TrendTrader007
Active Member
$TSLA bought more at $320.24
My latest and very last buy
My latest and very last buy
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TrendTrader007
Active Member
ValueAnalyst
Closed
I expect both GM and F to go bankrupt in the next three years as they fail to electrify their fleet in time.
Neither of these companies have even started building their first battery factory, whereas Tesla is planning to have five online by 2020/21.
Tesla will introduce additional models that will eat further into these companies' margins.
Their balance sheets are levered with leased car debt which is backed by used car values, which are declining quickly.
I expect Berkshire Hathaway to exit its $1B investment in GM sooner rather than later.
ValueAnalyst
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ValueAnalyst
Closed
This is what disruption looks like.
Auto roundup: Letdown in Detroit, new high out of Palo Alto - Fiat Chrysler Automobiles NV (NYSE:FCAU) | Seeking Alpha
Auto roundup: Letdown in Detroit, new high out of Palo Alto - Fiat Chrysler Automobiles NV (NYSE:FCAU) | Seeking Alpha
Gross vs. Net. Gross margins of 30%, net margins of 10%. Yes, overhead is expected to eat 20%. It's an overhead-intensive, capital-intensive business. If they can get greater economies of scale, they can have higher net margins with the same gross margins.
Lasse Heje Pederson describes all reliable investment strategies in a way which I will summarize as follows:
(1) Determine what piece of information you have which the "market" is not pricing properly
(2) Bet that you are correct on that point of information. Do not hedge it. This is where your profit comes from.
(3) Hedge against all *other* risks which could create loss even if your information is right, so that your bet is purely based on your informational advantage. This is how you reduce your risk.
This is an incredibly high-level summary, but it provides a good framework for any investing or trading strategy, even ones which are very different from each other.
DurandalAI
Member
3 years? There are more than enough luddites around to keep these two companies afloat for at least 8-10 years. I do expect them to struggle, however. My only hope is that Government Motors doesn't get yet ANOTHER bailout when it happens. Ford has the advantage of the Ford family still exerting a good amount of control, which I think lets them be more unified in direction. While F spouts a lot of lip service towards electrification, I believe that they have more in the pipeline than GM.
I certainly agree that GM is doomed to another bankruptcy eventually, but I think 3 years is too optimistic to witness their demise. Out in Mid-America, these "good ole boys" love their compensation vehicles, be it diesel V8 or gasoline. I think though if Ford gets serious about the serial-hybrid F150, they could stand to do very well against the other truck manufacturers, especially as training wheels to conversion of full BEV.
cheshire cat
Member
ValueAnalyst
Closed
It's funny that the feedback I'm receiving on my "F/GM to go bankrupt by 2020" prediction has evolved from "impossible/stupid" to "too optimistic/silly"
ValueAnalyst
Closed
Don't forget to tax rate when you're walking from gross margin to net income margin.
Having said that, I don't expect TSLA to achieve a sustainable 30% corporate gross margin as the Model 3 and the Model Y are targeted to have lower gross margins. Also, I'm not sure if SCTY or the overall Tesla Energy segment can achieve 30% gross margins.
My long-term expectation is 25% gross margin and 10% net income margin. Anything above that is gravy.
I know. There's a reason I put my XOM bankruptcy prediction down in the spreadsheet, just so that I could say I predicted it back when.
mickificki
Member
3 years might be reasonable imo...latest by year 5 it'll be the end of GM and maybe F. People will see that M3 has incredible range, is safe, and can be charged anywhere, drive you anywhere, even...EVEN be used as a source of income?
then when the pickup truck is introduced, the chevy silverado, tundra, dodge ram, etc...those sales will come to a grinding halt as people expect the tesla pickup to not only bring great range, but also to out torque ANY diesel pickup out there. F and GM rely heavily on pickup sales. goooooooo bye-bye!
i HATE the thought of people losing jobs...and i hope GM and F get their stuff together to compete. but imo they've missed the boat by 5 years too late.
Unfunded pension obligations are a significant issue also. GM was underfunded by $21bn and Ford by $8bn at YE 2015. These will continue to drag. I'm skipping the GM quite unrealistically positive assumptions, Ford's are better, but not by much.
Either way, bankruptcy is not too likely within the next five years because both are still generating substantial cash.
A more serious problem probably is inventory control. GM had 87 days on hand at YE 2016 but some expensive models were much much worse. Imagine 170 DOH for Corvette, 177 Camaro, 168 for LaCrosse, while Cadillac has 132 CTS, 119 ATS and 110 CT6.
GM inventory at 8-year high; will reduce car production
Since Buick, 80% sold in China, has suddenly hit problems in China, and key Chevrolet market in Brazil is >30% off in 2016 it is safe to say GM already faces serious problems.
Their dependence on Korea probably is not a net advantage today.
Simply, I'd be unsurprised if GM were for fail again within the next ten years. Ford I think will survive, but they'll succumb also if they fail to move faster.
I do not think the NA transition to EV's will be so rapid as in Europe and China. No other major markets are set to move more quickly, even though gradual shrinkage is almost a certainty.
Bankruptcy? Maybe FCA is not too far off, GM might follow, but even FCA will struggle on for a few years, especially since they are doing well at this minute, partly by deferring investment,
ValueAnalyst
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Regarding the statement I bolded in your message:
They are not generating any free cash flow (i.e. net income + depreciation - capex - stock buybacks - dividends). And the outlook will worsen for them once the Model 3 and the Model Y and Tesla's pick-up truck comes out.
In fact both of these companies have been issuing debt to sustain buybacks/dividends, which is financial mismanagement, instead of investing this cash to building Gigafactories.
This is now catching up to them, as they are not able to keep up with Tesla's accelerating pace of innovation.
I think it is a viable theory that if GM/F/FCAU fall off a cliff, If TSLA is gradually perceived as being part of the cause that money could flow in. I think we are all underestimating the model 3 wait-and-see effect. Hard to say when it will be, but if their inventory continues to grow while TSLA sales have eye popping increases as the model 3 goes from token to high production the narrative may well shift to "how long until Tesla dives the others out of business".
jhm
Well-Known Member
Considering the massive and well financed misinformation campaign against Tesla, anyone willing to actually follow what Tesla says they will do has an information edge over the rest of the market. Either the market is pricing on this disinformation or there is no value in spending millions on this disinformation.
Reciprocity
Active Member
Its hard to really know what it would take to push them over the edge. They could linger for a long time with support from outside so maybe from a financial standpoint, they should be bankrupt by then, but they might still linger for some time with bridge funding and restructuring and selling off assets. They could also miraculously change their ways and adapt to the world as it is changing. I dont believe Elon really wants traditional car companies to go away, he wants to push them to electrify in a meaningful way. The Bolt is really a very good car, but GM just refuses to make enough of them and to make them efficiently enough to make a difference for them long term.
If I had to predict, it seems like VW and the other German auto makers are waking up to the realities. They probably all had assumed that Tesla would have failed by now and lower the pressure on them to change. But now there is a sense of inevitability that they cannot avoid. Change or die. Its not even that hard of an equation, one battery prices drop to $100/kWh at the pack level, then they are competitive with ICE. I would guess that its actually more like $125 vs a BMW/Daimler because of the cost of their power trains is higher and probably more like $75/kWh for $13k-15k sub compact car which normalizes to about $100/kWh.
The other issue is that even if we lower our reliance on fossil fuels the cost will actually start to go up because of the failure by the companies that find the oil and the companies that refine the oil into gas and its other parts. Prices might go down in the short term, but eventually it become less and less efficient to get at due to the reverse of economies of scale. I dont have a good idea of when that will happen, but would guess it wouldn't take much to start to cause those companies to start having problems. There were a lot of companies to go belly up in the shale business when prices dropped, but they have all but come back stronger, probably in part due to consolidation and in part due getting real lean after the down turn. Problem is that you can only consolidate and get so lean before there is nothing you can cut.
TrendTrader007
Active Member
Couldn't resist buying more before ER it did bump up my cost basis to $210 but I'll live
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