Trade opened.
Entry Price .................$25.18
Stoploss.....................No Stoploss
Exit Criteria.................@ fair value or after 2yrs irrespective of price
Position Size...............1000 shares
Expectations.
This is obviously a value based trade. I believe that the share price is undervalued, and will at some point, see a return to a fair value.
I shall receive an 8% yield on the dividend, assuming that it is maintained.
Associated Press
GM Posts $1.1B 1Q Loss on Costs, Charges
Tuesday April 19, 4:57 pm ET
By John Porretto, AP Auto Writer
General Motors Reports $1.1 Billion First-Quarter Loss on Weak Response to New Models, Charges
DETROIT (AP) -- General Motors Corp. reported its deepest quarterly loss in more than a decade -- $1.1 billion -- as rising health care costs and lackluster response to some new models hammered its North American business. With health costs not getting any cheaper and Asian automakers grabbing more of the market, the outlook for the world's largest automaker remains bleak.
The January-March loss amounted to $1.95 per share, compared with earnings of $1.3 billion, or $2.25 a share, in the year-ago quarter, when the company benefited handsomely from its finance arm and improved business in Asia.
It marked Detroit-based GM's steepest quarterly deficit since the first quarter of 1992, when it reported a $21 billion loss primarily because of changes in accounting procedures for retiree health care costs.
Revenue fell 4.3 percent to $45.8 billion from $47.8 billion a year ago.
"We expected a difficult quarter," GM chief financial officer John Devine said in a conference call with investors and automotive journalists. "Obviously, that's what we saw."
GM shares fell 10 cents to close at $26.09 on the New York Stock Exchange after falling as low as $24.67 earlier in the day. In recent weeks, GM shares have traded at lows not seen in more than a decade.
The company behind brands such as Chevrolet, Saturn and Hummer simply hasn't had the response to a slew of new products it expected. GM led the industry with 29 U.S. vehicle introductions in 2004 and plans to follow that with 17 this year.
On top of lukewarm car demand and rising medical costs, GM also battled intense pricing competition in the first quarter. Revenue per vehicle in North America fell to $18,396 from $19,084 a year ago, in part because of reduced pricing on some vehicles.
Meanwhile, Asian automakers such as Toyota Motor Corp., Nissan Motor Co. and Kia Motors Corp. have posted impressive sales gains. The growth, analysts say, can be attributed in part to their reputations for quality as well as new products -- such as Toyota's Scion brand that targets younger buyers and the Nissan Titan, that company's first entry in the full-size pickup category.
Excluding special charges, GM said first-quarter earnings amounted to a loss of $839 million, or $1.48 a share, compared with net income of $1.2 billion, or $2.12 a share, in the first quarter of 2004.
The latest result was in line with Wall Street expectations for a loss of $1.49 per share, according to Thomson Financial.
GM's special items included charges for restructuring in Europe, where it trimmed its payroll by nearly 6,000 in the first quarter, and U.S. salaried attrition programs. Devine said the company lowered its U.S. salaried headcount by 2,800 in the first quarter.
GM said its cash, marketable securities and available assets from an employees' health care trust fund fell from $23.3 billion on Dec. 31 to $19.8 billion on March 31, excluding financing and insurance operations. The decline reflects lower vehicle production, restructuring costs and a $2 billion settlement with Fiat SpA to resolve a contract dispute.
GM warned investors in March its first-quarter earnings would be below previous estimates of break-even or better. It has said it expects income of $1 to $2 per share for the full year, down from a previous guidance of $4 to $5.
On Tuesday, the company declined to reaffirm its March guidance or offer any new forecast for the year. It cited "the uncertainty affecting key elements of our financial forecast, such as resolution of the health-care cost crisis."
GM has said U.S. health care costs continue to grow at an excessive rate and hamper profitability. GM spent $5.2 billion last year to cover 1.1 million salaried and hourly employees, retirees and family members. GM has said the amount could grow to $5.8 billion this year.
The United Auto Workers union said last week it had no intention of reopening its labor contract to negotiate lower medical expenses but would do what it could within the agreement to help GM lower costs.
Merrill Lynch analyst John Casesa said GM likely is "ratcheting-up pressure on the UAW to open the current contract," which expires in 2007. "Our view is that concessions are highly unlikely before 2007, and that today's statement underscores that restructuring GM's North American operations will be a long, arduous process," Casesa said in a research note.
The CFO Devine declined comment on any negotiations with the UAW.
Standard & Poor's, Moody's Investors Service and Fitch Ratings all have cut GM's debt rating to one notch above junk status because of declining market share, increased competition and other reasons. Further downgrades could significantly increase GM's borrowing costs, though none of the agencies acted after GM's report Tuesday.
An S&P spokesman said GM's first-quarter results were in line with the agency's expectations.
GM sales in the United States, its largest and most competitive market, sank 4 percent for the first three months of 2005 from a year ago. Its U.S. market share slipped to 25.6 percent from roughly 27 percent, according research firm to Autodata Corp.
In the past year or so, GM has focused on its car lineup, which generates lower profits than trucks and sport utility vehicles. Yet car sales fell 8 percent for the first three months of 2005 from a year ago.
Sales of some large trucks and sport utility vehicles also are down, hurt in part by rising gas prices, though GM in March reported its best month for full-size pickups since 1978.
The $1.3 billion loss from GM's global automotive business compared with earnings of $561 million in the year-ago quarter. In North America, GM said it lost $1.3 billion versus a profit of $401 million in the first quarter of 2004.
The company said its market share in North America was 25.2 percent in the first quarter, down from 26.3 percent a year ago.
GM's GMAC finance arm, which has contributed heavily to profits in recent quarters, earned $728 million in the quarter, down from $764 million in the year-ago quarter. The last time GM's automotive earnings outpaced those at GMAC was in the fourth quarter of 2002.
GM Europe posted a loss of $103 million in the first quarter, an improvement from a loss of $116 million a year ago. GM Asia Pacific earned $60 million in the first quarter, compared with earnings of $275 million in the year-ago quarter.
GM Latin America/Africa/Middle East reported earnings of $46 million in the first quarter, up from $1 million in the first quarter of 2004.
Ford Motor Co., GM's crosstown rival, also has been hurt by high health care and materials costs and earlier this month lowered its profit forecast for 2005. Ford is expected to announce further production cuts when it releases first-quarter earnings results Wednesday.
AP Auto Writer Dee-Ann Durbin contributed to this report.
General Motors Corp
cheers d998
Entry Price .................$25.18
Stoploss.....................No Stoploss
Exit Criteria.................@ fair value or after 2yrs irrespective of price
Position Size...............1000 shares
Expectations.
This is obviously a value based trade. I believe that the share price is undervalued, and will at some point, see a return to a fair value.
I shall receive an 8% yield on the dividend, assuming that it is maintained.
Associated Press
GM Posts $1.1B 1Q Loss on Costs, Charges
Tuesday April 19, 4:57 pm ET
By John Porretto, AP Auto Writer
General Motors Reports $1.1 Billion First-Quarter Loss on Weak Response to New Models, Charges
DETROIT (AP) -- General Motors Corp. reported its deepest quarterly loss in more than a decade -- $1.1 billion -- as rising health care costs and lackluster response to some new models hammered its North American business. With health costs not getting any cheaper and Asian automakers grabbing more of the market, the outlook for the world's largest automaker remains bleak.
The January-March loss amounted to $1.95 per share, compared with earnings of $1.3 billion, or $2.25 a share, in the year-ago quarter, when the company benefited handsomely from its finance arm and improved business in Asia.
It marked Detroit-based GM's steepest quarterly deficit since the first quarter of 1992, when it reported a $21 billion loss primarily because of changes in accounting procedures for retiree health care costs.
Revenue fell 4.3 percent to $45.8 billion from $47.8 billion a year ago.
"We expected a difficult quarter," GM chief financial officer John Devine said in a conference call with investors and automotive journalists. "Obviously, that's what we saw."
GM shares fell 10 cents to close at $26.09 on the New York Stock Exchange after falling as low as $24.67 earlier in the day. In recent weeks, GM shares have traded at lows not seen in more than a decade.
The company behind brands such as Chevrolet, Saturn and Hummer simply hasn't had the response to a slew of new products it expected. GM led the industry with 29 U.S. vehicle introductions in 2004 and plans to follow that with 17 this year.
On top of lukewarm car demand and rising medical costs, GM also battled intense pricing competition in the first quarter. Revenue per vehicle in North America fell to $18,396 from $19,084 a year ago, in part because of reduced pricing on some vehicles.
Meanwhile, Asian automakers such as Toyota Motor Corp., Nissan Motor Co. and Kia Motors Corp. have posted impressive sales gains. The growth, analysts say, can be attributed in part to their reputations for quality as well as new products -- such as Toyota's Scion brand that targets younger buyers and the Nissan Titan, that company's first entry in the full-size pickup category.
Excluding special charges, GM said first-quarter earnings amounted to a loss of $839 million, or $1.48 a share, compared with net income of $1.2 billion, or $2.12 a share, in the first quarter of 2004.
The latest result was in line with Wall Street expectations for a loss of $1.49 per share, according to Thomson Financial.
GM's special items included charges for restructuring in Europe, where it trimmed its payroll by nearly 6,000 in the first quarter, and U.S. salaried attrition programs. Devine said the company lowered its U.S. salaried headcount by 2,800 in the first quarter.
GM said its cash, marketable securities and available assets from an employees' health care trust fund fell from $23.3 billion on Dec. 31 to $19.8 billion on March 31, excluding financing and insurance operations. The decline reflects lower vehicle production, restructuring costs and a $2 billion settlement with Fiat SpA to resolve a contract dispute.
GM warned investors in March its first-quarter earnings would be below previous estimates of break-even or better. It has said it expects income of $1 to $2 per share for the full year, down from a previous guidance of $4 to $5.
On Tuesday, the company declined to reaffirm its March guidance or offer any new forecast for the year. It cited "the uncertainty affecting key elements of our financial forecast, such as resolution of the health-care cost crisis."
GM has said U.S. health care costs continue to grow at an excessive rate and hamper profitability. GM spent $5.2 billion last year to cover 1.1 million salaried and hourly employees, retirees and family members. GM has said the amount could grow to $5.8 billion this year.
The United Auto Workers union said last week it had no intention of reopening its labor contract to negotiate lower medical expenses but would do what it could within the agreement to help GM lower costs.
Merrill Lynch analyst John Casesa said GM likely is "ratcheting-up pressure on the UAW to open the current contract," which expires in 2007. "Our view is that concessions are highly unlikely before 2007, and that today's statement underscores that restructuring GM's North American operations will be a long, arduous process," Casesa said in a research note.
The CFO Devine declined comment on any negotiations with the UAW.
Standard & Poor's, Moody's Investors Service and Fitch Ratings all have cut GM's debt rating to one notch above junk status because of declining market share, increased competition and other reasons. Further downgrades could significantly increase GM's borrowing costs, though none of the agencies acted after GM's report Tuesday.
An S&P spokesman said GM's first-quarter results were in line with the agency's expectations.
GM sales in the United States, its largest and most competitive market, sank 4 percent for the first three months of 2005 from a year ago. Its U.S. market share slipped to 25.6 percent from roughly 27 percent, according research firm to Autodata Corp.
In the past year or so, GM has focused on its car lineup, which generates lower profits than trucks and sport utility vehicles. Yet car sales fell 8 percent for the first three months of 2005 from a year ago.
Sales of some large trucks and sport utility vehicles also are down, hurt in part by rising gas prices, though GM in March reported its best month for full-size pickups since 1978.
The $1.3 billion loss from GM's global automotive business compared with earnings of $561 million in the year-ago quarter. In North America, GM said it lost $1.3 billion versus a profit of $401 million in the first quarter of 2004.
The company said its market share in North America was 25.2 percent in the first quarter, down from 26.3 percent a year ago.
GM's GMAC finance arm, which has contributed heavily to profits in recent quarters, earned $728 million in the quarter, down from $764 million in the year-ago quarter. The last time GM's automotive earnings outpaced those at GMAC was in the fourth quarter of 2002.
GM Europe posted a loss of $103 million in the first quarter, an improvement from a loss of $116 million a year ago. GM Asia Pacific earned $60 million in the first quarter, compared with earnings of $275 million in the year-ago quarter.
GM Latin America/Africa/Middle East reported earnings of $46 million in the first quarter, up from $1 million in the first quarter of 2004.
Ford Motor Co., GM's crosstown rival, also has been hurt by high health care and materials costs and earlier this month lowered its profit forecast for 2005. Ford is expected to announce further production cuts when it releases first-quarter earnings results Wednesday.
AP Auto Writer Dee-Ann Durbin contributed to this report.
General Motors Corp
cheers d998
