Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: porcupine --''''> who wrote (518)	7/17/1998 1:31:00 PM
From: DRM	Read Replies (1) of 1722

<<What all the talk about the 80% decline in GM's profits ignored is that GM cut costs another $1 billion last quarter. GM's costs have nowhere to go but down, and it's competitiveness nowhere to go but up.>> I think the present management is truely committed to change. The problem is the economy is just to strong .... and so the union doesn't feel the need to change (Ford and Chrysler both got their big concessions when they were both down on the mat and almost out). There still is a loooooonng way to go. << Far East ... Small GM sales but they were triple whammied with currency devaluations.... Meanwhile GM continues investing heavily in more than a half dozen locations. My impression from the financial press is that, on balance, the local currency revenues stay there.>> No currency to extract (no profit)... GM does not expect a profit in China for 15 to 20 years (reported in Wall Street Journal)... Currently I work international and have seen the payback of ALL of the projects go WAY OUT in time... But give GM credit ... the $ is strong and they are creating the most global auto company... In the long hall there will be profits. << In many plants 30%-40% of the workers are eligible to retire in the next 5 years..... Right, and they are not going to be replaced. The estimated savings is in the neighborhood of $4 billion annually.>> Got to disagree with this one... These people are ALL getting replaced minus any plants closed down or sold off (several parts plants are in the process). My point here is that the retirement fund is a big burden that will not go away until the transplants have been here long enough to have the same cost.... It's just a fact in American business .... Newly established companies have low to no retirement funding .... Old established companies have heavy loads. This is not true in most other countries where the retirement funding is government centralized (Europe ..except the Brits,Japan,Brazil etc.) <<So, what's your view -- can GM and UAW forever resist the forces of economic rationalization that are reshaping everything else in the world?>> GM upper management strongly committed to changing NAO (this problem doesn't exist in the other countries ... except a little bit at Opel). Many of the younger union members understand the score... The problem is the older UAW members who only know the old days ... I really don't know where this thing is going this time. It looks like this could be the BIG standoff. If GM gives in the stock will fall ... it they hang on too long things really get ugly ... GM needs to get this done to spin off Delphi automotive (put a PE of 12 on Delphi and see what price you think the GM stock would be worth .....) The UAW has a warchest for this strike ($1B+) ... in the old days this was deleted quickly with the BIG walk-offs... Now they are smart and just strike 1 or 2 small plants .... The fund could last months if not years ..... As of July 1 GM has discontinued paying dental for the UAW members (the UAW then picks up this tab)...However, GM decided not to do this with the health care cost and continues national coverage ..... this saves the union warchest for more time.. But ... Buy at $66 is my motto .... Buy the way GM has stopped the stock buy back until strike is resolved.

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