As an Elder Millennial, it’s always dangerous to try to use the jargon of the day. I hope I never sink so low that I try to explain how Norbert Reithofer rizzed up Baby Koji Sato. Still, I do enjoy the way the larger internet tends to create useful binaries (it’s so over/we’re so back) and I’m going to use one today to talk about General Motors. Is the automaker cooking or is it “cooked”?
The cooked/cooking dichotomy is like a year old at this point and I’m sure parts of the internet have moved on, which means it’s a perfect time to drive it into the ground. The Morning Dump today will start with GM, which has done quite well up to this point. It’s definitely cooking, though there’s a disagreement over how long that’ll last.
Amazon’s car sales program with Hyundai has not, to this point, delivered much. Is it cooked? We’ve noted many times that Stellantis definitely is cooked at the moment, and its plan for the future seems to be laying off workers. And, finally, the editors at Cox have a list of the automakers they think are cooking and I mostly agree, though there’s one big flaw in their analysis.
Skibidi. [Ed Note: I had to look that up, and I still don’t get it. -DT]
Analyst Downgrades GM Stocks Over ‘Earnings Headwinds’
So far this year, Tesla stock is up about 2.35%, though it’s mostly been underwater. General Motors stock, however, has climbed about 33% and has spent most of the year in positive territory. While Tesla is still way more valuable than GM from a market cap perspective, this might be a surprise to people who think Tesla stock only goes up.
If you regularly read TMD this isn’t a shock to you, as last year General Motors indicated that the company’s plan was to improve the stock price and would do so via stock buybacks and dividends. Since writing that, GM stock has gone up more than 80%. It’s a publicly traded company, so improving the stock price is generally a good thing and Barra et al deserve credit for successfully navigating a tough year and delivering a big increase.
Still, I expressed a lot of skepticism last year that this was ultimately the best long-term strategy, writing:
Yes, the company’s truck and SUV business is very profitable and I also think their new EVs look very good, but if I were a GM shareholder I’d want them to invest as much as possible in hybrids and fixing their Ultium production. It’s nice that GM will be profitable this year and that the strike is only going to cost about a billion dollars, but in what universe does GM not need every cent to survive a future with Chinese automakers expanding in Mexico and Tesla showing no signs of slowing down?
This isn’t so out there a view as Daniel Röska, Bernstein analyst and recent GM bull, has downgraded GM from “outperform” to “market perform” and set a price target down slightly to $53 (it’s currently trading at around $48 per share). Röska gives many reasons:
From a macro point of view, Roeska noted that continued inventory build in the US will lead to pricing discounts in 2025, impacting profitability. “We assume that discounts will need to increase as inventories are getting pretty high, currently standing at 70 days,” he wrote.
Meanwhile, GM’s EV ramp might not go as expected. GM’s 200,000 EV production target in North America for 2024 is likely beyond reach, Roeska wrote, and GM would have to quadruple sales in the final four months of the year to hit that goal.
All that sounds reasonable to me, as are his concerns over hybridization costs:
Roeska is concerned that the joint venture with Hyundai will require significant capital expenditures which will dent profits. “We expect the [hybrid] endeavor to require catch-up capex on hybrid models reducing the FCF [free cash flow] available to return to shareholders.”
Yeah, but what if GM-Hyundai brings back the LUV?
In this first view, GM will be fine, it just won’t be returning as much value to shareholders as it has in the past. Is there another view? Analysts at British bank HSBC set a higher share price target of $58. Why? Here is HSBC’s reasoning:
In a note devoted to US automakers, the broker refers to “resilient” demand, but also to sharply contrasting sales dynamics between the “Big Three”.
While Ford and GM saw their sales increase by 6% and 2% respectively over the summer period (July-August), those of Stellantis fell by 19%, notes the broker.
As far as GM is concerned, the strength of the results published for the second quarter should make up for weaker performance in the second half of the year, he points out, while revising downwards his forecasts for 2025 by 6% in view of a more difficult market environment.
The broad view is that 2025 may be a good year for sales if something weird doesn’t happen, but it’ll probably be tight for automaker profits. I don’t personally think GM is cooked, I think it’ll do well, but I don’t think if we fast forward another 10 months that GM will be up 80% again.
Amazon’s Car-Selling Thing Isn’t Working Out So Well
In theory, Amazon sells cars via a pilot program with Hyundai. In reality, it’s a lot more complicated.
The concept of using Amazon to sell cars makes sense as it already has an enormous number of customers who look to the company for help in buying everything from movies to a 55-gallon barrel of lube to help you rev your Onan (full disclosure, I did put in an Amazon affiliate link, which means if you buy a 55-gallon barrel of lube we might make a commission on it. I mostly did this for my own amusement).
Early reports of the service identified some problems:
And most of the new car market, made up of franchised dealers protected by tough state vehicle sales laws, hasn’t been able to mimic the click-and-buy purchase process consumers are increasingly able to get everywhere else.
So far, Amazon’s program is small, but dealers are watching. Some are skeptical that Amazon will be able to overcome the challenges that have stymied other companies.
That was in January, let’s check in on this courtesy of NADA CEO Mike Stanton during a panel at the Automotive News Congress yesterday:
“What I am hearing right now is that the dealers are frustrated,” Stanton said. “They’re not there yet with the agreement. It appears to be another digital retailing tool at the moment and probably not top tier.”
[…]
“They still haven’t set up a situation where the dealer can deal with multiple banks or work on trades, so I think more will come,” Stanton said.
Panelist Inga Maurer, senior partner with McKinsey & Co., cautioned the Amazon-Hyundai partnership carries risks for dealerships in terms of the data they must give up to participate.
“It’s important that dealers understand what they’re giving up for data and what it means down the road,” Maurer said. Amazon likely will use their customer data to market other products to them including parts purchases, she added.
I went to an Amazon page to look at a car and it was basically a decently nice configurator that then just sent you to a dealership. This isn’t to say that Amazon can’t or won’t figure it out. Amazon has figured out how to do a lot of things, including saving the last few seasons of The Expanse, for which I’ll be forever grateful. This is just to say that making cars is hard and selling them, in some ways, is even harder.
Stellantis Is Laying Off Workers
I was going to go a day without writing about Stellantis. I really was. There’s been plenty of it lately, but it turns out I just can’t quit you Stellantis.
Today is the news that Stellantis is laying off UAW workers in all sorts of places as it continues to fight with the union and plan for its uncertain future. This bit from the Detroit Free Press stuck out to me:
Stellantis Chief Financial Officer Natalie Knight told analysts Monday that the company intends to have 80% of “our supply” coming from “best-cost countries” in coming years, echoing a theme the automaker has been touting to investors this year.
Stellantis’ issues go well beyond its fight with the UAW, however. The company has been struggling with high inventories, lower sales in its crucial U.S. market and diminished profits, although it has remained profitable, according to its most recent earnings report.
What, exactly, is a “best-cost” country? Places like Morocco, India, and Brazil.
The Best Brands Right Now According To Cox Automotive
The nice folks over at Cox Automotive do a lot of analysis that I link to and I’m grateful to have access to it as it helps me explain to all of you how I think the automotive world works. I also appreciate that they’re willing to engage in a bit of schtick to get the point across, especially for something that’s a bit more qualitative than quantitative.
This week’s schtick is comparing the four best brands to college football teams. I take no issue with the brands they picked because, while I’ve had my issues with Subaru, they are an extremely popular carmaker with products people seem to love. Toyota and Honda are definitely at the top of the game and Chevrolet, with products like the Trax and still-popular trucks and SUVs, is doing a great job. Other than a lack of hybrids and the lack of a Camaro replacement, Chevy has an appealing lineup.
My issue is that they made Toyota the “Alabama” of automakers and Chevrolet the “Texas.” Here’s what they wrote:
Toyota is the Alabama Crimson Tide of the car business and a championship contender every year. They have some compelling new product launches, including the all-new Land Cruiser (which looks great), the new Tacoma and the 100% Hybrid Camry. Toyota continues to carry the highest blue-sky multiples in the industry, enjoys the lowest incentive spending per unit, and has the fastest days to sell! As always, they will be a tough team to beat.
My Texas Longhorns (Class of ’05) are #1 in the rankings, baby! Also, Toyota is literally based in Texas now. I think this is a massive oversight on the part of Cox Automotive, but I’m gonna let it slide because they called Subaru the “Notre Dame” of car brands and I think that’s definitely right because Notre Dame has a bunch of extremely loyal fans, gets way more attention than it deserves, and is usually kinda mid!
What I’m Listening To While Writing TMD
I decided I needed to blog a bit this morning to help out while we’re short-handed, so I tossed on Rage Against The Machine’s “Wake Up.” I am pumped.
The Big Question
Who is cooked right now and who is cooking?
As an elder mellinial Australian, it’s fun to see “cooked” suddenly hit the big time. That’s a term we’ve used forever to mean something is dead, or f@#$&d… A couple days ago I watched an episode of “Bush Tucker man” from 1988 and he described something as “pretty cooked” haha
Whew I’m feeling pretty cooked, haha.
I wonder what car company my alma madder’s football team equates to? University of New Mexico Lobos. We suck ass, but maybe we’re getting a little better? Kind of, not really? Are we Nissan? Shit. We might be Nissan.
What’s hilarious is it’s National Cooking Day
DT is cooking spaghetti in the shower
DT = skibidi Ohio rizz
Wow! the Lube linked in Matt’s article is Sean “Diddy” Combs approved!
5 stars! 😉
Mary should be fired. The Ultium platform was supposed to be their big push into EVs. Multiple years and countless billions later to come out with uncompetitive cars that are years behind the Koreans and Tesla. Just unacceptable for the time and investment.
Savage burn on both Notre Dame and Subaru – bravo
It’s a good analogy. Both are heavily propped up by their past for current relevancy.
Made me actually laugh out loud. More aura points for Hardigree!
I’d say Lada is cooked because of all those sanctions and Hyundai-Kia is cooking.
TBQ:
Asked and answered. TMC is cooking, Stellantis is cooked.
Line that made me LOL so hard the lunchroom conversations all stopped to look:
“they called Subaru the “Notre Dame” of car brands and I think that’s definitely right because Notre Dame has a bunch of extremely loyal fans, gets way more attention than it deserves, and is usually kinda mid!”
Cooking;
Globe trotting international man of mystery
Dukes party crasher
Concours d’Elegance crasher
Entrepreneurial media mogul
Collector of almost desirable vehicles
Cooked;
Wedding planning
I test-drove a base Impreza yesterday. I don’t want/need AWD, but the pickings are getting slim in the small hatchback field, and Subaru is offering a healthy discount on the ’24s.
It was the most “meh” car I’ve driven in years. Aside from the abysmal programming of the CVT, there is nothing objectively bad about the car, but there is also nothing objectively *good* about it, either.
It’s rough out there for the hatch fans. Especially if you want a properly useful one (the Civic is more a liftback, the Corolla hatch barely has a cargo area for some reason) the Impreza is the best form factor, even if the powertrain is mediocre.
Oh wait, Mazda3 is probably the answer here. Though that’s a bit squished as well.
Civic and Impreza aren’t all that far off in dimensions. Both are longer than the Golf would be, so yeah that gives more of the slope to the hatch/liftback, but does give a longer load floor too rather than vertical height.
You do pay for it with the Honda, price is probably the biggest knock on the Civic, running more than a Subaru or Mazda but with a bit less content.
I was idly thinking through cars to get for my octogenarian mom and a Crosstrek Limited gets you eyesight, blind spot monitoring, reverse auto braking and decent safety without too many annoyances. I hate the meh, but for her what’s better?
Lexus? Lincoln? Lucid? Land Rove… uh, forget that last one unless you need a less obvious way to take her off the road.
I’m not sure how good the ADAS features are in these, but they should be halfway decent. They’re all a little pricey, but if you truly love her you will find the money.
I’d be trying to get her out of an extremely low milage (but dented and sun bleached extensively) 90s Outback she loves and her driveway demands a narrow vehicle.
The GX and Air are for ME in my idle dreaming.
GM should just withdraw from a currently underperforming market or sell some major assets, that usually sets things right
How is Subaru relevant anymore? I live in Maine, so I used to be a Subaru fan. They stopped making interesting vehicles in the mid 2000’s.
Cultism and herd-mentality folks who won’t look outside of the “walled garden”. Same reason starbucks and apple are so successful.
This is a little severe don’t you think? Subaru was first to market with all-weather economy/family cars. People bought them, liked them, and returned to buy another. That market became a major trend, and Subaru has reaped the rewards.
I wouldn’t say they were the first, but they were the first to identify most of the brand of non-BOF vehicles successfully with that ethos.
But blind brand loyalty can be dangerous. It leads to folks buying a chevy trax because their grandpa had a C10 that wouldnt quit, or their mom had a 3800 that got 200k miles on it or whatever.
Blind brand loyalty typically doesn’t help anyone. But in this case, most of the people I know with Subarus (wife included) have had good experiences. The people who haven’t, moved on.
Now, if someone is on Subaru #4 and is repeatedly getting head gaskets replaced but claims that Subarus are the most dependable and all cars have issues like that, well, that’s delusional stuff.
How about the herd-mentality that leads people to make wildly reductive analogies parroting talking points they read online? STARBUCK AND APPL ONLY POPULAR BECAUSE SHEEP REDDIT SAID SO
That was a lot of word salad.
I don’t go on reddit.
I form my own opinions from my own knowledge, experience, and research.
Just because you do something doesn’t mean others do it. It sounds like you’re projecting and overly defensive.
Starbucks sells mediocre products at premium prices and has a bunch of glaring flaws as a company and employer.
Apple sells mediocre products at premium prices and has a bunch of glaring flaws as a company and employer, especially through its third-party factories.
Neither is currently worthy of my support, business, nor positive attention. Both are examples of international companies that folks are aware of, so they’re a functional and effective point of reference.
Subaru sells mediocre products and is widely known within the industry for excessive cost-cutting that underscores the prices they charge, which is a relatively good business model, but doesn’t make the product superior. They also do not deserve my patronage nor acceptance, to the point where I’ll happily direct someone to one of their competitors’ superior offerings.
I was having a stressful morning and took it out on you. But I genuinely can’t stand people who call others “sheep”, it’s unproductive and condescending.
Oh I quite agree. The moment “sheep” or “sheeple” or whatever is mentioned I tend to want to shut down and dismiss the person presenting their viewpoint
Around here, it’s cars that have been thoughtfully designed for cold-weather markets, brand loyalty, and effective marketing.
And while they’re usually associated with outdoorsy and liberal folks, they also have a following among outdoorsy types and people in colder climates of all political stripes. I mean, obviously not Kristi Noem or Kevin Roberts, but at least some of the others.
There are tons of conservative types out here who drive Outbacks. Especially for those who seem to take that ideology literally, as it’s almost too sensible of a car.
The bloated size, the CVT only option to gain a precious 2mpg, lack of character. They are useful in cold-wearther markets. But now almost every manufacturer sells AWD and heated seats. That means they have no advantages or differences in the market at this point. I’d buy another light, manual, AWD Subaru wagon if they made one. Or a modern SVX.
Trust me, I vastly prefer the 00’s products compared to today’s Subarus. But I could say that for just about every brand. The car market is a snoozefest.
CVTs have become fairly common among many brands, and the Subaru’s sucks about as much as the rest. As for cold-weather markets, the AWD system is a bit more legit than Toyota’s or Honda’s, and Subaru tends to have little design features available that others don’t, like windshield wiper heating elements.
I can’t speak for other markets, but our local dealer is also Saturn-esque in the way it deals with customers. Nearly all of the salespeople there today have been there since or before those vaunted 00’s Subarus (back when they also used to sell Saabs). I’m going to assume that’s pretty rare, but it’s one of the reasons they manage to bring in so many repeat customers.
I distinctly remember driving the 09 refreshed Outback for the first time. It was so numb, sloppy and boring. My dad had a 05 Legacy GT that was so fun to drive. Everything went downhill from there.
This is the absolute worst thing you could do to EVs, unless the intent is for them to end up in a landfill soon after the warrantee is up, with bricked components that would otherwise have been good and functional for decades more if not for the cost cutting.
The electric Charger will sink them, when what they really need is an affordable electric M4S or electric Intrepid ESX2 that gets long range on a small/inexpensive battery. The Chinese are coming and will be attempting to offer similar.
I’m not really reading anything here that a business manager/exec wouldn’t place in the “PRO” column of the pros and cons list.
If they want to lose marketshare to the Chinese, then that’s their prerogative…
I thought GM would have a plug in hybrid Colorado with 70 miles of EV range and be able to tow about 5k. Sell it for 48k and I think it would do good. Hell, maybe the same receipt in a Silverado.
This is what I want. so, so much. I’ve never been so interested in spending that much money.
Nissan is so Ohio
I think you meant to say Mississippi.
Mitsubishi is the University of Phoenix online.
Ivy Tech
Hey now!
I object to this nonsense.
I am only 3 months away from being a Motel 6 manager, thanks to University of Phoenix, and the great education offered there. And it was only 26K for 18 months.
And with my degree from Trump University, well there’s bigly money in my future.
/s
I know what you are saying because I have a 10 year old.
Notice you didn’t add the State. The green school in Athens appreciates it’s existence being confirmed.
Mitsubishi is so cooked right now.
I forgot about them, that’s how hosed they are.
If Mitsubishi lasts long enough, they may find killing the Mirage to be a poor decision. Once all of this debt-fueled hallucination of prosperity is over, they’re going to need something to compete with the less expensive offerings from China. The legacy automakers in the USA are all sitting ducks once a financial crisis hits. Their bloatware offerings are unaffordable to the vast majority, and without easy/cheap credit, they wouldn’t be selling.
OMG! Thanks for that Skibidi link! I needed that to know WTF my kid is muttering under his breath!
How is it pronounced?
https://www.tiktok.com/@dominicditanna/video/7385217747396906271
You’re welcome
Brainrot content is nothing new and existed well before the internet. But it has definitely become more interesting, to say the least.
But it doesn’t hold a candle to some of the classics:
https://youtu.be/C78HBp-Youk?t=7
It probably took him way longer than a bidet to compose that one.
So the new slang is on tictok while the classics are on YouTube. Seems appropo.
I really wish I could say that helped….
Its a publically traded company that is too large for any sort of relevant buyout, so improving the stock price does not in any way improve the health of the company. It is completely and utterly irrelevant, and indeed throwing stock buy backs and dividends only harms the company itself. It does however enrich people who would rather milk a system than improve it.
Employees can also get some benefits, but long-term generally would be better off being given the extra money and allowed to invest it in properly and diversely.
Clearly you do not have an MBA. You speak too much sense.
It’s also of great benefit to people who invest in $MADE or similar ETFs…, which is pretty substantial.
So, all companies should be non-profits? Or ESOPs?
Absolutely not. It does not follow that disallowing stock buybacks takes away the profit motive. Stock buybacks were completely illegal until the Reagan administration and there were plenty of for-profit corporations that operated just fine without it.
A stock buyback converts cash into stock price gains, and only stock price gains which can only benefit stockholders.
Literally anything else you do with your cash flow is a better decision for broader stakeholders or long term investors. You can invest it back into the company with new R&D improving current and coming up with better future products, employee bonuses or 401k contributions, community outreach, building infrastructure. Every single other choice made with that cash has the potential to grow your underlying business by selling more/better things, lowering costs, retaining and attracting talent, or improving market perception.
A buyback gets the execs big ole paychecks, and big institutional investors nice bumps, and does almost nothing for retail or retirement investors, but sure lump them into the pie too of folks that benefit. At the end of the day though you’ve done absolutely nothing to actually use your cash to improve your business. All you’ve done is take a snort of stock-price coke.
OP was lumping in dividends too.
If buybacks are evil for established companies then surely the sale of new stock for raising capital is bad too, no? Or selling treasury stock?
edit: for the records I’m not a fan of buybacks, but I wouldn’t lump in dividends with them.
You know, I completely missed the dividends part of OPs post. Dividends are a radically different beast that I have no problem with.
But im not sure how your other questions are relevant. Raising capital gets your company cash. You can, you know, do stuff with that cash and grow your business. Folks arent generally raising money for the purpose of lining their C Suite’s pockets (which is the express purpose of a buyback, whether because of the executive class’s massive holdings or because of ubiquitous incentive structures directly tied to share price). It also has real tangible consequences in the market. If there is no growth plan for using that newly raised capital, all you are doing is diluting share price and generally making existing shareholders mad.
Buybacks differ from dividends a lot of ways. They are justified by saying “it’s just returning cash back to investors” but if that was true, the company would issue a dividend, not do a buyback. They are a scourge upon the corporate world and should go back to the shadow from whence they came.
Also, dividends paid to retail investors, option holders and the like are taxed as ordinary income, whereas any realized gains from a higher share price are taxed at the lower capital gains rate (presuming the shares are held long enough to qualify, of course.)
I’m not a fan of the tax treatment for gains from buybacks.
I think those questions are relevant because they are just the opposite of a buyback. Conceptually, if you are OK with taking money from people by issuing stock outside of the initial offering, then why not buying back stock in what is essentially the reverse of that?
Same (but opposite) impact on stock price. Same (but opposite) impact on cash.
I don’t like the way buybacks are tax preferential. But I don’t think buybacks are inherently sinister.
No, dividends are not identical to stock buybacks. Obviously buyback are purely awful. But fundamentally, in a mature company with mature stock inventory, dividends don’t directly help the company either. Obviously stock sales are valuable for companies, particularly early in their revenue streams, and diversifying ownership can give benefits to preventing arbitrary direction against the company’s own interests (at least in theory), but GM isn’t selling stock here. And even if they did, it wouldn’t really matter in the scheme of their revenue flow. Their yearly revenue is 3x their market cap.
The dividends comment wasn’t so much at GM, but there are more than a few companies paying excessive dividends, while failing to develop or reinvest in their companies. It is almost ubiquitous (the ubiquitous factor) in private equity schemes. That’s why I linked them together, not because I don’t think there isn’t any balance achievable. The last company I was at was noted as a “cash cow” because it was churning out 350M/year dividends while RnD budget for the company was less than 20M.
Basically as long as the stock price isn’t soo low that hostile takeovers are reasonably achievable, nothing above that actually benefits more than directly investing the same cash flow into the buisness itself. Dividend balance really should be aimed just at maintaining that minimum value, inflated market caps are not actually good business.
Yes, exactly.
Stellantis and Nissan seem cooked. I agree Toyota, Honda, Hyundai, Kia seem to be cooking right now with sales and product. GM and Ford are overdependent on trucks and the US market alone, but seem healthy, maybe they are chilling in the fridge. Ford seems to have an edge in hybrids, but Lincoln is just a drag at this point. GM may have an edge in overall product portfolio and electrification with Ultium. VW group is simmering but I’m sure it will survive, it’s too big to fail. I honestly have no idea about Mercedes, BMW, Subaru, Mazda. They seem to have a lot of brand loyalty but may be too small to survive long term alone.
I’m continually surprised by the existence of Lincoln. If goodcarbadcar.net numbers are accurate, they’ve been selling 80,000-something cars a year since 2021, down from the low 100,000s from 2015-2020. Honestly that is blowing my mind.
Lincoln’s overall product lineup is stronger than cadilliq’s by a decent margin. I could see Buick, Acura, and Infiniti dying before Lincoln based solely on their current offerings.
Lincoln (and Cadillac + Buick) exist mostly because of the Chinese market, where they are considered quite prestigious brands, unlike in North America. However, as the Chinese domestic market is becoming increasingly competitive, these American brands are losing market share to Chinese competitors. The market is full of EV startups with a point to prove, along with establishment brands who are launching new luxury subbrands (think Toyota->Lexus, etc). Due to the high competition, companies heavily cater to consumer tastes in a way that western companies either aren’t nimble enough or choose not to do. On top of that, there’s been an EV price war in the past couple years that’s adding further pressure to everything.
The latest gen Lincoln Nautilus gives a taste of what Chinese market cars are like, and that vehicle is likely somewhat uncompetitive in China due to not being advanced/luxurious enough, or by price.
I literally shared some of the 55 gallon lube reviews with a coworker yesterday, and now you bring me back today.
Matt, you just get me.
God, was that first RATM album good. It and the Matrix both blew my mind and both feel, while dated, timeless–they’re part of the pantheon like Dark Side of the Moon and Godfather.
Or maybe I was just the right age when they came out? Hard to listen with fresh ears!
It was the same year that Fight Club came out (1999) and for those of the right age at the time, those films and soundtracks sent the sort of message of, “See! These guys get it!”
(even if it all was still multinational corps that made them).
“GM – Now we’re cooking with GAS!”
Oh, wait – Equinox, Silverado, Blazer… Nevermind.
I appreciate your mid-century reference.