Warren Buffett dumped his entire $850m stake in GM [[Bankruptcy 2.0?)

Warren Buffett dumped his entire $850m stake in GM

https://fortune.com/2023/11/15/warre...motors-amazon/

There's blood in the water. Why would he do this? This is why:

GM Stock Has Suffered During Mary Barra’s 9 Years as CEO

https://www.msn.com/en-us/money/tops...eo/ar-AA1iRLVX

"Barra became CEO of the company nearly a decade ago in January 2014 and since then, General Motors [[Ticker GM) stock has dropped 25%. The stock even has a slightly negative annualized return including reinvested dividends."

"GM stock trades for about four times projected 2023 earnings, one of the lowest price/earnings multiples in the S&P 500."

This is important because it will buy GM some time:

"Net cash at the automotive operations is about $13 billion, or about a third of its market value. GM also has a valuable financial subsidiary, and the stock trades for half of its book value."

General Motors owns 80% of Cruise, which is failing. The auto market is softening as consumers are in the red due to inflation and high interest rates. GM's after-tax earnings this year will be nearly $10 billion but it spent $10 billion on EVs, leaving nothing for shareholders. Misdirected and under threat of being abandoned by shareholders, I believe that once GM starts to burn through the $13 billion in cash, it will need to CUT it's way into profitability. Layoffs, plant closures, portfolio reductions and new product cuts are likely to be seen soon.

GM's biggest mistake IMO is killing off the Volt and abandoning it's powertrain.

The Volt, or any vehicle with a similar batter/gas generator setup was the perfect thing to introduce the masses to the world of EV motoring. No range anxiety with the gas generator, but it let owners realize how little they would actually need more than the ~50 miles of pure electric range they get daily with a charged battery.

There is also the very real risk of the federal government closing the "light truck loophole" in the face of very real climate change. Since GM has basically killed off everything they made that's not a truck, SUV, or sports car they would be greatly effected by these vehicles being tossed back into CAFE calculations. I personally can't wait for this to happen as these giant vehicles are literally killing us in more ways that one...

But yeah, GM has a tough road ahead if they sty on their current course.

Quote:

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Originally Posted by K-slice

GM's biggest mistake IMO is killing off the Volt and abandoning it's powertrain.

The Volt, or any vehicle with a similar batter/gas generator setup was the perfect thing to introduce the masses to the world of EV motoring. No range anxiety with the gas generator, but it let owners realize how little they would actually need more than the ~50 miles of pure electric range they get daily with a charged battery.

There is also the very real risk of the federal government closing the "light truck loophole" in the face of very real climate change. Since GM has basically killed off everything they made that's not a truck, SUV, or sports car they would be greatly effected by these vehicles being tossed back into CAFE calculations. I personally can't wait for this to happen as these giant vehicles are literally killing us in more ways that one...

But yeah, GM has a tough road ahead if they sty on their current course.

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In all fairness to GM, they're not alone in this quagmire [[their crosstown rival is in an even worse position).

What really happened is many companies have been caught flat-footed with Jerome Powell suddenly going full-on Volcker with the monetary policy, as they all seemed to be under the impression that ZIRP would be around forever. Just wait until they have to refinance all of that corporate debt within the next few years.

And this doesn't even speak to the wild card of the geopolitical instability with Russia / China / Israel causing a 1970s or 2000s-style oil shock.

All of that said, those extetnal factors don't excuse GM's incompetent management from their short-term thinking. No one told Barra to go all-in on China, SUVs/Pickups and EVs.

Meanwhile, as Biden makes nice with Xi, China is busy buying up auto suppliers in Mexico and preparing to dump their cheap ev's on the U.S. market.

It does not really meen anything outside of Berkshire doing what they do.

Buffets motto - buying when others are fearful, and selling when others are getting greedy.

He bought a majority during Q1 COVID when prices were low and now is selling when prices are high.GM had 52 funds invested in 1st Q when everybody freaked out,now they are at 75.

He made his money and got out.Buy low sell high.

Musk has stated he will sell EVs at cost and make profits on the subscriber services that comes with the vehicles,GM is in the same position,you just do not hear much about their technology side of things that are high profit drivers.

What it is starting to look like with the whole EV thing is it is being set up like you will not be able to just buy the car and ride,you will have to pay subscription fees in order to unlock the technology built into them.

Tomorrow is when earnings reports come out.