[DeTomaso] Fwd: fixing the economy (npc content)

Fri Apr 3 11:12:40 EDT 2009

---------- Forwarded message ----------
From: boyd casey <boyd411 at gmail.com>
Date: Fri, Apr 3, 2009 at 11:10 AM
Subject: Re: [DeTomaso] fixing the economy (npc content)
To: Gray Gregory <rgg at gregorycook.com>

I have to differ on one point. The stock price does not reflect the value of
gm or for that part any other company most of the time. If you look at the
NAV ( net asset value) and what percentage if the NAV is reflected in the
current stock price it will range from a fraction  (like .4) to a multiple (
like 2.0) So sometimes the stocks price rflects only 40 % of the actual
value of the assest of the company ( this does not include the value of it a
a money makeing enterprise just hard assets or Liquidation value) sometimes
the stock price id\s double the NAV because of the earning petential of the
enterprise. What ever the earning potential of a company is if it's debt out
weighs it's potential to service it'debt at any concivable realistic level
of profiability yo have a problem. Its like trying to bail on the titanic
with a bucket . The water is coming in faster then you can bail it out (only
the water is money) The actual price of the stock rarely relects the actual
value of any company , If it did there would be very little trading,\.
People buy stock because they think the company is worth more then the stock
price . They sell because they think the company is worth less then the
sales price . In every transaction there is a buyer and and a seller so one
of them is wrong . The stock price rflects what some one is willing to pay
for it at any given time . sometimes it has absolutely no bearing on the
real value of the company. Do you think the value of a major large cap
company fluctuates by billions of  dollars everyday? It the opinions of the
traders that change not the value of the company. Warren buffet has become
the richest man in the country by finding companies who's stock price did
not accurately reflect the value of the company. GM was in trouble long
before the current economic fiasco. I remember doing an analysis of their
financials around three years ago . at that time and in
that business environment it would have taken them something like 50 years
to pay off their existing debt ( and their debt was growing not shrinking)
They were over burdened with legacy expenses from the pension fund, jobs
bank and other expenses they added several thousand dollars too the cost of
each car but did nothing the improve their profitability. They were expenses
that didn't add anything to the product or they business. It was doomed even
then. The problem was they would not have been able to sever those
relationships and obligations in that supposedly "up market" It took the
current collapse and environment of fear of loss to convince the public and
the unions and the bond holders that 10 % of something is better then 100%
of  nothing. I predict you will see a streamined  Bankruptcy and
reorganization ( one of the fastest in history ) that will leave us with a
GM that has been stripped of it's fat and its legacy obligation will have
gone the way of the Dinosaur. You will see a stripped out lean version of GM
with a much smaller product line , caps and controls on executive
compensation and an emphasis on R&D of Hybrid, electric and other
alternative energy solutions. You will also see a much greater utilization
 of cross model sharing  of major components. (like engines , transmissions
and platforms).  across a class of vehicles. This was already done on a much
smaller level with models like Pontiac sunbirds and cavilers  and camaros
and firebirds. But it is going to be taken to the next level . There will be
one basic platform for each class of vehicle (sub compact, compact, midsize,
full size) using the same platform and drive train components for each
vehicle in the same class. That allows utilization of one assembly line to
manufacture several different models with no retooling. They can make a
different model everyday of the week on the same line and just change the
trim and badging at the end of the line. This also allows for increases in
production if one model becomes more popular with out taking weeks to retool
or change the line. A perfect example is the Pontiac Solstice or the Saturn
Sky. They are the same car with slightly different trim. This next example
is a Chrysler but the concept is the same , the dodge neon and the PT
cruiser are both built on the same platform. These type of production
techniques first developed by the Japanese and combine them with a product
line up driven by customer demand not the ego centric design team that
decided Hummer H3's were what America needed. when gas was approaching $5.00
a gallon.
Just my 2 cents and as some of you already know i have too much time on my
hands and I had to use some of it up or the Government is likely to recall
it and redistribute it to someone who has less.
Boyd
(the opinions expressed here are those of the voices I hear in my head and
do not necessarily reflect the opinions of the heads owner )

On Thu, Apr 2, 2009 at 9:16 PM, Gray Gregory <rgg at gregorycook.com> wrote:

> We can debate the merits of various valuation metrics until we're blue in
> the face but as you correctly state under any method GM is a mess.
>
> I agree the government is likely going to pump many more billions into GM
> under the guise of saving jobs or national security or whatever is easiest
> to sell politically at the time. The bottom line is that politicians are
> always willing to spend taxpayer money to buy votes.
>
> Gray
>
> -----Original Message-----
> From: detomaso-bounces at realbig.com [mailto:detomaso-bounces at realbig.com]
> On Behalf Of Lynn Wall
> Sent: Thursday, April 02, 2009 5:40 PM
> To: 'Steve Hawkins'; detomaso at realbig.com
> Subject: Re: [DeTomaso] fixing the economy (npc content)
>
> Stock price does NOT reflect the "value" of a company.  It represents the
> "bet" people are willing to make regarding the future movements of the
> stock
> market, that particular segment of the market and finally rumors (sometimes
> facts) regarding the position the company is in to leverage external
> market/governmental forces.  This is why there is the term "market
> capitalization" (number of shares in the market times the share price) and
> "company value" (assets minus liabilities).  Either way for GM it is not a
> pretty picture for the reasons others have identified.
>
> I don't think the government wants the company nearly as much as it wants
> the union membership to continue voting for them.  Either way, and I have
> said this before on this forum, look for the US to spend about $100 billion
> more in an attempt to save the $20 billion they already put in.
>
> Slippery slope, pouring good money after bad, pot committed (poker term)
> pick your saying, just about any of them work.  Very few of the people, if
> any, on this forum (including myself) know the incredible complexities of
> the GM brand many of which will be sold to us as necessary for the security
> of the US and therefore we must save.
>
> I personally think the government is trying to desensitize us to the terms
> "trillions" and "billions" so when they tell us that the next social
> program
> will cost us $1 trillion dollars we will say "golly, at least it is not 2
> trillion" and our silence will be interpreted as support.
>
> I will now slip back into obscurity
>
> Lynn, shaking his head while driving his Chevy Duramax diesel
>
>
>
> -----Original Message-----
> From: detomaso-bounces at realbig.com [mailto:detomaso-bounces at realbig.com]
> On
> Behalf Of Steve Hawkins
> Sent: Thursday, April 02, 2009 3:41 PM
> To: detomaso at realbig.com
> Subject: Re: [DeTomaso] fixing the economy (npc content)
>
> This begs the question why did the Government invest $20 billion in a
> company doomed to fail?  Might it be just to gain control?
>
> Steve
>
> -----Original Message-----
> From: detomaso-bounces at realbig.com [mailto:detomaso-bounces at realbig.com]
> On
> Behalf Of Gray Gregory
> Sent: Thursday, April 02, 2009 8:46 AM
> To: Robert Kirk; detomaso at realbig.com
> Subject: Re: [DeTomaso] fixing the economy (with p content)
>
>
> I don't know what facts you injected here but you have a valid point about
> what is the actual value of the company. The stock price does indeed
> reflect
> the value of the company, but it only reflects it for that moment in time
> that shares actually trade hands at a given price and at this point
> everyone
> knows GM is no longer viable as a going concern in it's current form, so
> the
> stock price is really just speculation on what kind of bailout the company
> might be able to get from the Government.
>
> The fundamental problem at GM is that it owes many times more than it is
> worth under virtually any valuation model you could use. The company owes
> somewhere between $40 and $45 billion and there's no way it's worth
> anywhere
> near that. Of that debt it's about equally split between what's owed to the
> employee pension plan (+ or - $20 billion) and what's owed to the bond
> holders. The other things you mention are small by comparison and with the
> exception of the aircraft leases are not debts at all they're just
> operating
> expenses and would go away immediately if the company shut down.
>
> I don't see any solution other than bankruptcy, but I'm sure the "effete
> corps" has other ideas.
>
> Gray
>
> -----Original Message-----
> From: detomaso-bounces at realbig.com [mailto:detomaso-bounces at realbig.com]
> On
> Behalf Of Robert Kirk
> Sent: Thursday, April 02, 2009 7:51 AM
> To: detomaso at realbig.com
> Subject: [DeTomaso] fixing the economy (with p content)
>
> I always hate to wade into a good conversation with facts but GM stock does
> not reflect the value of the company.  It simply reflects the value of the
> stock at a given point.  The facts suggest  that GM owes more than its
> worth
> and much of that debt is to its workers but also includes its salaries and
> bonuses to top management and of course the corporate jet leases.
>
> I don't know if any of you are old enough to remember real railroads but
> what is happening to GM etc is similar.  Both the union and management are
> content to bleed all they can from the dieing animal and leave
> taxpayers what's left.  On the other hand Conrail and Amtrak have been
> doing
> a mostly adequate job.  I am just puzzled at why it costs as much to take
> an
> Amtrak as it does to fly anywhere other than the land of the "effete corps
> of impudent snobs who characterize themselves as intellectuals" (east coast
> corridor)...but then again that's why we have our cats and gooses.
>
> The more clever remarks above are via Nixon era speech writers William
> Safire, Pat Buchanan and/or Sprio Agnew himself.
>
>
>
> Regards,
> Robert Kirk
> www.kirks-auto.com
>
>
>
>
> _______________________________________________
>
> Detomaso Forum Managed by POCA
>
> Archive Search Engine Now Available at http://www.realbig.com/detomaso/
>
> DeTomaso mailing list
> DeTomaso at list.realbig.com
> http://list.realbig.com/mailman/listinfo/detomaso
> _______________________________________________
>
> Detomaso Forum Managed by POCA
>
> Archive Search Engine Now Available at http://www.realbig.com/detomaso/
>
> DeTomaso mailing list
> DeTomaso at list.realbig.com
> http://list.realbig.com/mailman/listinfo/detomaso
>
> _______________________________________________
>
> Detomaso Forum Managed by POCA
>
> Archive Search Engine Now Available at http://www.realbig.com/detomaso/
>
> DeTomaso mailing list
> DeTomaso at list.realbig.com
> http://list.realbig.com/mailman/listinfo/detomaso
>
> _______________________________________________
>
> Detomaso Forum Managed by POCA
>
> Archive Search Engine Now Available at http://www.realbig.com/detomaso/
>
> DeTomaso mailing list
> DeTomaso at list.realbig.com
> http://list.realbig.com/mailman/listinfo/detomaso
> _______________________________________________
>
> Detomaso Forum Managed by POCA
>
> Archive Search Engine Now Available at http://www.realbig.com/detomaso/
>
> DeTomaso mailing list
> DeTomaso at list.realbig.com
> http://list.realbig.com/mailman/listinfo/detomaso
>