GM Sales Collapse in October: Market share plummets to 20.5%
10-31-2005, 09:49 AM
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GM Sales Collapse in October: Market share plummets to 20.5%
General Motors in crisis as its car sales plummet
By : Tracey Boles Chief Reporter October 30, 2005
GENERAL Motors will this week reveal that sales collapsed in October, taking its US market share to a 25-year low and fuelling fresh fears that the world’s largest carmaker is heading towards bankruptcy. Its US sales dropped 26% compared with the same month last year, according to early estimates, putting its monthly US market share at 20.5% – the lowest since at least 1980.
The figures were compiled by Deutsche Bank analyst Rod Lache. Goldman Sachs also believes October will be the worst month for US car and truck sales in years. GM – whose brands include Cadillac, Pontiac and Hummer – is confronting its biggest financial crisis for 13 years. A bankruptcy filing by the Detroit carmaker would spell the end of an era for US industry and change global car manufacturing for ever.
Last week, it emerged that Toyota is poised to unseat GM as the world’s biggest carmaker measured by units produced. The Japanese giant, which already dwarfs the US carmaker in profitability and value, intends to ramp up production next year.
The GM sales slump – blamed on high fuel prices, unease about the US economy and the end of special summer offers for its staff -– is the latest in a stream of bad news to hit GM, all sparking market fears that the carmaker could go bankrupt. General Motors has denied it is drawing up any plans to declare Chapter 11 bankruptcy. Last week, America’s Securities and Exchange Commission (SEC) intensified an inquiry into how GM accounts for its pensions and employee benefits.
So far this year, GM has posted record losses of $3.8bn (£2.1bn, E3.2bn) and its crucial credit ratings have been reduced to junk by the main rating agencies. The company is burdened by $90bn in pension obligations and a $77bn healthcare plan. Two weeks ago, it was forced to renegotiate the terms of its healthcare plan with the United Autoworkers Union. It managed to agree a deal that will cut $3bn a year from costs.
On Friday, General Motors recalled 106,000 sports utility vehicles (SUVs) to fix a door latch. Sales of the SUVs have been falling faster than those of other vehicles as fuel prices remain high.
The spectre of bankruptcy at GM loomed again last week as the markets digested the news that the SEC had issued subpoenas related to GM’s financial reporting for pension and other post-employment benefits, and to transactions and obligations between the company and auto-parts supplier Delphi, which itself entered Chapter 11 earlier this month.
Until now, the SEC inquiry, which is also looking at other companies including rival carmaker Ford, has been informal. GM is Delphi’s former parent and its biggest customer. The carmaker may be responsible for $12bn in benefits at Delphi because of guarantees it offered when it spun off its former parts arm in 1999.
Analysts have warned that Delphi’s Chapter 11 filing under the weight of high wage, healthcare and pension costs, may foreshadow a similar drastic move by the world’s largest auto maker, whose labour woes could be compounded by the crisis at its supplier.
Bank of America analyst Ron Tadross said earlier this month: “It is our view that bankruptcy protection for GM is increasingly looking like a reasonable way to properly address the company’s retirement liabilities and job security benefits.” Steve Miller, chairman and chief executive of Delphi, said last week that unless Delphi’s bankruptcy process goes smoothly, it could “fatally wound” GM.
GM’s North American operations have been in crisis for some time, with commentators accusing it of spotting consumer trends too late. It has lagged Toyota in developing fashionable petrol-electric hybrids and launched the retro Chevrolet HHR after sales for retro vehicles peaked at other carmakers.
Last week the Detroit car company revealed plans to launch several crossover models – vehicles that have the interior space of SUVs but are built on the car rather than truck chassis. But the new models in the Buick, GMC and Saturn brands will have to compete with the crossover models that Toyota, Ford and DaimlerChrysler already have on the market.
In another desperate bid to get the ailing carmaker back on track, chief executive Richard Wagoner is seeking a buyer for all or part of the General Motors Acceptance Corporation, its finance arm. But there are fears the SEC investigation will hinder the sale. GM is hurting the most among the US carmakers but Ford and the Chrysler arm of DaimlerChrysler all experienced dismal sales performance last month.
http://www.thebusinessonline.com/Sto...E-D07EB5AA1CEE
By : Tracey Boles Chief Reporter October 30, 2005
GENERAL Motors will this week reveal that sales collapsed in October, taking its US market share to a 25-year low and fuelling fresh fears that the world’s largest carmaker is heading towards bankruptcy. Its US sales dropped 26% compared with the same month last year, according to early estimates, putting its monthly US market share at 20.5% – the lowest since at least 1980.
The figures were compiled by Deutsche Bank analyst Rod Lache. Goldman Sachs also believes October will be the worst month for US car and truck sales in years. GM – whose brands include Cadillac, Pontiac and Hummer – is confronting its biggest financial crisis for 13 years. A bankruptcy filing by the Detroit carmaker would spell the end of an era for US industry and change global car manufacturing for ever.
Last week, it emerged that Toyota is poised to unseat GM as the world’s biggest carmaker measured by units produced. The Japanese giant, which already dwarfs the US carmaker in profitability and value, intends to ramp up production next year.
The GM sales slump – blamed on high fuel prices, unease about the US economy and the end of special summer offers for its staff -– is the latest in a stream of bad news to hit GM, all sparking market fears that the carmaker could go bankrupt. General Motors has denied it is drawing up any plans to declare Chapter 11 bankruptcy. Last week, America’s Securities and Exchange Commission (SEC) intensified an inquiry into how GM accounts for its pensions and employee benefits.
So far this year, GM has posted record losses of $3.8bn (£2.1bn, E3.2bn) and its crucial credit ratings have been reduced to junk by the main rating agencies. The company is burdened by $90bn in pension obligations and a $77bn healthcare plan. Two weeks ago, it was forced to renegotiate the terms of its healthcare plan with the United Autoworkers Union. It managed to agree a deal that will cut $3bn a year from costs.
On Friday, General Motors recalled 106,000 sports utility vehicles (SUVs) to fix a door latch. Sales of the SUVs have been falling faster than those of other vehicles as fuel prices remain high.
The spectre of bankruptcy at GM loomed again last week as the markets digested the news that the SEC had issued subpoenas related to GM’s financial reporting for pension and other post-employment benefits, and to transactions and obligations between the company and auto-parts supplier Delphi, which itself entered Chapter 11 earlier this month.
Until now, the SEC inquiry, which is also looking at other companies including rival carmaker Ford, has been informal. GM is Delphi’s former parent and its biggest customer. The carmaker may be responsible for $12bn in benefits at Delphi because of guarantees it offered when it spun off its former parts arm in 1999.
Analysts have warned that Delphi’s Chapter 11 filing under the weight of high wage, healthcare and pension costs, may foreshadow a similar drastic move by the world’s largest auto maker, whose labour woes could be compounded by the crisis at its supplier.
Bank of America analyst Ron Tadross said earlier this month: “It is our view that bankruptcy protection for GM is increasingly looking like a reasonable way to properly address the company’s retirement liabilities and job security benefits.” Steve Miller, chairman and chief executive of Delphi, said last week that unless Delphi’s bankruptcy process goes smoothly, it could “fatally wound” GM.
GM’s North American operations have been in crisis for some time, with commentators accusing it of spotting consumer trends too late. It has lagged Toyota in developing fashionable petrol-electric hybrids and launched the retro Chevrolet HHR after sales for retro vehicles peaked at other carmakers.
Last week the Detroit car company revealed plans to launch several crossover models – vehicles that have the interior space of SUVs but are built on the car rather than truck chassis. But the new models in the Buick, GMC and Saturn brands will have to compete with the crossover models that Toyota, Ford and DaimlerChrysler already have on the market.
In another desperate bid to get the ailing carmaker back on track, chief executive Richard Wagoner is seeking a buyer for all or part of the General Motors Acceptance Corporation, its finance arm. But there are fears the SEC investigation will hinder the sale. GM is hurting the most among the US carmakers but Ford and the Chrysler arm of DaimlerChrysler all experienced dismal sales performance last month.
http://www.thebusinessonline.com/Sto...E-D07EB5AA1CEE
Oh well...GM's gonna be toast soon.
10-31-2005, 10:29 AM
#3
The sizzle in the Steak
Another day in Automotive news is another bad news story about GM.
11-15-2005, 06:48 PM
#4
I feel the need...
GM: See ya in bankruptcy court:
GM's Derivatives Show Increasing Bets on Bankruptcy (Update5)
2005-11-14 10:03 (New York)
(Updates share, bond price in 12th paragraph.)
By John Dooley and Barbara Powell
Nov. 14 (Bloomberg) -- Derivatives traders are increasing
bets that General Motors Corp. may follow Delphi Corp. and Delta
Air Lines Inc. into bankruptcy after the disclosure of
accounting errors and four straight quarters of losses.
Traders last week demanded upfront payments in addition to
annual premiums for derivatives contracts that protect owners of
the Detroit-based company's debt should it miss a payment or
declare bankruptcy. By doing so, traders relegated GM to the
same status as Delphi and Delta just before those companies
defaulted.
GM, the world's biggest automaker, is losing U.S. market
share to Asian rivals such as Toyota Motor Corp. and is in the
midst of its longest stretch without profit in 13 years. Moody's
Investors Service and Fitch Ratings this month cut GM's debt
rating two levels. Cash at the company's auto operations has
fallen to $19.2 billion from $24.5 billion a year ago.
``Things just keep piling one on top of the other for GM,''
said Rob Hinchliffe, an analyst with UBS Securities in New York
who rates GM ``reduce.'' GM is one of the two lowest-rated
stocks among the 11 auto and auto-parts companies he covers,
according to data compiled by Bloomberg.
The annual cost of insuring $10 million of GM debt for five
years with credit-default swaps rose to $1.7 million upfront
plus $500,000 a year on Nov. 10, compared with an annual premium
of about $1 million earlier in the week, traders said. The debt-
insurance contracts changed hands at about $260,000 at the start
of the year.
Demanding Upfront Payments
Delphi default-insurance sellers started demanding upfront
payments on April 19, six months before it filed for bankruptcy
on Oct. 8. Credit-default swaps on Delta, which filed on Sept.
14, were trading in January with upfront payments of about $4.5
million. Upfront fees for bankrupt Northwest Airlines Corp.,
which filed the same day as Delta, were about $4 million.
GM spokeswoman Toni Simonetti didn't immediately return
calls seeking comment.
A derivative is a financial obligation whose value is
derived from interest rates, the outcome of specific events, or
the price of underlying assets such as debt, equities and
commodities.
Investors use credit-default swaps to bet on a company's
creditworthiness or protect against non-payment. A buyer
typically pays an annual fee and gets the full amount insured if
the borrower defaults. In return, the swap seller gets the
defaulted loans or bonds.
Stock Tumbles
Swap prices typically decline when creditworthiness
improves, and rise when it worsens. Sellers of default
protection start demanding payments up front for the insurance
to compensate for increased concerns about a company's
creditworthiness.
GM said Nov. 9 that 2001 profit was overstated by $300
million to $400 million. The company previously reported 2001
net income of $601 million.
The announcement sent the automaker's stock down 4.5
percent the next day to its lowest since 1992. The shares are
down 37 percent since Oct. 17, when GM reported a third-quarter
loss of $1.6 billion. They fell 47 cents, or 1.9 percent, to
$24.01 at 10 a.m. in New York Stock Exchange composite trading.
GM's 8.375 percent note maturing in 2033 fell 1.5 cent on
the dollar to 68.5 cents, yielding 12.4 percent, according to
Trace, the bond-price reporting services of the NASD.
Options
The global credit-derivatives market has grown almost five-
fold in the past two years, mostly on demand for credit-default
swaps, according to data compiled by the International Swaps and
Derivatives Association. Investors held contracts on $12.4
trillion of debt at the end of June, ISDA data show. The market
wasn't tracked until 1997.
A growing number of investors are also using options to bet
GM's shares will decline. Activity in options contracts that pay
off should GM's stock fall below $10 before January 2007 has
soared. The number of outstanding contracts on that bet has
tripled to 514,725 since January.
There are four times as many outstanding put options --
agreements to sell a stock at a certain price -- as call options
on GM. At the start of the year, the ratio was half that.
Investors are reevaluating ``the overall risk and the
negative factors that weigh on the credit of GM,'' said Pete
Hastings, vice president of corporate fixed income at Morgan
Keegan Inc. in Memphis, Tennessee.
Benefiting
Some investors profited from concerns about GM. Pacific
Investment Management Co., manager of the world's largest bond
fund, says it made money at the expense of hedge funds by
betting that General Motors Corp. bonds would gain earlier this
year.
Pimco in April and May sold ``several billion dollars'' of
insurance against defaults on bonds issued by GM and Ford Motor
Co., Mark Kiesel, an executive vice president who runs Pimco's
investment-grade bond trading, said July 27. The strategy was
new to Pimco, which had never used credit-default swaps to take
a ``significant'' position in corporate bonds, Kiesel said at
the time. He didn't immediately return an e-mail seeking
comment.
On Oct. 17, GM reported a $1.6 billion quarterly loss,
extending its longest profitless streak since 1992. On Oct. 26,
the automaker said it received subpoenas from the U.S.
Securities and Exchange Commission concerning its reporting of
pensions and other retiree benefits.
October Sales Drop
The company's October U.S. auto sales dropped 26 percent
from a year earlier as Asian rivals took a record share of the
U.S. market. Moody's this month lowered its rating on GM debt to
B1, four levels below investment grade, and Fitch rated the
bonds an equivalent B+.
Some United Auto Workers members at Delphi, the biggest
U.S. auto-parts maker, have threatened to strike amid that
company's demands for wage and benefit cuts. That has raised the
possibility that GM won't have enough parts to continue building
cars.
Survivors
El Paso Corp., owner of the largest U.S. network of natural
gas pipelines, and U.K. industrial companies Corus Group Plc and
Invensys Plc have all avoided bankruptcy since their credit-
default swaps traded on an upfront basis.
Houston-based El Paso started trading upfront in February
2003 after its debt rating was cut to junk by Standard & Poor's.
The premium on five-year credit-default swaps has since shrunk
to about $309,000 on Nov. 11 from almost $1.5 million two years
ago, according to Barclays Capital, as the company sold assets
to reduce debt.
Bank of America analyst Ron Tadross said in a research
report that last week's restatement prompted him to raise his
estimate of the likelihood of a GM bankruptcy within two years
to 40 percent from 30 percent.
Hinchliffe, who estimates that GM would burn through $19
billion in cash at its automotive operations if a Delphi strike
lasted 10 weeks, said the company may be able to weather its
declines.
``I'm not convinced that Chapter 11 is that imminent given
GM's cash,'' he said.
--With reporting by Jennifer Ryan in London and Alan Katz in
Paris. Editor: Reierson (dsv/mno/jks/emr/grs)
Story illustration: See {CGM1U5 <Crncy> GP D <GO>} for a chart
Of GM credit-default swaps.
source: bloomberg.com
GM's Derivatives Show Increasing Bets on Bankruptcy (Update5)
2005-11-14 10:03 (New York)
(Updates share, bond price in 12th paragraph.)
By John Dooley and Barbara Powell
Nov. 14 (Bloomberg) -- Derivatives traders are increasing
bets that General Motors Corp. may follow Delphi Corp. and Delta
Air Lines Inc. into bankruptcy after the disclosure of
accounting errors and four straight quarters of losses.
Traders last week demanded upfront payments in addition to
annual premiums for derivatives contracts that protect owners of
the Detroit-based company's debt should it miss a payment or
declare bankruptcy. By doing so, traders relegated GM to the
same status as Delphi and Delta just before those companies
defaulted.
GM, the world's biggest automaker, is losing U.S. market
share to Asian rivals such as Toyota Motor Corp. and is in the
midst of its longest stretch without profit in 13 years. Moody's
Investors Service and Fitch Ratings this month cut GM's debt
rating two levels. Cash at the company's auto operations has
fallen to $19.2 billion from $24.5 billion a year ago.
``Things just keep piling one on top of the other for GM,''
said Rob Hinchliffe, an analyst with UBS Securities in New York
who rates GM ``reduce.'' GM is one of the two lowest-rated
stocks among the 11 auto and auto-parts companies he covers,
according to data compiled by Bloomberg.
The annual cost of insuring $10 million of GM debt for five
years with credit-default swaps rose to $1.7 million upfront
plus $500,000 a year on Nov. 10, compared with an annual premium
of about $1 million earlier in the week, traders said. The debt-
insurance contracts changed hands at about $260,000 at the start
of the year.
Demanding Upfront Payments
Delphi default-insurance sellers started demanding upfront
payments on April 19, six months before it filed for bankruptcy
on Oct. 8. Credit-default swaps on Delta, which filed on Sept.
14, were trading in January with upfront payments of about $4.5
million. Upfront fees for bankrupt Northwest Airlines Corp.,
which filed the same day as Delta, were about $4 million.
GM spokeswoman Toni Simonetti didn't immediately return
calls seeking comment.
A derivative is a financial obligation whose value is
derived from interest rates, the outcome of specific events, or
the price of underlying assets such as debt, equities and
commodities.
Investors use credit-default swaps to bet on a company's
creditworthiness or protect against non-payment. A buyer
typically pays an annual fee and gets the full amount insured if
the borrower defaults. In return, the swap seller gets the
defaulted loans or bonds.
Stock Tumbles
Swap prices typically decline when creditworthiness
improves, and rise when it worsens. Sellers of default
protection start demanding payments up front for the insurance
to compensate for increased concerns about a company's
creditworthiness.
GM said Nov. 9 that 2001 profit was overstated by $300
million to $400 million. The company previously reported 2001
net income of $601 million.
The announcement sent the automaker's stock down 4.5
percent the next day to its lowest since 1992. The shares are
down 37 percent since Oct. 17, when GM reported a third-quarter
loss of $1.6 billion. They fell 47 cents, or 1.9 percent, to
$24.01 at 10 a.m. in New York Stock Exchange composite trading.
GM's 8.375 percent note maturing in 2033 fell 1.5 cent on
the dollar to 68.5 cents, yielding 12.4 percent, according to
Trace, the bond-price reporting services of the NASD.
Options
The global credit-derivatives market has grown almost five-
fold in the past two years, mostly on demand for credit-default
swaps, according to data compiled by the International Swaps and
Derivatives Association. Investors held contracts on $12.4
trillion of debt at the end of June, ISDA data show. The market
wasn't tracked until 1997.
A growing number of investors are also using options to bet
GM's shares will decline. Activity in options contracts that pay
off should GM's stock fall below $10 before January 2007 has
soared. The number of outstanding contracts on that bet has
tripled to 514,725 since January.
There are four times as many outstanding put options --
agreements to sell a stock at a certain price -- as call options
on GM. At the start of the year, the ratio was half that.
Investors are reevaluating ``the overall risk and the
negative factors that weigh on the credit of GM,'' said Pete
Hastings, vice president of corporate fixed income at Morgan
Keegan Inc. in Memphis, Tennessee.
Benefiting
Some investors profited from concerns about GM. Pacific
Investment Management Co., manager of the world's largest bond
fund, says it made money at the expense of hedge funds by
betting that General Motors Corp. bonds would gain earlier this
year.
Pimco in April and May sold ``several billion dollars'' of
insurance against defaults on bonds issued by GM and Ford Motor
Co., Mark Kiesel, an executive vice president who runs Pimco's
investment-grade bond trading, said July 27. The strategy was
new to Pimco, which had never used credit-default swaps to take
a ``significant'' position in corporate bonds, Kiesel said at
the time. He didn't immediately return an e-mail seeking
comment.
On Oct. 17, GM reported a $1.6 billion quarterly loss,
extending its longest profitless streak since 1992. On Oct. 26,
the automaker said it received subpoenas from the U.S.
Securities and Exchange Commission concerning its reporting of
pensions and other retiree benefits.
October Sales Drop
The company's October U.S. auto sales dropped 26 percent
from a year earlier as Asian rivals took a record share of the
U.S. market. Moody's this month lowered its rating on GM debt to
B1, four levels below investment grade, and Fitch rated the
bonds an equivalent B+.
Some United Auto Workers members at Delphi, the biggest
U.S. auto-parts maker, have threatened to strike amid that
company's demands for wage and benefit cuts. That has raised the
possibility that GM won't have enough parts to continue building
cars.
Survivors
El Paso Corp., owner of the largest U.S. network of natural
gas pipelines, and U.K. industrial companies Corus Group Plc and
Invensys Plc have all avoided bankruptcy since their credit-
default swaps traded on an upfront basis.
Houston-based El Paso started trading upfront in February
2003 after its debt rating was cut to junk by Standard & Poor's.
The premium on five-year credit-default swaps has since shrunk
to about $309,000 on Nov. 11 from almost $1.5 million two years
ago, according to Barclays Capital, as the company sold assets
to reduce debt.
Bank of America analyst Ron Tadross said in a research
report that last week's restatement prompted him to raise his
estimate of the likelihood of a GM bankruptcy within two years
to 40 percent from 30 percent.
Hinchliffe, who estimates that GM would burn through $19
billion in cash at its automotive operations if a Delphi strike
lasted 10 weeks, said the company may be able to weather its
declines.
``I'm not convinced that Chapter 11 is that imminent given
GM's cash,'' he said.
--With reporting by Jennifer Ryan in London and Alan Katz in
Paris. Editor: Reierson (dsv/mno/jks/emr/grs)
Story illustration: See {CGM1U5 <Crncy> GP D <GO>} for a chart
Of GM credit-default swaps.
source: bloomberg.com
11-15-2005, 09:46 PM
#5
The sizzle in the Steak
Funny how this post is coming more true everyday that goes by.
https://acurazine.com/forums/automotive-news-6/general-motors-sales-marketing-financial-news-321371/
https://acurazine.com/forums/automotive-news-6/general-motors-sales-marketing-financial-news-321371/
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