JCC

Why I'd Buy Toyota, The #1 Automaker in the U.S.

It is amazing how this subject evokes emotions over solid reasoning. To start this off, I agree that Toyota is a decent long term investment. Also, I agree that GM has shown almost everything that is wrong with a capitalist company. Furthermore, I am impressed with Ford's performance under Mulally.

Since the 70's when the Japanese vehicles showed up on our shores, GM has been struggling, making one short-term and erroneous bet after another. Some of this is due to our quarterly report system, and some of it is due union intransigence, but most is due to very poor and shortsighted upper management at GM.

Generally this type of poor performance is handled by the bankruptcy court. What is unusual is that this bankruptcy has been orchestrated by the US Government.

So let's look at the results with some investment logic:
1. GM evolves from bankruptcy with very little debt.
2. GM's tax loss carryforward, shields them from US income taxes for 10 years. Note that rules were changed to allow this to happen.
3. Union contracts have been slashed and their labor cost structure is 1/2 of what it was.
4. The retirement cost structure has been transferred to the UAW.
5. GM's new Chairman of the Board (Whitacre) is a proven turnaround specialist.

So in the intermediate term, GM has it made, and will be a pretty good investment post-bankruptcy. For those who had the foresight to buy GM bonds just before bankruptcy, had made a great bet, because the conversion gives them a breakeven point at 56 cents a share or less.

For those who buy the new stock when it is available, GM will be a money making making machine for 5 years or more. The stock should show lots of upside. Some even worrry about Ford competing because they will not have the advantages of GM.

In the longer term, GM will have to make it on it's own. Their success will be highly dependent upon top management, the UAW and resulting product value and quality. They might or might not make it, but I can't see that far into the future. Ten years from now, the other shoe will have dropped, and a new set of issues will be guiding the success of the automotive industries.

Extended Excerpts: GM Dissident Bondholders

Smarty_Pants, that might be the way that you think it is, but your intrerpretation is not the law. And yes it is the way it is supposed to be. People cry about the law all of the time, disagreeing with the application, and interpretation.

Once again, this might go to the supreme court, where the approach will likely be affirmed. Many will say, that is not the law, but it is the law, and will have been affirmed by the highest court in the nation.

You have an option - If you don't like the law, work to have it changed.

On Jun 21 10:00 PM Smarty_Pants wrote:

> "In bankruptcy, the judge has the power to distribute the pain, and
> lots of people get hurt. That's the way it is, and while I sympathize,
> that is our system." - JCC
>
> That's not the way it's supposed to be, which is the point of the
> article. Will people lose money? Sure, that's what happens in bankruptcy.
> What the law is supposed to do however, is make sure that the losses
> are distributed equitably.
>
> When bondholder's claims for $27 billion in debt get about half of
> what Union claims (for less than $21 billion in debt) get, that's
> nothing like equitable.
>
> Even worse, the government's claim for $19 billion gets even more
> out of the deal and they are trying to make it happen before anyone
> can react. This is nothing more than an end run attempt at getting
> around the bankruptcy process to the benefit of the government and
> unions and to the detriment of those who hold the largest claim against
> the company.
>
> In a word, it's attempted theft in the guise of "saving" GM.
>
> This is the sort of thing our Founding Father's cited a reason for
> seceding from England. As I recall, they stated that their government
> had "combined with others to subject us to a jurisdiction foreign
> to our constitution, and unacknowledged by our laws".
>
> How sad that our government has reverted to behavior which was originally
> cited as cause for its formation.

Extended Excerpts: GM Dissident Bondholders

I purchased my GM Bonds on the last day they traded at about 12% of par. So, I see myself as a winner based upon the announced stock trade. It the stock hits 56 cents a share I break even. I bought them because they seemed like a good investment.

I feel bad for those who purchased the bonds at PAR, however, they could have sold at anytime along the path to bankruptcy. In bankruptcy, the judge has the power to distribute the pain, and lots of people get hurt. That's the way it is, and while I sympathize, that is our system. This is not the first time nor will it be the last time that bond holders get burned. They did better than the stock holders, who will be wiped out.

How GM Can Get Its Groove Back

GM emerges from Bankruptcy with a lot of positive changes:
1. Smaller and easier to run
2. Very little debt
3. Dramatically lower labor costs
4. Roughly 10 years of tax loss carry forward (rules were changed to allow this).
5. Strong US backing.

They have a lot going for them, and make a pretty good post bankruptcy bet. The bonds with the announced conversion to stock are an excellent bet. The bonds break even when the stock hit 60 cents. With the subsequent warrents, they should provide a great yield.

Many are too angry to see the possibilities, and will miss the opportunity. Political viewpoints act as a good blinder. These opportunities don't come around very often, and a reasonable investor should look at them.

GM: To File or Not to File, That Is the Question

Gerry - I notice that most GM bonds are not listed today. They were listed yesterday. I guess that they will get a new symbol.

The Market Loves GM Bankruptcy

GM moves forward with $70 billion in tax loss carry forward (the rules were modified to allow this), minimal debt, dramatically reduced labor costs and a much lower break-even point.

In the intermediate term, they will be wildly profitable. Who knows what will happen in the long term.

GM Common Stock Is Worth More than You Think

Dybydx - you were correct, but the rules have changed:

The rules were modified for companies taking TARP funds. For those companies, they are allowed to keep the Tax Losses. So the losses will go with the new GM.


On Jun 01 04:56 PM dybydx wrote:

> the author of this article needs to take an intro course on corporate
> taxes....
>
> as someone pointed out, if this is a sale of assets from old gm to
> new gm, follow up a dissolution of the old gm, then all tax values
> of the old corp is lost.
>
> also someone need to be seriously out of their mind to buy the old
> gm shell, since inheriting that shell means also inheriting any skeletons
> in the closet. gm is famous for its legacy costs, remember that.

GM Common Stock Is Worth More than You Think

Today GM has had a low of 27 cents and high of $1.01. Someone could have have quadrupled their money in a few hours. The current price is 89 cents, which is up 14 cents from Friday's close.

Pretty good for a stock that will soon be close to worthless. I have to admit, that I don't understand the buying of GM common. I think that it will eventually be close to worthless.

GM Common Stock Is Worth More than You Think

Today GM has had a low of 27 cents and high of $1.01. Someone could have have quadrupled their money in a few hours. The current price is 89 cents, which is up 14 cents from Friday's close.

Pretty good for a stock that will soon be close to worthless. I have to admit, that I don't understand the buying of GM common. I think that it will eventually be close to worthless.

GM Common Stock Is Worth More than You Think

Actually, if you had bought GM Bonds on Thursday, you would have already doubled your money. They are still an excellenct investment.

You will not have to wait years, because after bankruptcy, the breakeven is 54 cents a share. With the warrents which might to come into play a year or so late, the breakeven is less than 30 cents a share. If GM stock goes to $1 a share you come close to doubling your money. At $5 per share you have a great investment.

So this is a very quick great investment. In a year or two it might turn into an amazing dream investment.


On May 31 12:44 PM E Nuff Sed wrote:

> I am sure someone will figure it out. The "good" GM will sail on
> with all the assets, without debt and much lower costs while the
> "bad" gm will retain the shell with all the tax losses .
> I think GM bonds which will convert to 10% of the equity + 15% warrants
> (in "good" GM) are worth something. You will have to hold them for
> several years though before seeing any upside and there is down side
> in the interim as they will be paying no interest.

GM: To File or Not to File, That Is the Question

Will they be trading on Monday?


On May 29 11:17 AM Gerry Sullivan wrote:

> I sold all of mine. I think that the GM bonds are a good investment,
> but I am a trader.
>
> I was not able to find the new symbol for GRM.

GM: To File or Not to File, That Is the Question

Gerry,

I notice that GRM is not listed this morning. I guess that bonds don't trade the day before the end of the term?

I also see that nearly all of the other GM bonds are down ~10%.

With the bankruptcy planned for Monday, do you think that these bonds are a worthwhile investment today?

GM: To File or Not to File, That Is the Question

Gerry - Why is it that GRM is down, yet all of the other GM bonds are up ~25%?

The morning news is the obvious cause of movement. An analysis of this movement would be interesting, and possibly profitable.