General Motors Corp.’s (OTC: GMGMQ) emergence from bankruptcy Friday marks the beginning of the “new GM,” which will try to stay out of the ashes from which it emerged to become a leaner, customer-centric and modern company.

The official ownership of the new GM is divided as follows:

• 60.8%: U.S. Department of the Treasury, after a $50 billion taxpayer-funded investment.
• 17.5%: United Auto Workers (UAW) Retiree Medical Benefits Trust.
• 11.7%: Canada and Ontario governments.
• 10%: The “old” GM.

By the end of next year, the new GM will operate 34 assembly, powertrain and stamping plants, down from 47 in 2008. In the United States, its headcount will decline from roughly 91,000 at the end of last year to about 64,000 by the end of this year, which GM said will create “a company sized to respond quickly to changes in the market, while still retaining the global scope necessary to develop world-class products and technologies.”

Those left behind after the dust clears will be expected to perform with fewer human resources. GM will reduce the number of U.S. executives by 35% and its salaried employment by 20% by the end of the year-”flattening the organization and speeding decision making,” the company said.

Among the executive cuts will be the elimination of the GM North America president position. Taking those responsibilities will be newly announced Chairman Edward E. Whitacre, Jr., who oversaw the creation of the new AT&T Inc. (NYSE: T).

GM’s balance sheet will include a debt of approximately $11 billion, excluding preferred stock of $9 billion, and could change under its fresh-start accounting, it said. Overall, the company’s total debt has been reduced by more than $40 billion, representing mostly unsecured debt and the Voluntary Employee Beneficiary Association Trust fund that provides medical benefits to UAW retirees.

Those looking to invest in the new GM will have to wait until at least next year.

Though not a public company, “[GM] will be transparent in our financial and other reporting to further strengthen trust and confidence,” President and Chief Executive Officer Fritz Henderson said in a prepared statement. “We expect to take the company public again as soon as practical, starting next year, and to repay our government loans as soon as possible.”

The company’s emergence from bankruptcy comes roughly three weeks earlier than the U.S. government expected, and three days faster than Motown rival Chrysler LLC. GM is shooting to beat the clock on its deadline to repay the $50 billion in Troubled Asset Relief Program (TARP) bailout funds.

“We are required to pay off the loans by 2015, but our goal is to repay them much sooner,” Henderson said.

A slimmer catalog will be the face of the new GM, which now has four primary brands: Cadillac, Chevrolet, Buick and GMC. Gone are Saab, Saturn, Hummer and this fall, Pontiac.

Winning Back America

As Money Morning reported last month, the consumer backlash against GM’s bankruptcy likely won’t be as damaging as had been initially feared. In fact, as rival U.S. carmaker Chrysler already discovered in its own bankruptcy process, potential defections and severed relationships can be avoided with aggressive discounts and strong marketing efforts.

The image of the new GM will rest largely on the shoulders of 77-year-old Bob Lutz, whom the company coaxed out of retirement to sign on as its vice chairman and senior advisor. “Maximum Bob,” the auto industry veteran who originally joined GM in 2001 and chief cheerleader for the upcoming Chevy Volt, will be responsible for “all creative elements of products,” as well as customer relationships.

Translation: Lutz is tasked with winning back the droves of customers who fled from GM in the last 40 years-primarily to foreign automakers-to reduce the company’s domestic market share to less than 20%, down from more than 50% in GM’s heyday in the late 1960s and 1970s.

“[Lutz] has a proven track record of unleashing creativity in the design and development of GM cars and trucks. This new role allows him to take that passion a step further, applying it to other parts of GM that connect directly with customers,” Henderson said. “In August, we’ll begin regular visits with customers, dealers, suppliers, employees and others-in the U.S. and abroad-who impact our relationships with customers. We’ll be listening to their ideas, and acting on the ones that will improve our ability to serve our customers.”

A Fresh Coat of Paint for an Old Classic

Parts of GM’s transparency and customer bond-forming attempts will come online. Henderson will hold live chats with customers and respond to some ideas, concerns and suggestions through a “Tell Fritz” website to be launched next week.

Other GM online initiatives include:

• A Twitter page, containing “as it happens” updates on the company.
• A Facebook page, which includes company news, behind-the-scenes videos of things like the production of the Volt, or a video of the “Bumblebee” Camaro as seen in the new Transformers movie, which is filled with GM vehicles.
• GM FastLane, a blog from company executives and other employees.
• GM Facts and Fiction, a website devoted to dispelling myths about the carmaker.

Of course, when the rubber hits the road, modern means environmentally friendly vehicles. The Volt, which GM said can go 40 miles on one charge before using gasoline to continue, gets the most press. That vehicle is currently being road tested and scheduled to launch next year, with prices starting at $32,500 after tax credit incentives.

While President Barack Obama said he doesn’t want the U.S. government to be involved in the day-to-day operations of its bailout beneficiaries, there’s no doubt the pressure is on both GM and Chrysler to produce more fuel-efficient vehicles. To that effect, GM said it has moved “aggressively” to develop a range of energy-saving technologies, including advanced internal combustion engines, biofuels, fuel cells and hybrids.

“The new GM is also taking steps to make advanced battery development a core competency, and expects to make additional announcements on this matter late this summer,” the company said in what will likely be an attempt to address consumer concerns over battery life in hybrid and electric cars.

Source: The “New” GM: What Will it Look Like, and How Far Will it Go? ]]> http://www.contrarianprofits.com/articles/the-%e2%80%9cnew%e2%80%9d-gm-what-will-it-look-like-and-how-far-will-it-go/19035/feed 0 http://www.contrarianprofits.com/articles/g8-finance-chiefs-express-cautious-optimism-about-the-state-of-the-world-economy/17890 http://www.contrarianprofits.com/articles/g8-finance-chiefs-express-cautious-optimism-about-the-state-of-the-world-economy/17890#comments Mon, 15 Jun 2009 14:20:15 +0000 William Patalon III http://www.contrarianprofits.com/?p=17890

Top financial officials from the Group of Eight (G8) industrialized nations on Friday issued an upbeat evaluation of the global financial crisis, describing signs that markets were stabilizing around the world and warning that it was necessary to devise “exit strategies” to disengage from stimulus programs that have been put in place.

The G8 met for two days in Lecce, Italy. Eight world finance ministers – including U.S. Treasury Secretary Timothy F. Geithner, and his global counterparts from Britain, Canada, France, Germany, Italy, Japan and Russia – also agreed to create “a set of common principles and standards governing the conduct of international business and finance,”The Washington Post reported.

In a communiqué called “the Lecce Framework” – which described the strategy for obtaining those goals –…

This from Investor’s Daily Edge:

So, for what it’s worth, here are my predictions for 2009, please adjust the time frame as necessary.

The bailouts will work. The banking/credit crisis will ease in early 2009, and with it businesses should be able to start borrowing again.  Once the money flows open up we should see some relief from the recession.

Ford (NYSE:F) will survive, I’m not sure about General Motors (NYSE:GM). Chrysler has been dead for a long time. The future of autos is electric and hybrids, not minivans or trucks. This should not be news to anyone except GM and Chrysler.

The market will rebound to the range of about 10,000 to 11,000. Any significant move above these levels will be a function of how well the next administration handles their responsibilities in the early months of 2009. There are very real concerns.

We have elected the most inexperienced candidate, ever. This, during a time when what we need is wisdom, real down home, paid your dues, learned the hard way wisdom. What we have is a person with zero experience that many feel is a leader who can offer change. This may work.

It will work only if he makes all the right moves between January and June. If he makes any serious stumbles, or what are perceived to be serious stumbles, he will lose what is already a skeptical, beaten up American people, and that could be disastrous.

All he really has to do is to be able to explain what he is doing and why, and make us believe it’s good. Not perfect, but at least good.

The confidence of the American people is so badly damaged that we can’t survive another first six months of a new presidency like the last candidate that promised to change Washington, Jimmy Carter. Can’t remember what it was like? Read the editorials in the NY Times for the period of January 1977 to October 1977. Ouch!!

On the other hand, Obama may be able to pull the same smoke and mirror act he did in the campaign. It’s up to the press to let him continue to get away with it. I think they will. If so we may be in for a surge in confidence and better times. And confidence is what we need to get the show on the road. The press however is very fickle, and Mr. Obama may find himself on the other end of that information juggernaut that gave him the presidency.

Everything the government can do is being done to help us through this mess. The success we see in 2009 will be a function of whether the people of this country can get out the funk we are in, start spending and start looking a little further down the road than tomorrow. Pushing them out of the funk has fallen on the shoulders of the new president. It may be the finest hour of any president since FDR. Let’s hope.

Where to make the most money in ‘09: beaten up, high quality, dividend-paying stocks [like General Electric (NYSE:GE), Bristol Myers Squibb (NYSE:BMY), Verizon (NYSE:VZ), AT&T (NYSE:T), Lorillard (NYSE:LO) and Altria (NYSE:MO) etc.)].

Also, corporate bonds at a discount, look at banking, aluminum and other metals, consumer goods, tobacco, insurance, just stay in the short maturities, three years or less and investment grade only. This is not the time to be in junk bonds.

As promised here are two bond ideas. As I tell everyone in The Bond Trader, no matter how good these look to you, don’t load up on them. You should have 10 to 20 bonds in your portfolio not one or two with high coupons.

The first is a pure income play. It is about a ten-month maturity with a yield of 7.35. It is perfect if you want to get a good return on money you don’t know what to do with right now. It’s a Goldman Sachs bond of 10/1/2009, cusip 38141GAD6.

The second is what I call a total return bond, at a discount and a good coupon. The total return is about 22.2%. It is an Alcoa bond of 1/15/12. The coupon is 6 percent and you should be able to buy it around 94. The cusip is 013817AF8.

A return of 7.35 percent for the income folks and 22.2 percent for the total return folks, Merry Christmas.

Source: A Few Freebies To Get 2009 Off To A Good Start

The Fed extended the lives of recently initiated programs (lending facilities for investment firms, for instance) and is exploring additional moves (like Treasury purchases) aimed at reviving the credit markets.  Bernanke believes more needs to be done to slow the pace of foreclosures, especially since they jumped another 10% in September.

Meanwhile, the U.S. Treasury Department is working on a plan to rejuvenate the housing market by slashing mortgage rates to 4.5% on new purchases.  Experts say that at some point these stimuli must take hold, but that’s not necessarily true.

This week’s economic calendar is highlighted by two late-week releases that are sure to garner much analysis.  The producer price index (PPI) brings another look into the inflation picture, though the dramatic decline in energy prices may renew “premature” talks of deflation.  And November retail sales should offer few positive surprises for the holiday season.

Are there any 12-step programs for overcoming “gloom and doom?”

Market Matters

Black Friday has passed. And so has Cyber Monday (the Monday after Thanksgiving when online shopping begins in earnest).  So let the analysis begin.

While retailers continued to cry “gloom and doom,” the so-called experts did not appear to be quite as pessimistic.  According to National Retail Federation, holiday sales will climb by 2.2% from last year’s levels.  Research firm ShopperTrak claimed that sales on Black Friday rose by 3%, and ComScore Inc. (SCOR) said Monday’s online activity soared by 15% from 2007. Toys “R” Us Inc. execs “were definitely pleased with sales” during the initial holiday shopping weekend, and Internet data collector, Hitwise, revealed that web traffic increased by 21% at Amazon.com Inc. (AMZN).

While November sales remained bleak (see below), analysts point out Thanksgiving came late in the month (Nov. 27) and Cyber Monday actually fell in December.  The optimists (rare as they are) are hopeful holiday activity may be skewed with December faring far better than November.

Automakers returned to Capitol Hill. But for “Begging for a Bailout II,” the “Big Three” CEOs were smart enough leave their corporate jets at home and arrive in hybrid sedans.  Maybe next time they can carpool. But there’s a problem: Combined, the Big Three are this time are requesting $34 billion in loans, which is $9 billion more than they’d been lobbying for all along. Ford Motor Co. (F) implied its situation may be less dire and a mere $9 billion standby line of credit would suffice (assuming the others don’t fail).  The execs also expressed a willingness to operate under a federal oversight board, and even the unions offered concessions regarding health plans and the jobs bank.  While some politicos used scare tactics to predict even greater economic hardships should relief not be granted, others remained skeptical of the unlimited bailouts.  Mostly, they chose to grandstand and politicize the tragic times to win support at home (as if their constituents even watch C-SPAN).  Stay tuned…

In other corporate news, Goldman Sachs Group Inc. (GS) may be forging more into the banking world as it considers launching an Internet operation to increase its deposit base.  Meanwhile, analysts predict its fourth quarter loss could skyrocket to $2 billion.  Beezer Homes USA Inc. (BZH) and Blackberry-maker Research in Motion Inc. (RIMM) both lowered their quarterly outlooks and AT&T Inc. (T) became the latest domestic giant to announce layoffs.  While General Electric Co. (GE) believes its earnings will be weaker than initially expected, the company plans to maintain its dividend and solid commitment to shareholders.  Merrill Lynch & Co. Inc. (MER) shareholders approved its sale to Bank of America Corp. (BAC), though total valuation plunged to $20 billion (from $50 billion at announcement) as a result of the stock market decline.

Oil continued its never-ending decline below the $41 a barrel level, a point not seen in four years, while gas fell below $1.80 a gallon nationally. While winter weather generally means higher energy prices, the economic doldrums have more than offset the traditional trend.

Treasury yields plunged to historic lows on speculation that the Fed may purchase government securities to support the credit markets (as well as the ongoing “flight-to-quality” moves).  Stocks resumed their overall bearish ways on dramatic volatility, as investors grew more fearful about the economy before totally disregarding the awful unemployment data (see below) and staging a late-week “illogical” rally.  Then again, since when have markets been considered logical?

Economically Speaking

In what could one of the worst kept secrets of the year, the National Bureau of Economic Research (NBER) revealed the domestic economy has been in a recession since December 2007.  In the post-World War II era, the average length of recession has been 11 months, with the downturns of 1973-74 and 1980-81 lasting 16 months.

And the current recession will likely surpass the norm.  As the data gets weaker with each passing release, most economists expect this recession to last beyond the next four months and to set a new duration record in post-World War II times.

Then again, each new month means we are getting closer to the end; additionally, equity markets typically serve as leading indicators and begin to rebound months before a recovery starts – meaning we’ll see a bull market get under way while the economy is still in the depths of recession.

The weekly releases revealed that any pending rebound should remain on the back burner for some time.  In November, the unemployment rate jumped to 6.7% as the U.S. economy lost more than 500,000 jobs, the largest monthly decline in 34 years.  In the last three months alone, more than 1.2 million individuals have moved into the ranks of the unemployed.

November represented the 11th straight month of labor contraction.  Both the manufacturing and services sectors continued to struggle according to Institute for Supply Management and factory orders plummeted by the largest amount in eight years.  Retailers reported weak same-store sales numbers, with only Wal-Mart benefiting from the dire times.  Even Costco Wholesale Corp. (COST) experienced a steeper than expected decline.   And of course, dismal auto sales brought more ammunition to those Congressional hearings as General Motors Corp. (GM) (-41%) and Ford (-31%) were joined by Honda Motor Corp. (ADR: HMC) (-32%) and Toyota Motor Corp. (ADR: TM) (-34%) in the “if misery loves company” category.  Meanwhile, Bernanke and friends are hard at work dreaming up creative ways to shore up the economy, particularly after the Beige Book reported softer activity across the country.

Weekly Economic Calendar

Source: Fed Looking at Another Rate Cut, While Treasury Has New Plan for Housing

• AT&T Inc. (T) said it would scale back 12,000 jobs, about 4% of its workforce, between now and the end of 2009 to fight “economic pressures, a changing business mix and a more streamlined organizational structure.” It will also take a severance charge of nearly $600 million for the fourth quarter, Reuters reported.

• Credit Suisse Group AG (ADR: CS) will scale back its workforce, eliminating 5,300 workers, or about 11% of its workforce. Switzerland’s second-largest bank will also nix bonuses for its top executives, Bloomberg reported.

• Capital One Financial Corp. (COF) said it will acquire privately-held Chevy Chase Bank for $520 million in cash and stock, The Associated Press reported. Bethesda, Md.-based Chevy Chase Bank has branches primarily in Maryland, Virginia and Washington, D.C., and has about $11 billion in deposits.

• Argentine President Cristina Fernandez de Kirchner said the government will offer 13.2 billion pesos ($3.9 billion) for an economic stimulus. The plan seeks to reduce loan costs to manufacturers, help finance new auto purchases and reduce export taxes on corn and wheat, Bloomberg reported.

• The number of U.S. workers on unemployment benefits rolls soared to 4.09 million last month, the highest level in 26 years, according to the Labor Department. The four-week moving average of initial claims, a less volatile measure, climbed to 524,500, also the highest since 1982.

• E.I. du Pont de Nemours & Co. (DD) said yesterday (Thursday) that it will not turn a profit in the fourth quarter, and consequently, will be forced to cut 2,500 jobs and release 4,000 contractors by the end of this year. “We expect 2009 to be a very challenging year,” said DuPont chief financial officer Jeff Keefer.

• Williams-Sonoma Inc. (WSM) beat analysts’ third-quarter expectations, but the company’s revenue still fell 16% from a year ago, to  $752.1 million. The company lost $11 million, or 10 cents a share, for the in the three months ended November 2, compared with a profit of $27.1 million, or 25 cents a share, a year earlier. Analysts’ average forecast was a loss of 11 cents a share, according to Reuters Estimates.

• Crude oil prices fell more than 5% yesterday (Thursday) as employment and manufacturing data indicated the U.S. recession would be severe. Light, sweet crude for January delivery fell $2.49 to settle at $44.30 a barrel on the New York Mercantile Exchange.

Source: Global Investing Roundups, Friday, December 5th, 2008

• Deere & Co. (DE), the world’s largest maker of farm equipment, dropped the most in 20 years after reporting earnings that missed analyst estimates yesterday (Wednesday). The company reported third-quarter profit rose 7% to $575.2 million, but $140 million increase in raw materials and freight costs pushed profit below estimates. Deere stock fell as low as $61 a share before closing at $67.10.

• Genentech Inc. (DNA) yesterday (Wednesday) rejected a $43.7 billion buyout offer from Roche Holding Ltd. (OTC: RHHBY) but said it is open to a higher takeover bid. Roche, which already owns about 55.9% of Genentech, offered $89 a share last month for the California-based company. Several analysts have said Genentech is worth over $100 per share, The Associated Press reported.

• U.S. crude settled up $2.99 at $116 a barrel after a government report showed declines in fuel and crude inventories. U.S. crude stocks fell by 400,000 barrels in the week ended August 8, and gasoline stocks dropped by 6.4 million barrels.

• China Fire & Security Group Inc. (CFSG) said yesterday (Tuesday) that income rose 57% to $6.7 million in the second quarter. Revenue jumped 44%, from $11.5 million a year ago to $16.7 million. China Fire & Security, which makes industrial fire protection products, attributed the increases to total solution contracts and maintenance service.

• Ten exchanges yesterday (Wednesday) agreed to consolidate insider-trading surveillance and investigation efforts, turning over the responsibility to the regulation arms of the New York Stock Exchange and to the Financial Industry Regulatory Authority in an effort to cut down on overlap between individually run programs, The Washington Post reported. “I think we all recognize that in a world of electronic trading, where there are more venues and more opportunities where people may be able to hide their activity, consolidating the review of insider-trading activity was critical,” said Richard Ketchum, chief executive officer of NYSE Regulation and chairman of Washington-based FINRA.

• Best Buy Co. Inc. (BBY) will begin selling the Apple Inc. (AAPL) iPhone, previously only available at Apple and AT&T Inc. (T) retail locations. While Best Buy is not likely to make much on the sale of the phone itself, the electronics retailer should profit from the sale of higher margin accessories, The New York Times reported.

• Merrill Lynch & Co. Inc. (MER) analyst Guy Moszkowski downgraded four Wall Street investment banks in a research report yesterday (Wednesday), Reuters reported. Citing continued fallout from the credit crisis, Moszkowski cut the ratings of Citigroup Inc. (C), Goldman Sachs Group Inc. (GS), Lehman Brothers Holdings Inc. (LEH) and Morgan Stanley (MS).

• Ford Motor Co. (F) announced yesterday (Wednesday) that it expects sales of small cars to increase as it tailors its North American offerings to follow its European models. “Ford already delivers the best small cars in Europe,” said Mark Fields, Ford’s president of the Americas, in a speech at a conference in Traverse City, Michigan, Reuters reported. “Now it’s North America’s turn, and we intend to deliver these small cars profitably.”

Source: Global Investing Roundups Thursday, August 14th, 2008

• U.S. factory orders increased 1.1% in April, an unexpected gain that was boosted by the high cost of gas and other petroleum products, the Commerce Department announced yesterday (Tuesday). Economists had expected a smaller gain of just 0.1% after an upwardly revised 1.5% gain in March, MarketWatch reported.

• Borders Group Inc. (BGP) announced yesterday (Tuesday) it would reduce 20% of its corporate positions in an ongoing effort to cut costs. The No. 2 U.S. bookseller will eliminate 156 positions at its Ann Arbor, Mich. Headquarters and 118 corporate positions at other locations, Reuters reported. The reductions represent less than 1% of Borders total staff.

• In a bid to lure new customers to purchase reloadable cards, Starbucks Corp. (SBUX) will offer free AT&T Inc. (T) wi-fi service to patrons who buy a minimum $5 on a reusable Starbucks Card. “Customers have let us know they want to be recognized for choosing Starbucks,” Brad Stevens, vice president of customer relationships, told USA Today. Particularly, he says, at a time when “budgets are tight.”

• Annual inflation in Kenya soared 31.5% higher in May, Bloomberg reported, citing the country’s National Bureau of Statistics reported yesterday (Tuesday). May’s numbers are even steeper than April, when soaring food prices pushed inflation up 26.6%.

• Chevron Corp.’s (CVX) vice chairman told Bloomberg that the company will spend up to $5 billion in African oil projects – including nearly $5 billion for a gas-to-diesel conversion plant in the Niger Delta – to boost production and help accommodate global demand. “The world is saying it needs it,” said Peter Robertson.

• Staples Inc. (SPLS) yesterday (Tuesday) raised its hostile bid for Dutch office supplies distributor Corporate Express NV (ADR: CXP) to $2.6 billion. Rather than accepting two previous overtures from Staples, Corporate Express last month struck a surprise deal to buy a French competitor, Lyreco SAS, which would create an international competitor to Staples, the Associated Press reported. Lyreco may be entitled to a $46.8 million break-up fee if Corporate Express shareholders pursue the Staples deal.

• Lehman Brothers Holdings Inc. (LEH), set to report its first quarterly loss since going public, is considering raising billions of dollars in fresh capital to help shore up its balance sheet, the Wall Street Journal reported. The exact amount isn’t known, but analysts estimate it is likely to be between $3 billion and $4 billion. Lehman will probably reveal the details of the plan with its quarterly results, due the week of June 16.

• Oil prices fell sharply yesterday (Tuesday), at times slipping more than $3 a barrel on the New York Mercantile Exchange. The drop came after Federal Reserve Chairman Ben S. Bernanke indicated that more interest rate cuts are unlikely. His comments sent the dollar higher and raised questions about oil’s ability to reach new highs in the short term.

Source: Global Investing Roundups Wednesday, June 4th, 2008