Tag Archive | "General Motors Co."

General Motors To Raise Prices $123 Per Vehicle

General Motors Co. the largest U.S. automaker, will raise prices by an average of $123, or 0.4 percent, per vehicle because of higher commodity costs.

The price increases will be on most models in the U.S. and will be effective May 2, Tom Henderson, a spokesman for Detroit- based GM, said today in a telephone interview. The move isn’t related to the Japan earthquake, he said.

GM is following Toyota Motor Corp. and Ford Motor Co. in boosting prices, reported Bloomberg. Ford said April 4 it would raise prices by $117, or 0.4 percent. Toyota’s increase on most models averaged 1.7 percent, the automaker said March 31.

Industry price increases are common as automakers enter seasonally stronger months for sales in the spring and summer, said Maryann Keller, principal of a self-titled consulting firm. They will be supported this year by parts shortages resulting from the March 11 Japan earthquake and tsunami, she said.

“Auto companies even before the tsunami have not been able to meet their production targets,” Keller, whose firm is based in Stamford, Connecticut, said in a telephone interview. “They’ll get away with a price increase because there just isn’t a huge supply of vehicles out there to result in a great amount of discounting.”

GM will notify dealers of the increases today, Henderson said. The automaker ended March with U.S. inventory of 574,000 vehicles, about 57,000 more than at the end of February, according to an April 1 statement.

GM, Toyota and Ford, based in Dearborn, Michigan, each have lost some North American output, citing supply disruptions since the earthquake in Japan. Production disruptions may lead to a tighter supply of vehicles and higher prices, Itay Michaeli, an analyst for Citigroup Global Markets in New York, wrote today in a research note.

Low industry inventory and Japan-related supply-chain issues should keep pricing in check for at least three to six months, he wrote.

GM declined 27 cents to $29.97 at 4:15 p.m. in New York Stock Exchange composite trading. The shares earlier fell to $29.90, the lowest since GM sold shares at $33 each in an initial public offering in November.

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The Shine Is Off The New GM For Investors

DETROIT – The new General Motors made its Wall Street debut with much fanfare last November. The initial public offering that was supposed to max out at about $10 billion ended up raising more than double that amount.

CEO Dan Akerson had a good story to tell: The Detroit automaker had posted a $4.8 billion profit for the nine months ended Sept. 30, and new models like the Chevrolet Equinox and Cadillac SRX SUV were selling well, reported Automotive News. Two weeks after the IPO, GM was worth just $1.6 billion less than Ford Motor Co., and by mid-January the stock ran up 20 percent, to almost $40 a share, giving GM a value of $59.3 billion.

GM’s feel-good moment didn’t last. Since the beginning of January the stock has fallen more than 18 percent, to close Friday at $30.24 a share, which is $2.76 below its IPO price. GM’s market valuation now trails Ford’s by almost $8 billion. Analysts fret about the churn in GM’s management ranks, the aggressive use of incentives to sell its cars, ongoing losses in Europe, and a softening in the Chinese market, where GM is the leader.

There’s also the thin pipeline of new models. Add it up, and investors may be better off taking a wait-and-see approach, says Peter Nesvold, an analyst with New York research firm Jefferies.

The U.S. Treasury owned 61 percent of GM as a result of its 2009 bailout of the automaker. It sold shares equal to a 28 percent stake during the IPO and can unload the rest as early as May 18. In a January interview, Ron Bloom, head of the Obama Administration’s auto-industry task force, said the government wanted to sell its GM shares “as soon as practical.”

The Feds need a $53 share price to break even, and right now auto stocks are under pressure from higher oil prices and Japan’s disaster, which has disrupted production for many carmakers. “Politically it would be hard for the administration to sell the remaining shares below the original deal price,” says Nesvold.

A GM spokesman declined comment.

Even in China, a bright spot for GM over the last decade, there are challenges. Growth in the world’s largest auto market slowed to 8 percent this year after reaching almost 30 percent in the fourth quarter. Some local governments, such as the city of Beijing, are placing restrictions on new-car sales to battle traffic congestion. In the long run, GM may struggle to sustain its 11 percent net margin in China as more competition continues to pour in.

The revolving door in GM’s executive suite also has investors nervous, according to Brett D. Hoselton, analyst for KeyBanc Capital Markets. The carmaker is on its third CEO since it emerged from bankruptcy in 2009.

Same for its chief financial officers: The latest, Chris Liddell, left on Apr. 1 after 15 months on the job, saying he was ready for bigger things. He ceded the job to GM Treasurer Daniel Ammann. “I don’t know what the management team will do,” says Hoselton. “There’s a lack of predictability.”

Ammann attempted to calm Wall Street’s nerves at a dinner with analysts on Apr. 7 by indicating he will be in the job for years. He also said GM’s heavy spending on sales incentive – at $3,300 per vehicle, they were the highest of any major carmaker in March – will not become the status quo. Analysts said the next day they were satisfied that GM won’t start a price war and may be firming up its management team.

Still, to say shareholders are feeling confident would be a stretch. Says Nesvold: “GM remains a ‘show-me’ story.”

The bottom line: Management turnover, weakness in China, and big sales incentives have hit GM’s stock, complicating Treasury’s plans for an exit.

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Spyker Seeks To Raise Cash For Saab

AMSTERDAM – the owner of Swedish car maker Saab Automobile, said Tuesday it has asked the Swedish National Debt Office to allow it to sell and lease back Saab properties to secure the funding it needs to resume production.

Spyker reiterated in a statement that it is in talks with several parties to secure short- and medium-term funding. It said it hopes to give more details before Thursday, depending on whether the Swedish debt office approves the request.

The statement comes a day after Spyker said that it was in talks with a financial institution controlled by Russian financier Vladimir Antonov for the sale and leaseback of Saab Automobile’s real-estate operations, reported The Wall Street Journal.

Mr. Antonov, who was forced by General Motors Co. to withdraw as a Spyker shareholder before the U.S. giant sold Saab to Spyker, has said that he would be willing to invest €50 million ($72.1 million) in Saab.

Legal documents outlining Saab Automobile’s assets in March 2009 valued the company’s buildings and grounds at 915 million Swedish kronor ($146.1 million).

The Swedish National Debt Office said Tuesday that it continues its work on trying to resolve Saab Automobile’s financial problems, but declined to go into detail. “We are working hard to find financial solutions for Saab and we have been for some time,” said debt office spokeswoman Unni Jerndal, adding “there’s been a lot of late nights and early mornings.”

Saab’s production currently is halted because it has been unable to pay its suppliers. Spyker said Tuesday it expects to be able to resume production within a week of receiving new funds.

The Swedish National Debt Office, which overseas state-backed guarantees for €400 million in European Investment Bank loans to Saab Automobile, said last week it could release some collateral put up by the car maker to secure the guarantees. The collateral consists of pledges of shares in three holding companies for Saab assets: real-estate arm PropCo., tool operations ToolCo., and spare-parts business PartsCo.

“The Swedish National Debt Office has been requested to release its pledge in the shares of Saab Automobile Property AB in order to enable Saab Automobile to use this property to secure further funding. This is one of the funding scenario’s Saab Automobile is currently working on,” Spyker said in a statement.

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Old GM Bondholders Getting Shares In New General Motors May Depress Price

Investors holding bonds in the old General Motors Corp. will receive stock and warrants for shares in the new General Motors Co. On April 21, an action that analysts said may depress the stock price.

Old GM, now known as Motors Liquidation Co, will give bondholders 150 million shares in GM and warrants to buy 272.8 million more shares. A trust holding the shares will distribute them directly to bondholders’ brokerage accounts on or after April 21, according to a memo distributed Wilmington Trust Inc., a money-management firm hired by the creditors’ committee, reported Bloomberg.

Some of the bondholders are retail investors who may sell the shares and briefly sink GM’s stock price, said David Whiston, an analyst with Chicago-based Morningstar Inc. Investors have probably priced in the dilution, so it won’t change GM’s long-term value, he said. He has not changed his $48 a share valuation based on the release of shares to bondholders.

“I would think that there will be more selling than holding,” Whiston said. “Any sell-off in GM is a buying opportunity. Long term, I think the company is positioned very well.”

Bondholders were promised stock and warrants in the new GM to make up for some of their loss during the predecessor company’s government-backed bankruptcy. The warrants given to bondholders for new GM stock are already in the money, according to a report by Kirk Ludtke, senior vice president of CRT Capital Group, a money management firm in Stamford, Connecticut.

When U.S. Bankruptcy Court releases the warrants and stock through a trust, bondholders will collectively get 136.4 million warrants for one share each at $10 a share and an equal amount at $18.33 a share, said Wilmington Trust, which is based in Wilmington, Delaware.

Owners of old GM bonds must notify Wilmington Trust by April 15 to get stock and warrants on April 21. If they notify Wilmington later, the bondholders will get their shares and warrants at a later date.

Currently, Motors Liquidation has about $30 billion in claims allowed by bankruptcy court, of which about $29 billion are from the bondholders, said a person familiar with the matter.

There may be as much as $8.8 billion in additional claims that could be allowed by the court, Ludtke said in the report.

If the approved unsecured claims exceed $35 billion, GM would have to issue up to 30 million shares, Jim Cain, a company spokesman, said in an interview. GM doesn’t expect claims to reach that amount, the company said in a regulatory filing.

The bonds issued by General Motors Corp. should recover about 30 cents on the dollar when the shares are distributed later this month, Ludtke said in a telephone interview. He expects GM’s share price to rise to $40, which implies a recovery rate of about 40 cents on the dollar, Ludtke said.

GM shares were unchanged at $32.87 yesterday in New York Stock Exchange Composite trading, down from a high of $38.98 on Jan. 7. The shares were priced at $33 for the initial public offering in November.

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Auto Leasing Back To Highest Rate Since ’05

Vehicle leasing, a popular financing option that dried up with credit during the recession, is rebounding, another sign of an improving economy and a recovering automotive industry.

That’s good news for consumers attracted to leasing because it sometimes offers lower monthly payments plus a new car every couple of years. Automakers and dealers like leasing because it drives sales and keeps customers coming back to showrooms, reported The Detroit News.

“It really has stormed back,” said John Sternal, vice president of Leasetrader.com, an online lease tracking firm, noting that automakers are advertising lease deals with monthly payments for under $199. “Just 14-16 months ago, that was unheard of.”

The trend reflects improving economic conditions, with credit markets loosening and banks lending more freely at historically low interest rates. At the same time, used car values are strong, giving lenders confidence there will be a sound return at resale.

With automakers touting low monthly payments and eye-catching offers — including cash back and no money down at signing — customers are flocking back to dealer showrooms to lease cars and trucks.

But analysts warn that leasing poses risks for automakers. Because leased cars are resold every few years, too many deals at one time can flood the market with used cars, hurting resale values.

Leases accounted for an estimated 21 percent of new car sales in March. That followed a strong February, when leasing represented about one-quarter of all car and truck sales, the highest monthly lease rate since November 2005, according to Santa Monica, Calif.-based auto research firm, Edmunds.com.

Leading the comeback are Japanese automakers such as Honda Motor Co. and Nissan Motor Co., which are using lease deals to clear out old inventory and make room for new stock, analysts say.

In March, roughly one-third of Honda’s U.S. sales were leases; for Nissan, leases accounted for 29.1 percent of sales, according to Edmunds.com.

Among Detroit’s Big Three, General Motors Co. has been the most aggressive about promoting leasing this year. Leasing represented 14.2 percent of GM’s March sales, down from 28.4 percent in February as the automaker ended some incentives, according to Edmunds.com.

GM continues to target consumers for leases, even offering deals on its entire Buick lineup. The automaker’s momentum is fueled in part by its purchase last year of what is now known as GM Financial, which provides financing for moderate-risk borrowers.

Leases represented 16.9 percent of March sales for crosstown rival Ford Motor Co., according to Edmunds.com. That’s up from 13.4 percent for the same month a year ago. Ford dealers are promoting lease deals on the Ford Fiesta and Fusion.

Chrysler Group LLC’s leasing volume accounted for 15 percent of sales in March, up from 10.9 percent in the same month a year ago, Edmunds.com said. The Auburn Hills automaker is offering a slew of deals, including on its popular Jeep Grand Cherokee.

Industry experts say leasing volumes of about 25 percent of industry sales are considered healthy, but automakers must not slip back into an old bad habit: using irresistibly low lease rates to inflate sales numbers.

“The leasing dropped to such a small level for so long, it’s like a whipsaw effect” now, said Karl Bauer, an auto industry analyst, formerly with research firm Edmunds.com. “It’s only a good thing if the market is naturally supporting this.”

Several years ago, American automakers glutted the market with attractive lease deals, only to find that leased vehicles were worth far less than expected when consumers turned them in.

The financial meltdown made matters worse. Credit markets seized up in late 2008, causing auto sales to plummet and wreaking havoc on automakers and lenders.

GM and Chrysler stopped leasing in the fall of 2008 when their lending arms — GMAC Financial Services and Chrysler Financial — shut down as the automakers hurtled toward bankruptcy. Other financial institutions also pulled back on auto loans as they struggled to stay afloat. Suddenly, consumers had one less option for getting a new car.

In 2009, leasing fell to 13.1 percent of U.S. auto sales, down from 19.1 percent in 2007, according to Southfield-based R.L. Polk Co., an auto research firm. Last year, leasing volumes rebounded to 18.9 percent of industry sales.

Some lease deals now, however, are giving analysts pause.

GM has been offering aggressive lease deals on its all-new 2011 Chevrolet Cruze, which went on sale in the fall, said former Edmunds.com analyst Bauer. Typically, automakers reserve leasing for luxury cars and aging models, not vehicles that just arrived in showrooms.

“That’s where you get a little worried they’re trying to move iron and buy market share,” Bauer said.

GM officials contend they’re merely bringing leasing back to healthy levels — between 15 percent and 20 percent of sales — and say they’re being cautious about promotions.

The automaker was heavy on lease deals in January and February, but spokesman Tom Henderson noted that leases as a percentage of sales fell last month.

GM dealers say leasing promotions are helping drive sales.

“Three years ago, (leasing) was 70 to 75 percent of our business,” said George Fowler, general manager for Superior Buick GMC Trucks in Dearborn. That business took a nosedive during the recession.

“It has come back like gangbusters,” Fowler said, with leasing now accounting for more than half the dealership’s sales.

Casey Cabana, a sales manager at Mark Chevrolet in Wayne, said his dealership is flourishing because of leasing. Its website prominently advertises the latest “Malibu Blowout Sale!” — $192 a month and nothing down.

“It’s definitely driving showroom traffic,” Cabana said.

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Treasury Seeks $5B In Lender Ally’s IPO

Washington – The U.S. Treasury Department plans to raise $5 billion when auto and mortgage lender Ally Financial Inc. launches an initial public offering in the coming months, The Detroit News has learned.

Ally filed the paperwork Thursday to launch an IPO. The Securities and Exchange Commission must approve the nearly 500-page prospectus before the company can go public, likely in a few months.

Ally, one of the world’s largest automotive financial services companies, will first have to mount a road show to sell the offering to investors.

The Treasury Department, which owns a controlling 74 percent stake in Detroit-based Ally Financial as part of a $17.2 billion bailout, said it has agreed to be named the selling shareholder.

Treasury will retain the right to decide whether to participate in the IPO and at what level.

The government also owns $5.9 billion of mandatorily convertible preferred stock.

Ally won’t price the stock or disclose how many shares it plans to sell until just before the company goes public.

A person briefed on the matter said only Treasury is expected to sell shares, not other owners such as General Motors Co., which holds a 9.9 percent stake in Ally.

With the $2.7 billion in new proceeds, Treasury will have received about $4.9 billion in returns from Ally to date, including $2.2 billion in dividends and interest.

The company reported a $1.1 billion profit in 2010.

Citi, Goldman, Sachs & Co., J.P. Morgan and Morgan Stanley are advising Ally on its initial public offering.

With more than $172 billion in assets as of Dec. 31, 2010, Ally operates as a bank holding company.

Ally also has mortgage operations and commercial finance, and the company’s subsidiary, Ally Bank, offers retail banking products through its online arm.

Ally, which was known as GMAC Inc. until last year, was founded by GM more than 90 years ago as its in-house finance arm. It sold a 51 percent stake in the company in 2006 to Cerberus Capital Management LP in a $7.4 billion deal.

Ally will need to reassure investors that it has a stable relationship with GM, which last year acquired a subprime financing company AmeriCredit and renamed it GM Financial to form the basis of a captive finance arm.

Ally said it raised its percentage of new car lending to 9.9 percent in 2010, up from 6.1 percent, to jump from third highest to the leading auto lender.

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