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Global Auto Industry

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Global Auto Industry Franklin Guo Dat Hong Rex Liu Reya Lu Auto Manufacturing Industry Agenda Auto Manufacturing History & Regulation Business Strategy ... – PowerPoint PPT presentation

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Title: Global Auto Industry


1
Global Auto Industry
  • Franklin Guo
  • Dat Hong
  • Rex Liu
  • Reya Lu

2
Auto Manufacturing Industry Agenda
  • Auto Manufacturing History Regulation
  • Business Strategy Characteristics
  • Global Auto Supply Chain
  • Global Auto Sales Production Analysis
  • Industry Future Forecast

3
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.

4
Auto Manufacturing History
  • 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

5
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.

6
Industry Overview
7
The Automobile Design and Development Process
8
Auto Industry Business Strategy
9
Global Auto Ownership
10
Porters 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

11
Supply Chain
12
(No Transcript)
13
Auto Suppliers
  • 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.

14
M A of Auto Suppliers
15
(No Transcript)
16
(No Transcript)
17
Gasoline Prices Impact on Auto
18
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.

19
Global Auto Sales
http//www.scotiacapital.com/English/bns_econ/bns_
auto.pdf
20
(No Transcript)
21
Global Auto Production
22
(No Transcript)
23
Current Auto Manufacturing
24
(No Transcript)
25
(No Transcript)
26
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

27
Manufacturers Operating Margins Comparison
  • US automakers operating margins are lower than
    their major competitors.

28
Manufacturers Profits Per Unit Comparison
29
Cost Structure - CAPEX
30
Cost Structure RD
31
Cost Structure Health Pension
  • The U.S. Big Three reported that pension and
    health cost them 1,500 per vehicle produced
    currently.

32
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33
Interoperability Costs
  • Imperfect interoperability impose costs due to
    higher costs of design and production and slower
    implementation of design changes.

34
Vehicle Ownership Forecast
35
U.S. Market Forecast
36
Auto Market Forecast
37
(No Transcript)
38
Global Auto Sales Forecast
39
Asia Pacific will lead in production volumes by
2011
  • 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 OEMs.
  • 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.

2004
2011
Source CSM Auto Production Forecast
40
Emission Standards Comparison
41
Emission Standards Comparison
  • ACEA agreement is a voluntary agreement between
    European automobiles manufacturers association
    and the European Commissions. Its goal is to
    reduce 25 of 1995s 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 weight-based 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 CAs lead.

42
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 TE, the
    European Federation for Transport and the
    Environment.
  • There will be additional manufacturing associated
    with CO2 emission constraints.

43
BMW Group
44
BMW GroupSymbol Common BMW Preferred
BMW3Primary Exchange FrankfurtCurrency Euro
(1 EUR 1.27 USD)
  • Key Share Information

45
Common Stock Price (BMW)Price in Euros
  • Last 43.92 Change -0.16 Change -0.36
  • 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

46
BMW Common Stock 5 Year Performance
Source Deutsche Börse AG / Interactive Data
Managed Solutions
47
BMW Common Stock 1 Year Performance
Source Deutsche Börse AG / Interactive Data
Managed Solutions
48
Preferred Stock Price (BMW3)Price in Euros
  • Last 43.64 Change -0.25 Change -0.56
  • 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

49
BMW Preferred Stock 5 Year Performance
Source Deutsche Börse AG / Interactive Data
Managed Solutions
50
BMW Preferred Stock 1 Year Stock Performance
Source Deutsche Börse AG / Interactive Data
Managed Solutions
51
(No Transcript)
52
Company Overview
  • 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

53
Important Company Milestones
  • 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

54
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

55
Company Management
  • Dr. Helmut Panke
  • Current Chairman of the Board of Management
    2002-2006
  • Born in 1946
  • - 1976 1978 Researcher at the Swiss Institute
    of Nuclear Research
  • - 1978 1982 Consultant at McKinsey Co
  • - 1982 1985 Head of planning control at BMW
  • - 1993 1995 CEO and Chairman of BMW (USA)
  • - 2002 2006 Chairman of the Board of Management
  • - 2006 Current member of the Board of Directors
    at Microsoft
  • Education University of Munich, B.Sc, 1968 MS,
    1972 PhD, 1976

56
BMW Group Shareholder Structure Overview
JOHANNA QUANDT
SUSANNE KLATTEN
STEFAN QUANT
57
BMW Group Shareholder Structure Overview
58
BMW Share Buyback Program
  • Approved by shareholders on May 12, 2005
  • 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
    companys 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

59
BMW Group Production Figures
60
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61
BMW Group Vehicle Model Analysis
62
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

63
Dividend Payout 1999-2005
64
Factors Affecting Profitability
  • 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

65
BMW Group Capital Expenditure and Cash Flow Data
66
Financial Statements
67
BMW Group Income Statement for the period of
January 1 to September 30, 2006
68
BMW Group Income Statement for 3rd Quarter
69
BMW Group Cash Flow Statement for the period
January 1 to September 30, 2006
70
BMW Group Balance Sheet
71
BMW Group Balance Sheet
72
BMW Group Growth Strategies
  • Objective increase volume of automobiles sold
  • Producing more fuel efficient vehicles

73
BMW Group Growth Strategies
  • Increasing consumer demand with by producing
    safer and more reliable vehicles

BMW NightVision
74
BMW Group Growth Strategies
  • Introduction of the first luxury hydrogen hybrid
    car 745hL
  • September 2005, BMW joins hybrid technology
    sharing partnership with GM and Mercedes to build
    gas-electric engines

75
BMW Group Growth Strategies
  • 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
76
BMW Group Growth Strategies
  • Continued roll out of new updated versions of
    existing vehicle models
  • BMW
  • New redesigned 3 series launched late 2005
  • New redesigned X5 launches late November 2006
  • New redesigned 7 series launches 2008
  • MINI
  • New redesigned MINI Cooper launches late November
    2006
  • Rolls Royce
  • New convertible and coupe version of Phantom
    available late 2007

77
Fishers Analysis
  • 1) Financial Skill
  • Great financial performance with increasing
    profits
  • Industry product leadership
  • 2) People Factor
  • Great management team relatively good employee
    relationship
  • 3) Investment Characteristics
  • Limited growth space due to intense competition
  • Low industry profit margin
  • 4) Investment Price
  • - P/E ratio is relatively low

78
Recommendation
HOLD
79
Honda Motor Co., Ltd.
80
Agenda
  • Current Financial Position
  • Company Analysis
  • Financial Analysis
  • Semi-annual Financial Statements
  • Annual Financial Statements
  • Fishers Analysis
  • Recommendation

81
Company Snap Shot
  • 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

82
Chart 1 Year (Daily)
  • Source Globeinvestor.com

83
Chart 10 Years (Weekly)
  • Source http//money.cnn.com/

84
Chart 3 Year Stock Performance Compared to DJTA
  • Source Globeinvestor.com

85
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86
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87
Credit Ratings
  • As of March 31, 2006

88
Company Analysis
89
Overview
  • Established in 1948
  • Four lines of business
  • Motorcycles
  • Automobiles
  • Power products and others
  • Financial services
  • Over 61 principal subsidiaries
  • 32 manufacturing facilities in 19 countries
  • Total of about 144,785 full-time employees

90
History
  • 1948 Honda Motor Co., Ltd. incorporated
    (capital 1 million yen)
  • 1949 First motorcycle manufactured
  • 1953 H-type engine, Hondas 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 Hondas first sports car (S500) and light
    truck (T360) released

91
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

92
Corporate Governance
93
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

94
Lines of Business
  • Motorcycles
  • Automobiles
  • Power products and Others
  • Financial services

95
Fields of Business
  • Research Development
  • ASIMO
  • HondaJet
  • Next generation powertrains
  • Manufacturing Distribution
  • Local production plants to meet local demand
  • Sales Services
  • Emphasis on customer satisfaction

96
RD Efforts
97
Key Regions of Operation
  • Japan
  • Centers for RD, manufacturing, and customer
    service
  • North America
  • Hondas overall largest market
  • Europe
  • Increasing brand popularity
  • Asia
  • China increasing production facilities
  • Others
  • Honda has over 80 market share in Brazilian
    motorcycle industry

98
Unit Sales Breakdown
  • 53 from motorcycles, 17 from automobiles, and
    30 from power products

99
Revenue and Operating Margin
100
Business Segment Information
101
Revenue Breakdown by Business Segments ()
102
Geographic Segment Information
103
Revenue Breakdown by Geographic Segments ()
104
Risk Factors
  • 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

105
Growth Strategies
  • 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
  • 2007 Sales forecast 10,840,000 units

106
Growth Strategies
  • 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
  • 2007 Sales forecast 3,720,000 units

107
Growth Strategies
  • Power products
  • Supplying cost-competitive general-purpose
    engines from Asia
  • Extending sales of compact, home-use cogeneration
    system from Japan to the US
  • 2007 Sales forecast 5,880,000 units

108
News
  • 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

109
Financial Analysis
110
Financial Highlights
111
(No Transcript)
112
(No Transcript)
113
2006 Capital Expenditure Breakdown by Business
Segments
114
Forecasted 2007 Cap. Ex. Breakdown by Business
Segments
115
Semi-annual Financial Statements
116
Semi-annual Financial Highlights
117
Financial Results
118
Important Factors
119
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120
(No Transcript)
121
(No Transcript)
122
(No Transcript)
123
(No Transcript)
124
(No Transcript)
125
(No Transcript)
126
(No Transcript)
127
(No Transcript)
128
(No Transcript)
129
(No Transcript)
130
(No Transcript)
131
Annual Financial Statements
132
(No Transcript)
133
(No Transcript)
134
(No Transcript)
135
(No Transcript)
136
(No Transcript)
137
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138
Fishers Analysis
139
Superiority in Financial skills, Production,
Marketing, Research
  • 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 RD

140
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

141
Investment Characteristics of Some Business
  • Strong market position
  • Diversified into related businesses where there
    are strategic fits and benefited from economies
    of scope

142
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)

143
Recommendation
144
BUY
145
General Motors
146
Table of Contents
  • Stock price
  • Company Background
  • Company Analysis
  • Financial Highlight
  • (06 3rd Quarter report ? 05 Annual report)
  • Income statement
  • Balance sheet
  • Cash flow statement
  • Conclusion Recommendation

147
Current Position onNov. 24, 2006
  • Industry Global Automobile
  • Ticker Symbol GM-N (NYSE)
  • Share Price 31.23
  • 52 week range 18.33 - 36.56
  • P/E 40.00
  • EPS 0.78
  • Dividend 1 (3.2)
  • Shares Outstanding 565,611,157
  • Market Capital 20,096,164,408

Globeinvestor.com and merchantonline.com
148
5-Year Stock Price
(from bigcharts.com)
149
1-Year Stock Price
(from bigcharts.com)
150
GM vs. SP/TSX Composite Index
Globeinvestor.com
151
Definitions
  • GMA GM Auto
  • GMNA - GM North America
  • GME - GM Europe
  • GMLAAM - GM Latin America / Africa / Mid-East
  • GMAP - GM Asia Pacific
  • GMAC General Motors Acceptance Corporation

152
Background
  • The world's largest automaker
  • Founded in 1908
  • Global industry sales leader for 75 years
  • GM today employs 327,000 people in the world
  • Huge labor pension cost
  • Global headquarters in Detroit, Michigan, USA
  • GM manufactures its cars and trucks in 33
    countries

153
GMs Products
  • In 2005, 9.17 million GM cars and trucks were
    sold globally under the following brands
  • GM operates one of the world's leading finance
    companies
  • 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.
  • Opel
  • Pontiac
  • Saab
  • Saturn
  • Vauxhall
  • GM
  • Daewoo
  • Holden
  • HUMMER
  • Buick
  • Cadillac
  • Chevrolet
  • GMC

154
GMA GMAC Revenue Share - Nine months ended
September 30, 2006
155
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.
  • Advanced technology collaborations with
  • DaimlerChrysler AG
  • BMW AG of Germany
  • Toyota Motor Corp. of Japan
  • Vehicle manufacturing ventures with
  • Toyota
  • Suzuki
  • Shanghai Automotive Industry Corp. of China
  • AVTOVAZ of Russia
  • Renault SA of France

156
Type of Vehicle and Market Share
157
Management
  • Key people
  • G. Richard Wagoner, Jr.
  • Chairman CEO since May 1, 2003
  • Joined GM since 1977
  • BA in economics from Duke University
  • MBA from Harvard Business School
  • Frederick (Fritz) A. Henderson
  • Vice Chairman and CFO since Jan. 1, 2006
  • Joined GM since 1984
  • BBA from the University of Michigan
  • MBA from Harvard Business School
  • Robert A. Lutz
  • Vice Chairman, Global Product Development since
    Sept. 1, 2001
  • 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

158
The World's Largest Automaker
  • GM's largest national market in order
  • the United States
  • China
  • Canada
  • the United Kingdom and Germany.
  • Global market share for vehicles sales
  • 14.2(2005) from 14.4(2004)

159
Declining Revenue
  • High oil price
  • GM produce high horse power vehicles
  • Used to be American consumers favorite
  • People switch to low oil consumption vehicles
  • Japanese cars
  • Korean cars

160
Competitive Position
161
Financial Statement Analysis
  • The 2006 3rd Quarter Report
  • Ended at September 30, 2006

162
(No Transcript)
163
(No Transcript)
164
(No Transcript)
165
2006 Quarter Revenue Breakdown- Auto Financing
and Insurance Operations
166
2006 Quarter GMA Net Income by Region
167
2006 Quarter GMAC Net Income by Division
168
(No Transcript)
169
0607 EPS Estimates
(Earning estimates from Zacks.com)
170
Segment Reporting
171
GMA Revenue Share by Region- Nine months ended
September 30, 2006
172
Financial Statement Analysis
  • 2005 Annual Report

173
General Idea about the Performance of GM in 2005
  • GM is losing big money in North America
  • GMAs global sales revenue is good (growth)
  • GMAC is making money
  • We can see that the auto division is dragging the
    company performance

174
Breakdown of GMAs Loss by region in 2005
175
Breakdown of GMACs profit in 2005
176
Financial Highlights (In USD as of 12/31/2005)
  • Total Revenue 192,604,000,000
  • EBITDA 31,516,000,000
  • Net Loss (10,567,000,000)
  • Total Assets 476,078,000,000
  • Current Assets 99,414,000,000
  • Total Liabilities 461,481,000,000
  • Current Liabilities 117,963,000,000
  • Long Term Debt 202,177,000,000
  • Stockholders' Equity 14,597,000,000

177
GMs Main Challenges
  • Huge legacy cost burden
  • Inability to adjust structural costs in line with
    falling revenue

178
GMs Legacy Challenge
  • 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
  • (!!!Big competitive disadvantage)

179
Estimated Future Employee Benefit Payments
180
Consolidated Balance Sheet - Asset
181
Consolidated Balance Sheet- Liabilities and
Stockholders Equity
182
Breakdown for Balance Sheet- Asset
183
Breakdown for Balance Sheet- Liabilities and
Stockholders Equity
184
(No Transcript)
185
Consolidated Income Statement
186
Breakdown for Consolidated Income Statement
187
Loss from Continuing Operations
188
2005 to 2004 Comparison
  • 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

189
Reasons for Unfavorable results in 2005
  • GMNA market share and product mix
  • Revenue declining
  • Delphi Chapter 11 Proceeding
  • 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

190
Factors for Loss in GMNA
  • Unfavorable product mix (2.2 billion loss)
  • Reduced in demand for higher margin large utility
    vehicles (reaching the end of the life cycle)
  • Production volume decreases (2.1 b. loss)
  • Market share decline
  • Reduction in dealer inventories
  • Unfavorable material costs (700 mil. loss)
  • Increased health-care expenses (600 mil. loss)
  • Escalating health care cost trends
  • Advertising and sales promotion cost increase
    (500 mil. loss)
  • Restructuring charge (1.7 b. loss)
  • After-tax impairment charge (552 mil. loss)

191
North America Turnaround Plan
  • Keep raising the bar in the execution of great
    cars and trucks
  • Revitalize sales and marketing strategy
  • Significantly improve cost competitiveness
  • Address health-care and pension legacy cost burden

192
GMNA Turnaround Plan Highlight
  • 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

193
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194
Consolidated Cash Flow Statement (cont.)
195
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196
Supplementary Information for Cash Flow Statement
(cont.)
197
GM Profitability Plan
  • Keep working on cost reduction
  • Growing revenue around the world
  • Invest in technology, better fuel efficiency
  • Revitalizing sales and marketing strategy

198
Significant Events
  • Delphi Bankruptcy
  • GMAC Pending Sale of 51 controlling interest
  • Discussions with Renault and Nissan
  • Sale of investments in Isuzu and Suzuki
  • Sale of Regional Homebuilder

199
GM-Fishers Analysis
  • 1) Financial Skill
  • Bad financial performance in GMA
  • Depending on profits from GMAC
  • 2) People Factor
  • Great management team
  • Relatively bad employee relationship (cutting
    pension expense)
  • 3) Investment Characteristics
  • Limited growth space due to intense competition
  • Low industry profit margin (negative profit)
  • 4) Investment Price
  • P/E ratio is High
  • Increasing stock price if turn the Net loss
    around

200
Recommendation
HOLD
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