Transcript Global Auto Industry Franklin Guo Dat Hong Rex Liu

Global Auto Industry
Franklin Guo
Dat Hong
Rex Liu
Reya Lu
Auto Manufacturing Industry Agenda
Auto Manufacturing History & Regulation
 Business Strategy & Characteristics
 Global Auto Supply Chain
 Global Auto Sales & Production Analysis
 Industry Future Forecast

Auto Manufacturing History
Eras of Invention (late 17th century – 1890s):
 A small steam car was demonstrated in 1678
The early automobiles manufacturing companies: Panhard
et Levassor, Oldsmobile, Cadillac, Winton, Ford, etc.
 After 1930, the number of auto manufacturers declined
sharply as the industry consolidated and matured.
 By 1960s, foreign competition arose as Japanese
appeared as a serious auto manufacturing nation.
 Captive imports and badge engineering swept through
the U.S. and UK, resulting in major acquisitions and
merges by the end of 1960s.
Auto Manufacturing History
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As the 1973 oil crisis, automobile emissions control
rules, Japanese and European imports, and stagnant
innovation changed American industry.
Small imported cars outperformed large American ones,
and the domestic auto industry began to fail. Small
performance cars from BMW, Toyota, and Nissan took
the place of big-engined cars from America and Italy.
Major M & A, alliance:
GM---SAAB, Daewoo; Isuzu, Subaru, Suzuki
Ford---Jaguar, Land Rover, Volvo; Mazda
Benz---Chrysler
Renault---Nissan
Regulation History

Emission Regulation Act
 Since 1970, emissions from motor vehicles were regulated by
Transport Canada under the authority of the Motor Vehicle
Safety Act (MVSA) and it was later amended in 1993.
 In 1999, with the passage of the proposed amendment to the
Canadian Environmental Protection Act (CEPA), automotive
emissions regulations have become the responsibility of
Environment Canada.
 In 2001, Canadian government published the Canada Gazette
Part I to develop and implement services and measures over the
next decade to further protect the health of Canadians and the
environment by reducing emissions from vehicles, engines and
fuels.
Industry Overview
The Automobile Design and Development Process
Auto Industry Business Strategy
Global Auto Ownership
Porter’s Model for Automakers
Barriers to entry
 Weak supplier power
 The threats to substitute products is low
However, are offset by
 Strong rivalry among competitors
 Bargaining power of consumers
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Supply Chain
Auto Suppliers
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Facing a number of challenges including:
 A lack
of pricing power, high labor costs,
decreasing volume and increasing raw
material costs;
 NAFTA-only suppliers are losing market
shares to global suppliers.
 Suppliers are trying to increase value-added
content, supply systems instead of
components, technology innovations, etc.
 Acquisitions, joint ventures, etc.
M & A of Auto Suppliers
Gasoline Prices’ Impact on Auto
Changes in Gas Price vs. SUV & Hybrid Auto
Sales

Gasoline price has a positive correlation with the sales of hybrid
auto and a negative correlation with the sales of SUV.
Global Auto Sales
http://www.scotiacapital.com/English/bns_econ/bns_auto.pdf
Global Auto Production
Current Auto Manufacturing
Manufacturers’ Unit Price Comparison

On average, vehicles from US car makers
were sold for $21,597 in 2005, which was
13% below the comparable sales price for
the Japanese car makers’. It was mainly
due to:
 Missed
design opportunities
 Heavy employee-level discounting
 Higher labor costs
Manufacturers’ Operating Margins
Comparison

US automakers’ operating margins are lower than their
major competitors’.
Manufacturers’ Profits Per Unit Comparison
Profit/Unit in $, 2005
$2,500.00
$2,000.00
$1,500.00
$1,000.00
$500.00
$0.00
-$500.00
-$1,000.00
-$1,500.00
Honda
Toyota
Nissan
Chrysler
Group
Ford
GM
Cost Structure - CAPEX
Cost Structure – R&D
Cost Structure – Health & Pension

The U.S. “Big Three” reported that pension and health
cost them $1,500 per vehicle produced currently.
Interoperability Costs

Imperfect interoperability impose costs due to higher
costs of design and production and slower
implementation of design changes.
Vehicle Ownership Forecast
U.S. Market Forecast
Auto Market Forecast
Global Auto Sales Forecast
Asia Pacific will lead in
production volumes by 2011
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European production
levels will grow at 2%
and most of it in Central
Europe, Turkey and
Russia.
North American growth
will be coming from
transplant operations of
Korean, Japanese and
German OEM’s.
China will expand its
production base at an
average annual rate of
12%. Exports of
Chinese cars to Europe
and US will commence
by 2008- 2009.
South America will see
recovery and growth
specifically in Brazil.
Source: CSM Auto Production Forecast
2004
Other
2%
SA
4%
NA
26%
2011
Other
2%
SA
5%
Asia
Pacific
35%
Asia
Pacific
40%
NA
22%
EU
33%
EU
31%
Global Production
74.6 million
Global Production
59.8 million
Regional CAGR 2004-11
Global
Other
SA
NA
EU
Asia Pacific
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Emission Standards Comparison
Emission Standards Comparison
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“ACEA agreement” is a voluntary agreement between European
automobiles manufacturers association and the European
Commissions. Its goal is to reduce 25% of 1995’s level of vehicle
CO2 emissions by 2008. Automakers are questioned for failing to
deliver the emissions cut.
- Japan automakers joined the agreement later and aimed to reduce
23% in vehicle CO2 emissions by 2010 (from 1995 levels).
Australia: voluntary commitment to improve fuel economy by 18%
by 2010.
Canada: has proposed a 25% improvement in fuel economy by
2010.
China: Introduced new fuel economy standards in 2004; weightbased standards to be introduced in 2 phases (2005 and 2008).
California: CARB approved GHG emissions reductions for
automobiles, currently under legislative review.
New York: Clean Cars Bill proposing to follow California standards
is currently in committee. Several other NE states have indicated
they will follow CA’s lead.
Emission Standards Comparison
However, automakers are questioned for failing to
deliver the emissions cut.
Nissan, Suzuki, Mazda, Audi, Volvo, BMW and
Volkswagen are the worst performers among a
group of 20 manufacturers surveyed by the
Institute for European Environmental Policy
(IEEP) for T&E, the European Federation for
Transport and the Environment.
There will be additional manufacturing associated
with CO2 emission constraints.
BMW Group
BMW Group
Symbol : Common [BMW] Preferred [BMW3]
Primary Exchange: Frankfurt
Currency: Euro ($1 EUR = $1.27 USD)
Key Share Information:
Common Stock Price (BMW)
[Price in Euros]
Last: $43.92
Change: $ -0.16
Date: Nov. 23, 2006
Open: 44.10
Bid: N/A
High: 44.36
Ask: N/A
Low: 43.86
EPS: 4.23
Volume: 21,311
P/E: 10.43
52 Week
52 Week
High: 45.97
Low: 35.68
Yield: 1.45%
Beta: 0.80
Dividend per share: 0.64
%Change: -0.36
BMW Common Stock 5 Year Performance
Source: Deutsche Börse AG / Interactive Data Managed Solutions
BMW Common Stock 1 Year Performance
Source: Deutsche Börse AG / Interactive Data Managed Solutions
Preferred Stock Price (BMW3)
[Price in Euros]
Last: $43.64
Change: -$0.25
Date: Nov. 23, 2006
Open: 44.00
Bid: N/A
High: 44.04
Ask: N/A
Low: 43.28
EPS: 4.23
Volume: 3,367
P/E: 10.71
52 Week
52 Week
High: 45.01
Low: 31.95
Yield: 1.50%
Beta: N/A
Dividend per share: 0.66
%Change: -0.56
BMW Preferred Stock 5 Year Performance
Source: Deutsche Börse AG / Interactive Data Managed Solutions
BMW Preferred Stock 1 Year Stock Performance
Source: Deutsche Börse AG / Interactive Data Managed Solutions
Company Overview
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Established in 1916, originally founded as an aircraft engine manufacturer
Head offices located in Munich, Germany
One of the top 10 largest vehicle manufacturers in the world
Produces automobiles and motorbikes under the following premium brands:
BMW also operates successfully in the areas of financial services such as
financing/leasing and asset management
Conducts sales in approximately 40 international markets
Has 15 production facilities spanning 7 countries
Employs over 100,000 people globally
Important Company Milestones
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1972 - BMW ventures into South Africa and sets up first production plant
outside Germany
1992 – BMW ventures into North American and sets up first production
plant in South Carolina
1994 – BMW acquires the British based Rover Group, landing the brands
Rover, Land Rover, MINI, and MG
1998 – BMW acquires the Rolls-Royce brand from Volkswagen Group;
however, vehicle production is prohibited until 2003
2000 – BMW sells the Rover brands at a loss; however, holds onto the MINI
brand
2001 – BMW successfully introduces the MINI brand into the market
2003 – BMW re-launches the Rolls-Royce brand with the introduction of the
$330,000 USD Phantom
2004 – BMW ventures into Asia and builds production plant in
Shenyang, China
Company Management

Dr. Norbert Reithofer
Current Chairman of the Board of Management as of September 1, 2006
 Born in 1956
- 1991 - 1994 Director of the Body-in-White Production Division
- 1994 - 1997 Technical Director BMW South Africa
- 1997 - 2000 President BMW Manufacturing Corporation, USA (South
Carolina)
- 2000 - 2006 Member of the Board of Management; Production
Company Management
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Dr. Helmut Panke
Current Chairman of the Board of Management 2002-2006
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Born in 1946
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- 1976 – 1978 Researcher at the Swiss Institute of Nuclear Research

- 1978 – 1982 Consultant at McKinsey & Co
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- 1982 – 1985 Head of planning & control at BMW
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- 1993 – 1995 CEO and Chairman of BMW (USA)
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- 2002 – 2006 Chairman of the Board of Management
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- 2006 Current member of the Board of Directors at Microsoft
Education : University of Munich, B.Sc, 1968; MS, 1972; PhD, 1976
BMW Group Shareholder Structure Overview
17.4
Stefan Quandt
Johanna Quandt
16.7
53.4
Susanne Klatten
Free Floating
12.5
STEFAN QUANT
JOHANNA QUANDT
SUSANNE KLATTEN
BMW Group Shareholder Structure Overview
Investor Type
8.8
46.6
44.6
Institutional Investors by Region
Germany
strategic investors
institutional investors
Europe
UK & Ireland
N. America
other investors
4.7
10.8
9.8
6.6
12.8
Rest of World
BMW Share Buyback Program
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Approved by shareholders on May 12, 2005
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BMW to buyback common shares up to a maximum of 10% of the company
share capital

By the end 2005, 13,488,400 common shares have been bought back
(equivalent to 2% of the company’s share capital)

Average price paid per share $37.49

Approximate total cost for the share buyback program in 2005: $506 million

In 2006, up to 1.5 millions shares of preferred stock will be bought back for
employee stock plan
BMW Group Production Figures
BMW Group Vehicle Model Analysis
BMW Group Key Motorcycle Markets 2005
• Sales of motorcycles are down 2% from last year
• Inconsistent market development throughout 2005
Large increase in sales throughout most of Western Europe
Sales up 48% in Spain, 22% U.K. and 12% Italy
Sales down 9% in Germany
Dividend Payout 1999-2005
0.7
0.66
0.58
0.6
0.55
0.52
0.5
0.46
0.6
0.62
0.64
0.64
0.55
0.52
0.48
0.42
0.4
Euro
0.4
Common shares
Preferred shares
0.3
0.2
0.1
0
1999
2000
2001
2002
Date
2003
2004
2005
Factors Affecting Profitability
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Sharp rise in crude oil prices
Reduced consumer buying power and demand
Elevated price of raw materials such as steel and other metals
Intense competition from Asian competitors
Fluctuating currency exchange rate
Large capital expenditure costs
BMW Group Capital Expenditure and
Cash Flow Data
Financial Statements
BMW Group Income
Statement for the period
of January 1 to September
30, 2006
BMW Group Income
Statement for 3rd Quarter
BMW Group
Cash Flow
Statement
for the period
January 1 to
September
30, 2006
BMW Group Balance
Sheet
BMW Group Balance
Sheet
BMW Group Growth Strategies

Objective: increase volume of automobiles sold
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Producing more fuel efficient vehicles
BMW Group Growth Strategies
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Increasing consumer demand with by producing safer and more
reliable vehicles
BMW NightVision
BMW Group Growth Strategies
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Introduction of the first luxury hydrogen hybrid car 745hL
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September 2005, BMW joins hybrid technology sharing partnership with
GM and Mercedes to build gas-electric engines
BMW Group Growth Strategies
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Continued sales network expansion to meet the needs and demands of
local consumer
Continue to penetrate the dynamic Asian markets
Beginning preparation to enter the Indian market
 Starting 2007, BMW will build a production plant in Chennai, India
Move down market and target a younger demographic with less
income with the 1 series
1 Series arriving in N. America in
late 2007
BMW Group Growth Strategies
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Continued roll out of new updated versions of existing vehicle
models
 BMW
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New redesigned 3 series launched late 2005
 New redesigned X5 launches late November 2006
 New redesigned 7 series launches 2008
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MINI
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New redesigned MINI Cooper launches late November 2006
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Rolls Royce
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New convertible and coupe version of Phantom available late 2007
Fisher’s Analysis
1) Financial Skill
-
Great financial performance with increasing profits
Industry product leadership
2) People Factor
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Great management team; relatively good employee relationship
3) Investment Characteristics
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Limited growth space due to intense competition
Low industry profit margin
4) Investment Price
- P/E ratio is relatively low
Recommendation
HOLD
Honda Motor Co., Ltd.
Agenda
Current Financial Position
 Company Analysis
 Financial Analysis

 Semi-annual
Financial Statements
 Annual Financial Statements
Fisher’s Analysis
 Recommendation
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Company Snap Shot
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Industry: Consumer Products (Automotive)
Listed: NYSE (HMC-N)
TSE (7267)
Share price: US $34.870
P/E: 12.00
EPS: US $2.90
Dividend: US $0.51
Yield: 1.50%
# of shares outstanding: 1,834,828,000
Chart: 1 Year (Daily)
Source: Globeinvestor.com
Chart: 10 Years (Weekly)
Source: http://money.cnn.com/
Chart: 3 Year Stock Performance
Compared to DJTA
Source: Globeinvestor.com
Credit Ratings

As of March 31, 2006
Credit Ratings
Agencies
Short-term
Long-term
unsecured
unsecured
debt securities debt securities
Moody's Investors
Service
P-1
A1
Standard & Poor's
Rating Services
A-1
A+
Company Analysis
Overview
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Established in 1948
Four lines of business:
 Motorcycles
 Automobiles
 Power
products and others
 Financial services
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Over 61 principal subsidiaries
~32 manufacturing facilities in 19 countries
Total of about 144,785 full-time employees
History
1948 Honda Motor Co., Ltd. incorporated (capital: 1 million yen)
1949 First motorcycle manufactured
1953 H-type engine, Honda’s first power product, produced
1957 Listed on the Tokyo Stock Exchange
1962 ADRs issued at market price.
Adopts consolidated accounting using U.S. SEC standards
1963 Honda’s first sports car (S500) and light truck (T360)
released
History
1977 ADRs listed on the New York Stock Exchange (NYSE)
Consolidated financial disclosure begins
1983 Cumulative automobile production reaches 10 million units
1995 Cumulative automobile production reaches 30 million units
2004 Honda enter cooperative agreement with GE to jointly market
the independently developed HF118 jet engine
2006 Implementation of two-for-one stock split for common shares
Corporate Governance
Corporate Governance
Takeo Fukui
President, CEO, and Rep Director
An engineer
Joined Honda since 1969
President since 1998
CEO since 2003
Satoshi Aoki
Executive VP and Rep Director
Joined Honda since 1969
Promoted to Executive VP in summer 2005
Lines of Business
Motorcycles
 Automobiles
 Power products and Others
 Financial services
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Fields of Business
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Research & Development
 ASIMO
 HondaJet
 Next
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generation powertrains
Manufacturing & Distribution
 Local
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production plants to meet local demand
Sales & Services
 Emphasis
on customer satisfaction
R&D Efforts
Key Regions of Operation
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Japan
 Centers
for R&D, manufacturing, and customer
service
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North America
 Honda’s
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overall largest market
Europe
 Increasing
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Asia
 China
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brand popularity
– increasing production facilities
Others
 Honda
has over 80% market share in Brazilian
motorcycle industry
Unit Sales Breakdown
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~53% from motorcycles, ~17% from automobiles, and ~30%
from power products
Revenue and Operating Margin
Business Segment Information
Revenue Breakdown by
Business Segments (%)
90.00%
80.00%
Motorcycle Business
70.00%
60.00%
Automobile Business
50.00%
40.00%
Financial Services
30.00%
Power Products and
Others
20.00%
10.00%
0.00%
2002
2003
2004
2005
2006
Geographic Segment Information
Revenue Breakdown by
Geographic Segments (%)
70.00%
60.00%
Japan
50.00%
North America
40.00%
Europe
30.00%
Asia
20.00%
Others
10.00%
0.00%
2002
2003
2004
2005
2006
Risk Factors
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Exchange and interest rate risks
Market condition/Intensity of competition
Political condition
Relationship with suppliers of raw materials
Legal and regulatory risks
 Environmental
and governmental regulations
 Patents and trademarks
Growth Strategies
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Motorcycles
 Equipping
scooters with automatic transmission
 Equipping more models with PGM-FI and other
features that provide superior environmental
performance
 Launching new models
 Offering the first motorcycles with airbags
 Increasing production capacity in Asia
 Beginning production in Argentina
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2007 Sales forecast: 10,840,000 units
Growth Strategies
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Automobiles
 Launching
new model of SUV and refine
existing models
 Expanding light truck models
 Expanding sales and services centers in Asia
to meet increasing demand
 Expanding production capacity to meet
demand in Brazil
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2007 Sales forecast: 3,720,000 units
Growth Strategies
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Power products
 Supplying
cost-competitive general-purpose
engines from Asia
 Extending sales of compact, home-use
cogeneration system from Japan to the US
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2007 Sales forecast: 5,880,000 units
News
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Nov. 21, 2006
 2007 Honda CR-V and Pilot Earn Insurance
Institute for Highway Safety TOP SAFETY PICK
Award
 2007 Acura RDX Earns an Insurance Institute for
Highway Safety TOP SAFETY PICK Award
Nov. 7, 2006
 HondaJet Named Winner of Popular Science's
2006
Sept. 27, 2006
 HondaJet Goes on Sale at National Business
Aviation Association Convention
Financial Analysis
Financial Highlights
2006 Capital Expenditure Breakdown
by Business Segments
Forecasted 2007 Cap. Ex. Breakdown
by Business Segments
Semi-annual
Financial
Statements
Semi-annual Financial Highlights
Financial Results
Important Factors
Annual Financial
Statements
Fisher’s Analysis
Superiority in Financial skills,
Production, Marketing, Research
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Clear, easy to read annual reports and financial
statement
Financial statements not prepared in
accordance with the US GAAP
Steady increase of capital expenditure
Over 30 principal manufacturing facilities
About 145,000 full-time employees
~5% of total revenue used toward R&D
People Factor
Experienced management team
 Promote from within
 CEO is customer-oriented
 Executives and managers make up the
board of directors, this may decrease the
effectiveness of corporate governance and
increase risk for stakeholders

Investment Characteristics of Some
Business
Strong market position
 Diversified into related businesses where
there are strategic fits and benefited from
economies of scope
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P/E Ratio
P/E ratio: 12.00
 Competitor P/E ratios:

 General
Motors: 40.00
 BMW: 10.43
 Ford Motors: 0.00 (negative EPS)
 Toyota: 14.70
 Nissan: 0.00 (0 EPS)
Recommendation
BUY
General Motors
Table of Contents
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Stock price
Company Background
Company Analysis
Financial Highlight
 (06 3rd Quarter report  05 Annual report)
 Income
statement
 Balance sheet
 Cash flow statement

Conclusion & Recommendation
Current Position on
Nov. 24, 2006
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Industry:
Ticker Symbol:
Share Price:
52 week range:
P/E:
EPS:
Dividend:
Shares Outstanding:
Market Capital:
Global Automobile
GM-N (NYSE)
$31.23
$18.33 - 36.56
40.00
$0.78
$1 (3.2%)
565,611,157
$20,096,164,408
Globeinvestor.com and merchantonline.com
5-Year Stock Price
(from bigcharts.com)
1-Year Stock Price
(from bigcharts.com)
GM vs. S&P/TSX Composite Index
Globeinvestor.com
Definitions

GMA – GM Auto
GMNA - GM North America
 GME - GM Europe
 GMLAAM - GM Latin America / Africa / Mid-East
 GMAP - GM Asia Pacific

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GMAC – General Motors Acceptance Corporation
Background
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The world's largest automaker
Founded in 1908
Global industry sales leader for 75 years
GM today employs 327,000 people in the world
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Huge labor pension cost
Global headquarters in Detroit, Michigan, USA
GM manufactures its cars and trucks in 33
countries
GM’s Products

In 2005, 9.17 million GM cars and trucks were sold globally under the
following brands:
•Buick
•Cadillac
•Chevrolet
•GMC

•Opel
•Pontiac
•Saab
•Saturn
•Vauxhall
GM operates one of the world's leading finance companies
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•GM
•Daewoo
•Holden
•HUMMER
GMAC Financial Services, which offers
automotive, residential and commercial financing and insurance.
GM's OnStar subsidiary is the industry leader in

vehicle safety, security and information services.
GMA & GMAC Revenue Share
- Nine months ended September 30, 2006
GMAC
17%
GMA
Other Auto
Other
Auto
1%
Other
Financ
ing
0%
GMA
GMAC
82%
Other Financing
Global Partnerships

Majority shareholder of GM Daewoo Auto & Technology
Co. of South Korea

Has product, powertrain and purchasing collaborations
with Suzuki Motor Corp. and Isuzu Motors Ltd. of Japan.
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Advanced technology collaborations with
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DaimlerChrysler AG
BMW AG of Germany
Toyota Motor Corp. of Japan
Vehicle manufacturing ventures with
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Toyota
Suzuki
Shanghai Automotive Industry Corp. of China
AVTOVAZ of Russia
Renault SA of France
Type of Vehicle and Market Share
Management
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Key people

G. Richard Wagoner, Jr.
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Chairman & CEO since May 1, 2003
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Frederick (Fritz) A. Henderson
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Vice Chairman and CFO since Jan. 1, 2006
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Joined GM since 1977
BA in economics from Duke University
MBA from Harvard Business School
Joined GM since 1984
BBA from the University of Michigan
MBA from Harvard Business School
Robert A. Lutz
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Vice Chairman, Global Product Development since Sept. 1, 2001
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Former CEO of Excide Technologies & Vice Chairman of Chrysler Corporation
BA in production management from the University of California-Berkeley
MBA from the University of California-Berkeley
Degree of doctor of management from Kettering University
The World's Largest Automaker

GM's largest national market in order:
1.
2.
3.
4.
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the United States
China
Canada
the United Kingdom and Germany.
Global market share for vehicles sales:

14.2%(2005) from 14.4%(2004)
Declining Revenue
High oil price
 GM produce high horse power vehicles
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Used to be American consumers’ favorite
People switch to low oil consumption
vehicles
Japanese cars
 Korean cars
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Competitive Position
Financial Statement Analysis
The 2006 3rd Quarter Report
Ended at September 30, 2006
2006 Quarter Revenue Breakdown
- Auto & Financing and Insurance Operations
2006 Quarter GMA Net Income by Region
2006 Quarter GMAC Net Income by
Division
06~07 EPS Estimates
(Earning estimates from Zacks.com)
Segment Reporting
GMA Revenue Share by Region
- Nine months ended September 30, 2006
GM LAAM
8%
GMAP
9%
GME
19%
GMNA
64%
GMNA
GME
GM LAAM
GMAP
Financial Statement Analysis
2005 Annual Report
General Idea about the
Performance of GM in 2005
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GM is losing big money in North America
GMA’s global sales revenue is good (growth)
GMAC is making money
We can see that the auto division is dragging the
company performance
Breakdown of GMA’s Loss by region in 2005
Breakdown of GMAC’s profit in 2005
Financial Highlights
(In USD as of 12/31/2005)
Total Revenue
EBITDA
Net Loss
Total Assets
Current Assets
Total Liabilities
Current Liabilities
Long Term Debt
Stockholders' Equity
192,604,000,000
31,516,000,000
(10,567,000,000)
476,078,000,000
99,414,000,000
461,481,000,000
117,963,000,000
202,177,000,000
14,597,000,000
GM’s Main Challenges
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Huge legacy cost burden
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Inability to adjust structural costs in line
with falling revenue
GM’s Legacy Challenge
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Huge retiree population  Huge cost for health care & pensions
11.5 active employees support 1 retiree in 1962
1 active employee supports 3.2 retirees in 2005
Health care bills totaled $5.3 billion in 2005
No other company has this much health-care obligation
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(!!!Big competitive disadvantage)
Estimated Future Employee Benefit Payments
Consolidated Balance Sheet
- Asset
Consolidated Balance Sheet
- Liabilities and Stockholders’ Equity
Breakdown for Balance Sheet
- Asset
Breakdown for Balance Sheet
- Liabilities and Stockholders’ Equity
Consolidated Income Statement
Breakdown for Consolidated Income Statement
Loss from Continuing Operations
2005 to 2004 Comparison
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Net sales fell to $192.6 billion from 193.5 billion
Net loss of $10.6 billion from Net income of $2.8
billions
Unfavorable results primarily due to losses at GMNA
GMAC net income declined to $2.4 from $3.0 billion
Reasons for Unfavorable results in 2005
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GMNA market share and product mix
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Delphi Chapter 11 Proceeding
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Revenue declining
GM recorded a charge of $5.5 billion
Including the benefit guarantees for certain former GM U.S.
employees who transferred to Delphi
GMNA restructuring and global asset Impairments
Health-care cost escalation
Factors for Loss in GMNA
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Unfavorable product mix ($2.2 billion loss)
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Reduced in demand for higher margin large utility vehicles (reaching the end of
the life cycle)
Production volume decreases ($2.1 b. loss)
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Market share decline
Reduction in dealer inventories
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Unfavorable material costs ($700 mil. loss)
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Increased health-care expenses ($600 mil. loss)
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Escalating health care cost trends
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Advertising and sales promotion cost increase ($500 mil. loss)
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Restructuring charge ($1.7 b. loss)
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After-tax impairment charge ($552 mil. loss)
North America Turnaround Plan
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Keep raising the bar in the execution of great cars and
trucks
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Revitalize sales and marketing strategy
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Significantly improve cost competitiveness
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Address health-care and pension legacy cost burden
GMNA Turnaround Plan Highlight
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Cease production at 12 U.S. plans by 2008
Reduce 30,000 manufacturing positions
Work with United Auto Workers to reduce health-care
obligations by $15 billion
Modify pension benefits
Reduce salaries of top executives
Reduce dividend by 50%
Consolidated Cash Flow Statement (cont.)
Supplementary Information for Cash Flow Statement (cont.)
GM Profitability Plan
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Keep working on cost reduction
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Growing revenue around the world
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Invest in technology, better fuel efficiency
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Revitalizing sales and marketing strategy
Significant Events
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Delphi Bankruptcy
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GMAC – Pending Sale of 51% controlling interest
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Discussions with Renault and Nissan
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Sale of investments in Isuzu and Suzuki
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Sale of Regional Homebuilder
GM-Fisher’s Analysis
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1) Financial Skill
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2) People Factor
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Great management team
Relatively bad employee relationship (cutting pension
expense)
3) Investment Characteristics
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Bad financial performance in GMA
Depending on profits from GMAC
Limited growth space due to intense competition
Low industry profit margin (negative profit)
4) Investment Price
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P/E ratio is High
Increasing stock price if turn the Net loss around
Recommendation