETF instead.

  • Reply to

    Value Investing, Ford and GM

    by strat58cat Sep 12, 2014 3:39 PM
    strat58cat strat58cat Sep 12, 2014 3:50 PM Flag

    These companies share common weaknesses as well. The recalls are a particular point in the suspect quality to which each company remains subject. The failures of management at GM that led to the recalls were classic dysfunction. Personally in one of our cars - a recently purchased Cadillac - GM's Onstar can't figure out that both the husband and wife need to be on the account. There seems to be a continuing inability to perform basic functions. GM's Corvette has been a hit, but they just issued a stop-sale due to defects, and Car and Driver blew two engines in two separate Corvettes due to some sort of manufacturing problem amid reports of engines blowing. Ford's management has done better, but after having fixed their initial quality ratings Ford has watched problems with My Ford Touch tube it again. Each company has a reputation for quality lapses, and in each case it's due to actual quality lapses. Personally, I've never had a problem with a Ford aside from a minor recall in 1995, but I don't buy the first year or production - ever - and opted away from My Ford Touch. Each company has a potentially restive union to contend with. In recent history, long-term shareholders of neither company have done very well, while the employees also have seen benefits cut. The companies have underfunded pensions and healthcare liabilities. The automobile industry is highly competitive globally with every emerging market in the hunt. Autos is capital intensive and debt quickly can escalate.

  • This board needs a jump start. I'm here to give it a kick.

    I've been seeing articles touting Ford and GM as value investments at their current prices. That's counter to textbook investing in cyclical companies. When the economy is out of recession, as it has been for the past few years, such companies are expected to have low multiples. When the economy is in recession they have outrageously high, or infinite, multiples. So now's not the time? How about in the next recession? Buy one or both or neither? Now or later or never? What would Warren do?

    GM and Ford share some strengths. In trucks, both companies have maintained a strong position in North America. In automobiles, while they've lost leadership of the mid-sized sedan market to Toyota and Honda, Ford is in the mix with the Focus and Fusion more than the Taurus, and GM manages to hit them where they ain't with upscale Buick and Cadillac offerings and the large Impala, even while the Cruz and Malibu disappoint. The much-touted recall story has a positive aspect in that each company actually recognizes and attempts to fix problems, unlike some Asian competitors who have engaged in cover-ups. Both companies have been losing money in Europe, but in product they've stayed competitive with Daimler, Fiat-Chrysler and the VW group. Here's the key point about both companies: Europe essentially has been in a recession. Buying one or both of them depends on an assessment that Europe will emerge from recession, providing earnings leverage. Another strength for each company is the emerging Asian markets. The Japanese have been squabbling over fishing and mineral rights that depend on uninhabited islands. It's caused a serious reaction in China. The American companies therefore have an opening. More or less they have been making hay in Asia. So in addition to Europe, growth in Asia is the rationale for buying in.

BRK-A
208,445.00-455.00(-0.22%)Sep 23 4:00 PMEDT

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