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: porcupine --''''> who wrote (525)	7/19/1998 2:14:00 PM
From: DRM	Read Replies (1) \| Respond to of 1722

<<"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. >> There are not substantial revenues yet ... the most important point here is that GM is pouring into Asia well over a billion ... revenues are miniscule ... profits do not exist ... at this point in time the revenues themselves would not cashflow the investment... Each new "profit center" will require an additional cash infusion in a couple of years to take them out of technical bankruptcy (This is typical of all emerging market auto startups ... I think it's planned because ususally the local GM partners can't afford the cash drain and then get bought out by GM at low prices). <<I thought even the UAW had accepted that 10's of thousands of retiring workers aren't going to be replaced.>> This is only plants being closed down or sold off. <<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.>> Agree its getting better ... the point is when will parity be reached? I think it will take one generation.... That's a long time to carry a heavy burden ($600 - $800 per vehicle). <<"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. >> Not sure you got my point on this one. In Europe there is parity for employer paid retirement costs. Every company has the same load rate. Not true in the states becaue of employer specific retirement plans. In the U.S. a company such as GM has a much higer cost to cover there older workforce than a new transplant. <<Barron's did a cover story on Toyota a while ago. Basically, it's a mess, productivity-wise.>> Toyota is the benchmark for productivity and cost. This is accepted generally in the industry (and by GM management). A good example is Nummi in California. Toyota did what GM couldn't ... Took an old GM (Van Nuys) outdated facility with old employees .... installed the "Toyota Manufacturing System" ... and voila one of the top three assembly plants in the U.S. is created in terms of productivity and quality. <<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.>> Agree with you here ... but to play devils advocate: The U.S. automotive cycle has not had such a prolonged upterm in the last 35 years. The average life of vehicles is getting longer.... The general concensus is that the next correction will take longer than normal to work-off because of the "oversupply" in new vehicles. If GM should burn their cash in this strike and there would be a downturn next year .... It would hurt GM very much (I believe S&P put GM on their credit watch yesterday). Several of the published automotive journals predict a mild downturn in production levels next year. Since the foreign companies are picking up share ... it hurts GM more. (By the way Yardini is predicting a major correction late next year .. check out his website .. I believe it is yardini.com)