Killing the Mercury brand
71-year old Mercury is being killed off. Why?
Oldsmobile cost General Motors about a billion dollars to close. How much will it cost Ford to close Mercury?
These are questions that need to be answered when you are allowed a certain amount of money in stock and you have to decide if you want to diversify some of your Ford stock into the new General Motors IPO.
If you were allowed to only hold so much stock in automotive holdings would you buy Ford Motor Company
(F: NYSE $11.77) or a stock that is about to come out with General Motors?
Ford Motor Company
will not die because of their stock price. Howe’ver, if General Motors has a bad IPO and a bad third quarter General Motors could be in for a rough ride.
Ford has two brands:
Ford (up 27% in sales as of 7/2010)
Lincoln (up 4.1% in sales as of 7/2010) is promising seven new or significantly improved Lincolns in the next four years
Ford will be closing down Mercury at an unknown cost to Ford.
dumped by Ford:
GM has only $8.1 billion after shedding much of its debt in a bankruptcy reorganization last year.
$2.2 billion in the first half of 2010
GM got a $50 billion bailout, of which $43.3 billion still needs to be repaid.
Eliminating the government stake, and word, in “Government Motors” is critical for General Motors
and the Obama administration.
dumped by GM:
Pontiac, Saturn, Saab, and Hummer
You got to know when to hold ’em, know when to fold ’em
So GM’s Ed Whitacre is leaving after two-quarters of profitability, but before an IPO comes out. In the conference call today Whitacre said, “My public duty was to return this company to greatness, and I didn’t want to stay a day beyond that.”
First the numbers
Droll as they might be, compared to the rest of the news, the numbers are good.
General Motors’ profit for the second quarter. This number is earnings before taxes (EBIT), so look for the next number, which is
While profit is good, net income is better. General Motors
posted the best net income they’ve had since 2004. This number parlays out to $2.55 earnings per share.
The difference in loss between the first quarter and second quarter for GM Europe. GM Europe had a loss $200 million
in the second quarter, an improvement of $300 million from the first quarter.
Unfortunately, GM International Operations earned $700 million in the second quarter, down from $1.2 billion in the first quarter.
$2.8 billion in free money!
Oh, alright maybe it was $2.8 billion in free cash flow. Not really free money, but all money is good and spent with equal glee. GM closed the second quarter with $32.5 billion in cash and marketable securities.
According to an article written by Michelle Krebs for Edmunds.com, using Edmunds.com data, General Motors
has met some challenges, still has a way to go to be at U.S. industry standards.
– Today most GM vehicles sell for an average of 15.7 percent off sticker price; the industry average is 13.7 percent
. During the first quarter, GM’s discount was 13.9 percent and the industries were 13.2 percent. In the second quarter of last year, GM’s discount was 16.6 percent and the industries were 15.5 percent.
– GM dealer inventory is at 47 days to turn, down from 53 in the first quarter and from 117 in the second quarter of last year, demonstrating GM, indeed, has skillfully maintained discipline in matching supply to demand.
– GM’s True Cost of Incentives (TCI), Edmunds’ proprietary calculation of incentives, for the second quarter is $3,691 per vehicle sold; the industry average is $2,672. GM’s incentives have climbed an average of nearly $400 per vehicle since the first quarter of this year while the industry average rose only $66 per vehicle sold. This time last year
, GM incentives averaged $776 higher than the industry average; currently, GM averages $1,018 higher.
– Of all new GM financing deals, 14.8 percent are leased; this is the highest lease penetration rate for GM since July 2008.
Why is Whitacre leaving?
No one knows why he is leaving before an IPO is out. They can conjecture that Dan Akerson
might be better for the IPO job and has had more experience as a CEO, but this was not said.
Whitacre has acclaimed himself as a non-car guy. He has to listen to people working inside General Motors in order to find out what needs
to be done. But he does that. He makes the changes, changes the people, changes the “frozen middle” of a hundred-year-old company that knew it had to be changed but was still risk-averse.
In a briefing with analysts and media, Whitacre said, “We’ve positioned the company for success and things look good. There’s a foundation in place, a good foundation. I see no reason to delay.”
The fairly consistent part of Whitacre’s regime was changed. As one GMer put it, “if things weren’t changing, one started feeling nervous”.
Is Akerson the right person for the job?
In an Associated Press interview Bob Lutz
, a former vice-chairman of GM who retired earlier this year, said in an e-mail that Akerson doesn’t need auto experience to run GM because it has a solid management team of industry experts. But he does need to listen to that team, Lutz said
“He’s (Akerson) very strong, very opinionated, not always right, and needs to work on listening skills,” Lutz said. “If he can bring himself to trust his now-outstanding senior executive group and lead rather than direct, I think he’ll do an outstanding job.”
When you think of a board of directors you think anyone of those people should be able to step in and be CEO of the company they are a board of director for. Dan Akerson’s been a Board of Director since July 2009.
The question is, will he be another interim CEO or an ongoing concern CEO? Akerson, 61, will be GM’s fourth CEO in 18 months.
Think about that. Think about how frazzled you would be if every 4 months you had a new boss. A new boss that was brought in with the express intent of thawing out and thinning out the old regime.
According to Carlyle’s website, Akerson’s bio is a plethora of CEO and Chairman
jobs sprinkled in with some Board of Director
Akerson is a member of the Board
of Directors of the American Express Company, Booz Allen Hamilton, Freescale Semiconductor, and General Motors Company.
Will Akerson need to step down as board of director for these other companies when he becomes CEO of General Motors?