Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: DRM who wrote (524)	7/17/1998 6:41:00 PM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

"I think the present management is truly committed to change." That's really the case for GM, in a nutshell. They have no choice. They got their jobs because outside directors ousted a management they didn't believe was committed to change. "The problem is the economy is just too 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." This cuts both ways. It was in 1937, when the economy was taking its 2nd big plunge of the 1930's, and there was a lot of political cover and popular support for struggling workers, that the seizure of the very same Flint plant by GM workers led to the present arrangement -- and the virtual destruction of every U.S. auto maker but GM. With a strong economy, I don't think there's as much sympathy for metal stampers who insist on a compensation package of $45 to $75 per hour plus another $300 million in capital equipment. It's not like these workers can't find manufacturing jobs elsewhere in the midwest, which was the case during the Great Depression. They just can't find ones that pay as much as GM is forced to pay them. << My impression from the financial press is that, on balance, the local currency revenues stay there. >> "No currency to extract (no profit)..." But, there are still revenues, and my impression is that the revenues don't get translated back into more expensive dollars, rather they are used to buy things (including the new investment mentioned) in the local currency. "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)." I thought even the UAW had accepted that 10's of thousands of retiring workers aren't going to be replaced. "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." I concede that the siuation with future liabilities is less than ideal. But, I would argue that it's getting better, which I believe is what is important in evaluating this stock. "This is not true in most other countries where the retirement funding is government centralized (Europe ..except the Brits,Japan,Brazil etc.)" Allow me to quibble a bit on this one. It's not called "retirement funding" on the books. It's called "taxes". But, it's still retirement funding. Off the top of my head, I would say that Western European companies have 20% to 30% more of their profits carved out by taxes. The upshot is that their economic recovery is being led by companies that are using workers from other sources. The Japanese situation is a real hall of mirrors. But, whatever they call import barriers that lead to sky-high savings that earn only a miniscule return, I call it a "tax". Barron's did a cover story on Toyota a while ago. Basically, it's a mess, productivity-wise. GM won't deny rumors its considering taking over Nissan. The Japanese solution to providing a permanent no-unemployment, no-bankruptcy economy has turned out just like all of the others: Robbing from the future to pay for the present. In Japan, the future is now. I'm not familiar with the particulars of the Brazilian situation. But, I gather that their fiscal house is not quite in order. Hopefully, GM won't be called upon to clean that one up. "(put a PE of 12 on Delphi and see what price you think the GM stock would be worth .....)" I don't put a p/e on Delphi or GMAC. Nor do I know what GMH's p/e really should be. And, I don't believe that the present value calculations on the medical portion of the retirement plan is anything more than a guess. (I admit that whatever this last is, it's big.) But, I know that on an inflation-adjusted basis GM shares cost about 1/4 what they did in 1965, a time when everything was headed in the wrong direction, while for the past 5 years, profitability been headed in the right direction.