"I've mentioned before that I have an old chess game on my computer that I still like to play occasionally even though I never lose. I suspect these drubbings you give to people like Pete and PM serve the same purpose for you!"
There's some truth in that I confess. I have preconceived notions just like anybody else and when some poster puts something out there that doesn't quite ring true with me, I start researching to see who's right. Sometimes they are, sometimes I am. When they are, I adjust my thinking. When I am, I post it.
After so many years of getting information from different people, one starts to develop a pretty good mental BS meter. One thing I learned in my second career was that there is an unbelievable amount of information out there on any public, and even some privately owned companies. You just have to know where it is.
I learn a lot by doing that research.
"I think that Tesla's book value proves that it is a startup."
That's kind of an odd definition, but use it if you want.
"R&D costs doubled because they're going to add a second model to their lineup."
So you assume they continue at the same rate of R&D after 3 years of production on the Model S, and double that for the Model X. Wouldn't you think that the R&D for the Model S should be falling off since they introduced it in 2012 and have 57,000 units shipped? I'm afraid that horse doesn't trot.
“I didn't want to make any comparison between these two companies”
“Secondly, Tesla's Gross Profit Margin is 27% while GM's is only 12%.”
You have obviously forgotten your earlier post. Let me refresh your memory.
“Usually if you have to evaluate a startup company you look at its Gross Profit, since it gives you an idea of what profits it could have in the future.”
Tesla was incorporated in July, 2003. I’m not sure I would call a company 12 years old a start-up.
“R&D costs are fixed costs and also tend to decrease once the know-how is achieved.”
Tesla’s R&D costs in 2013 were $232M rising to $465M in 2014. Do you expect a reduction in 2015??
“Probably Tesla is in a bubble, Amazon is in a bubble even more than Tesla.”
Nope, wrong again. Tesla is financing its expansion by debt. Amazon earned a net positive cash flow from operations of $6.8B last year and is paying for its expansion through cash flow. Amazon has ALWAYS had positive operating cash flow, Tesla has NEVER. Big difference.
“What about GM? Is $52B a fair value, given those low margins?”
OK, we’re starting the GM comparisons again. GMs market cap is $52B and its book value is $36B for a ratio of 1.44. Tesla’s market cap is $33.9B and its book value is $912M for a ratio of 37.2. What do you think?
"They are building a huge battery plant, that's where they're burning money, but their cars are profitable."
No they're not. As of 12/31/14, Tesla had spent $106.6M on the Gigafactory (page 76 of their latest 10K). That leaves a net loss remaining of $194 million spread across 31,600 cars sold in 2014 yields an average loss of $6,100 on each car.
GM made $4B on 9,924,880 cars sold for an average profit of $400 each.
“GM is 3rd now, but if FCA merges with Suzuki (for example), then GM will slide to 4th position.”
In 2014, the FCA Group had revenues of $105B (Euro 96.1B). Suzuki had revenues of $24.7B (Yen 3,015B). That totals $129.7B. GM’s revenue was $155B. GM would NOT “slide to 4th position.”
“Secondly, Tesla's Gross Profit Margin is 27% while GM's is only 12%. It's useless to sell millions of cars if you earn nothing from them.”
Interesting that you chose Gross Margin to compare GM to Tesla, particularly because it hides two of Tesla’s largest expenses…namely R&D and SG&A. In 2014, Tesla incurred costs of $465M of R&D (14.5% of revenues) and another $604M of SG&A (18.9% of revenues). As everyone knows when these costs are added in, Tesla had a net loss of $294 million.
And since you compared Gross Profit to GM, while it’s true that GM had a smaller number, the rest of the story is that SGA was only 7.8% of revenue compared to TSLA’s 18.9%. And GM R&D was just 4.7% of revenue compared to 14.5% for TSLA.
All of that means that GM had 2.6% NI ($4.0B) vs. Tesla’s -9.1% (-294M). Granted GM’s margin was nothing that I would call good, but certainly better than a net LOSS of 9%. Quoting someone else, “It's useless to sell millions of cars if you earn nothing from them.”
For me, the most alarming thing about Tesla is the cash burn. In 2014, Tesla had a net cash LOSS of $57M from operations and a net cash loss of $990M from investing activities (mostly purchasing property and equipment). The only thing that kept them afloat was an additional $2.3 BILLION of debt. Normally, the expansion of business is good if accomplished through cash earned, but in Tesla’s case it is solely through additional debt.
At the end of 2014, Tesla’s total debt was $2.4B which equates to 2.64x the book value of the company. In GM’s case, they have $9.4B of debt equating to 0.26x the book value of the company. In other words, Tesla has 25.5% of the debt that GM has, with 2.1% of the revenue that GM has.
I think it’s possible to make a case for Tesla, but please, don’t insult our intelligence by trying to make it a financial case. Even Elon Musk has said that the stock is over valued.
"Well these hyped stories are used by the Crooks on Wall Street are used to shake the small retail investors out of their shares."
Do you think this is over?
"GM walked away from its debt and yet you are still dumb enough to own shares."
Justum is right, you just make this stuff up as you go along. I don't own a single share of GM.
You aren't mentally capable of carrying on a conversation, so I have no further use for you. Bye, bye.
"While you're right about the impact this would have, it's hard to imagine Greece being this suicidal. Wars have been fought over much less. Though war is unlikely, Greece would be severely sanctioned and their economic destruction assured."
From a rational standpoint, you're exactly right. But I haven't seen Greece doing much rationally lately. Think about what just happened this weekend. The Eurozone said:
"OK, you defaulted on the loan we gave you but we're here to offer you one last chance to keep your country. But you can't keep expecting us to fund your excess spending as though you were Bernie Sanders. Here are the rules and covenants we expect you to abide by in order for us to have some hope of getting paid back."
And Greece overwhelmingly told them:
"No thanks. We think if we play hard to get, you'll come around with a better offer and forgive a bunch of debt, plus don't make us try to get our ship in order."
You never can tell with Europe, but I'm willing to bet that the countries that have their house in order (Germany) are getting fairly fed up with this, and are pretty much at the point of telling Greece to start figuring out how to explain to their citizens why the bank won't give them the money they have deposited.
As soon as the Eurozone kicks them out of the Euro, and writes off the debt, watch what happens to the financial markets. I don't know if you read about it, but China took extraordinary action to prevent their financial markets from crashing this morning and it was only partially successful.
I hope I'm wrong, but I think this is a long way from being anything close to being resolved
"We happy if gm down."
I'm happy you happy. But unless your entire portfolio is in shorts, you are going to lose money today. That's why YOU are dense.
On the other hand if you have no portfolio, you may continue on in your own little world and may only suffer in ways that you can't comprehend.
"Yes and Greece should mean no more than Detroit to the Market. We have way to much media hype in this country to many talk shows"
This is more than media hype Jeye. The IMF, European Commission, and the European Central Bank have loaned Greece 250 billion Euros ($275 billion) and all of that is in play. If Greece walks away from that debt and forms its own currency it will be a huge hole in the entire European economy and thus, in the world economy as well.
It's not trivial.
"How Many DOLLARS will GM share price Slip and Slide Away this week? Greece will put the hurt on all of Europe sales even more than it was."
This isn't just a GM issue. This will affect the whole market. Are you that dense??
"the rest I used to buy 24 cases of Chateau Lafite-Rothchild in 1982. At this moment, I am having a glass from a $3000 bottle of wine."
If you have some '82 Lafite-Rothschild Pauillac and it has been well stored, it is worth considerably more than $3K. At the latest London auctions it has been around 27K Pounds Sterling, or $43K for 6, or about $7200 a bottle.
I used to have clear access to French wines in the mid 80's, and I had a few bottles of Latour and Margaux, but in general avoided the premier crus. I think they're over priced. I normally bought fourth and fifth growths, better values. I had some GREAT '82 Lynch-Bages (just drank the last of it last year), Beychevelle, and Hayt-Batailley. Had some really good Pavillon Rouge (second growth of Chateau Margaux).
Good stuff, although you really couldn't go wrong with almost any '82 Bordeaux.
Under Kressa, there were 2 appointments to the BOD (Girsky and Marinello). Kressa’s background is aeronautical engineering and was the Chairman/CEO of Northrop-Grumman. Of the 2 appointees, one of them came from private equity and investment banking, the other was the CEO of several financial services companies. Note that both appointees were from different industries than Kressa, and there were no overlapping board memberships as well.
Under Whitacre (formerly the CEO of AT&T), there were 3 BOD appointments (Akerson, Russo, and Stephenson). One was from private equity, one was CEO of Alcatel-Lucent, and one is the Dean of the business school at the University of Western Ontario, note all different industries. Again, there are no overlapping board memberships in any of these cases as well.
Under Akerson, there were 4 appointments. Akerson came from private equity, specifically The Carlyle Group. The appointees from his tenure are a retired Admiral and Chairman of the Joint Chiefs, Chairman/CEO of ConocoPhillips, Chairman/CEO of Cummins Diesel, and CFO of Walmart. Once again, all from different industries and no overlapping directorships.
Lastly, under Solso whose background is Cummins Diesel, there were 4 appointees. One is a retired VP of the UAW (to represent the shares owned by the UAW VEBA), one an EVP of Lockheed Martin, one the CEO of Novartis, and the last was Mary Barra. Again, from diverse industries and no overlapping directorships.
I believe this is a pretty compelling argument to show that the old wives tale of "bod's are picked from the outside by the cob!" is false. Maybe in sleazy companies decades ago, not today. Your information is false and dated.
"OK genius. Tell us what political process picked the people on GM's board, since this is a GM message board. What connection did they have to the chairman when they were picked? Is the GM Chairman on any of their boards?"
"bod's are picked from the outside by the cob!"
Here’s why you are wrong.
All large corporations have some form of Nominating Committee as a sub set of the BOD. At GM, that committee is called the Directors and Corporate Governance committee (DCGC). It is currently staffed by 4 non-executive outside directors, none of whom are the COB (Directors Russo – Chair, Marinello, Stephenson, and Isdell). According to the by-laws of the corporation, the responsibilities of this committee are (among others):
-Identify and evaluate potential board members
-Recommend candidates to the general board
-Recommend board size and composition
-Compensation for board members
-Annual performance reviews for board members
-Recommend committee composition and Chairs
Board vacancies are examined for the Board’s particular needs in terms of business experience required and functional expertise. In nearly all cases, a third party search firm with a specialized board placement practice (such as Korn Ferry, Heidrick & Struggles, or Spencer Stuart) is engaged to find suitable candidates and present them to the DCGC. The DCGC examines the candidates for experience, potential conflicts, and Clayton Act requirements and makes a recommendation to the board in general. The vetted candidate is then place on the proxy statement and voted on by shareholders.
Specific to the GM board, all members are new since the bankruptcy. During that time frame there have been 4 COB’s. Kent Kresa (March 30, 2009 - July 10, 2009), Edward Whitacre, Jr. (July 10, 2009 – December 31, 2010), Dan Akerson (December 31, 2010 – January 15, 2014), and Theodore M. Solso (January 15, 2014–present).
To be continued
In his mind I'm probably breaking some NDA, but I hear the big boys are lining up between GM (Goldman Sachs and Morgan Stanley) and FCA (UBS and Lazard).
Marchionne is getting desperate. This may end badly for FCA. They will have to make a heck of a case to get the major shareholders to agree to pressure GM management to negotiate.
Just my opinion (no PM, I have no inside information) but I don't see any advantage for GM any where in this.
"bod's are picked by a political process which is heavily influences by the ceo,"
OK genius. Tell us what political process picked the people on GM's board, since this is a GM message board. What connection did they have to the chairman when they were picked? Is the GM Chairman on any of their boards?
Let's see if you are capable of making a logical, fact based argument for your contention, or if this is just what the boys around the water cooler have told you.
Give it your best shot. We are all waiting anxiously to be enlightened by the corporate governance expert.