Auto manufacturer death watch

Discussion in 'Investing' started by TomB16, Jul 14, 2022.

  1. TomB16

    TomB16 Well-Known Member

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    I hope this becomes a participation thread. Please share your thoughts, death threats, and well considered FUs below.

    This thread is not what we want to happen. This is what we expect to happen.

    My apologies to people who work for any of these companies for predicting their failure. I will take delight in being wrong.

    I predict these companies to go bankrupt and in this order. This is a wild, semi-educated, guess. It is not something I have deeply studied, although it is based on real world factors I consider to be significant.

    - Rivian (They continue to exist because they have infinite funding. The first bad market will take them out.)
    - Canoo (It breaks my heart to predict this companies failure because I so much like what they are doing.)
    - Lucid (If they can get someone to buy them, it would push them further down the list. I predict no one will buy them. I really like this company above all others and would prefer to predict great success for them.)
    - GM (GM will go bankrupt; probably multiple times. They probably have a bankruptcy department. They have great engineering chops. It's too bad the executives are incompetent.)
    - Toyota (Akio Toyoda is still betting on ICE and seems to continue to think fuel cells are a thing. His divine right to rule is going to bring a divine right to go bankrupt.)
    - Volkswagen (Management roulette is their death knell. I suspect the source of their problems is at the board level. Meanwhile, they are having more software problems.)
    - Stellantis (truck/van sales will keep this company going after others are gone)
    - Ford (truck/van sales will keep this company going after others are gone. CEO is a grossly over paid moron.)


    Footnotes

    - Tesla

    I believe Tesla is going to have a wild ride. They appear to be the heir apparent of charging networks. In fact, I'm almost ready to declare a victory in their favour. The Tesla vs the world contest is over; Tesla won.

    FSD could create a pretty massive implosion, if they can't pull it out. I used to sit back and let people complain about it being late, smug in the knowledge they are going to succeed. I was 95% sure. Now I'm 85% sure. A lack of FSD will not kill the company but it will wound it terribly and it could take Elon Musk away from relevance.

    There is an amazing energy company growing inside of Tesla. This company will almost certainly succeed but it has a long, long way to go to grow into the trillion dollar valuation that Tesla has become.


    - BYD / SAIC / BAIC / NIO / CATL / et al.

    These companies, in some form, are going to dominate the world. They are going to be able to build cars far more efficiently in China than anywhere else.

    I think these brands are going to merge and transform but the slightly different looking forest will still consist of the trees that are growing today.

    Even if these companies are blocked from entering foreign markets due to legislation, they will become component suppliers of significant assemblies and maybe even software.

    I list CATL in this list because they are selling battery packs. While they don't presently have a car, their parts catalog is growing significantly and they have started to build out a major charging / battery-swap network in China that might turn into something.
     
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  2. T0rm3nted

    T0rm3nted Moderator
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    I respect your opinion on the matter, you were ahead of almost everyone on this and made yourself a good amount of money in this field being so early on Tesla. I agree with a lot of what you said, but am hesitant to call Tesla a clear early winner. Maybe it's because we define it differently so we might actually agree using your definition. I won't personally call tesla a winner until I see at least as many tesla's on the road as any of the others, and right now it's nowhere close. That doesn't mean majority tesla, just the same amount as ANY current ICE competitor (GM, Ford, Stellantis, VW, Hyundai, Honda, Toyota, Kia, etc.).
     
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  3. anotherdevilsadvocate

    anotherdevilsadvocate Well-Known Member

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    Thank you for this thread, it's off to a great start.

    So what is the future?
    100% EV?
    30% EV, 10% Hydrogen, 60% ICE?
     
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  4. Spud

    Spud Active Member

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    I vote Tesla for the win. Boy wonder is a genius and has created a conglomerate that most just don't understand the capabilities or intentions. 10 years ago the big car companies laughed at him. Now they have went nearly bankrupt trying to catch up. I would not want to be a CEO of a competing company in the sights of Elon.
     
  5. TomB16

    TomB16 Well-Known Member

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    Tesla is a winner, from a market perspective. An assortment of very powerful interests spread endless lies about Tesla for three years and could not kill them. Tesla has had more demand than production capacity for 10 years. They were a trillion dollar company producing less than a million vehicles per year. It isn't possible to frame that as not a success without lieing.

    On the business side, Tesla has to make FCD happen or they will be in trouble. I don't see it as an existential threat but it might be. Opinion swings really fast and that is what will make or kill Tesla. That's why Elon should shut the hell up about politics.
     
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  6. T0rm3nted

    T0rm3nted Moderator
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    I just made the largets profit sharing bonus I've ever had, so I wouldn't say traditional autos are nearly bankrupt.
     
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  7. TomB16

    TomB16 Well-Known Member

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    Meanwhile, at BMW, sales are off 20% year on year and last year was very bad.

    This is the problem.

    When public sentiment shifts, a viable company with a decent product can go down the tubes in a shockingly brief period of time.

    I give BMW 5 years.
     
  8. TomB16

    TomB16 Well-Known Member

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    Lots of profit sharing and bonuses is the hallmark of failing companies. Executives milk the owners to the end and frequently beyond, as
    well (see Northern Telecom)

    Hopefully, that is not happening in your case.
     
  9. TomB16

    TomB16 Well-Known Member

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    I started this thread to dupe people like you into sharing your perspective. Please do share.

    I don't have a clear vision of the future at all. The only thing I know with certainty is that politics will f-it up at every opportunity.

    So, my guess at the ratios in 2032:

    85% EV, 0% fuel cell, 15% ICE
     
  10. Spud

    Spud Active Member

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    The bigger ones have so many gremlins in the woodwork they're not investment worthy anymore. From the front office to the union halls. If you went in and trimmed the fat there wouldn't be any bacon left. These companies are very new to the E.V. industry and have been forced ultimately by Tesla to enter a market that it dominates. Personally I don't think anyone alive has the intellectual capacity to compete with Elon's mind. Dude is in his own Einstein world. Tesla will always be a step ahead of the pack. Ford and Tesla are the only 2 that survived the 2009 crash without unpaid bailouts, think about it.
     
  11. Spud

    Spud Active Member

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    Tesla for the win
    Ford 2nd "" I like em"
    EV 75%
    ICE 15%
    OTHER 10% Hydro,cells, flintstones,etc.
    ICE will always be around to some degree.
     
  12. T0rm3nted

    T0rm3nted Moderator
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    Nah, just the same contractually agreed upon profit sharing % for the UAW as we always get.
     
  13. TomB16

    TomB16 Well-Known Member

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    This statement seems to be based on the misapprehension that accounting is a completely objective process.


    Consider how much your profit sharing went up, year on year. Next, consider how much sales are up YoY. How about margins... how much are they up?

    So, as you can see, the accounting process does not represent the business as directly as it should.
     
    #13 TomB16, Jul 14, 2022
    Last edited: Jul 14, 2022
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  14. TomB16

    TomB16 Well-Known Member

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    First, T0rm3nted, I have huge respect for you. I've come to know you as an outstanding person and wish to show you every bit of respect I can muster. Thank you for being an excellent poster to exchange with, over the years.

    This is not a case of me wanting American car companies to go broke; to the contrary.

    I've been thinking about what would happen if GM, Ford, and Stellantis were to go bankrupt with 5 years of each other. Could the American economy survive? I think not. At least, not in it's current form.

    A failed auto industry is an apocalyptic scenario. And yet, I have the utter gall to predict this?

    I do not own any S&P 500 index. I don't own any technology. I'm in REITs, utilities, and financials with one exception. We own a very small building products company. It's a micro-cap, we don't own a ton of it, and I like how they run their shop. We also have our DRIPs turned off so cash is building. As valuations decline and our cash builds, our cash ratio is now over 20%. If we can sell a couple more properties this year, our cash ratio will end up in the 30% range.

    In other words, I have my windows boarded up and am now waiting for the hurricane so I can go looting.

    It occurs to me the cash may be needed for survival and could very easily not end up back in the market.

    Also, I've considered the possibility that American auto will survive but it would have to transform to do so. If someone had FSD ready to go, the first thing they will try to do is create a ride share network. No one wants to sell FSD for $12,000 per copy with lifetime maintenance when there is a $2T ride sharing industry to conquer.

    If 3rd party FSD were available today, they would get as many cars from as many manufacturers as possible. Gas or electric. They wouldn't care. They would want a fleet in the street to harvest the ride share cash crop. American auto can fit into that for a while, even if they never make the jump to EV. In this scenario, however, American auto does not earn as much as they currently do and the dealer networks are pretty much f-ed.

    I can't think of a scenario which preserves the dealership networks.
     
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  15. T0rm3nted

    T0rm3nted Moderator
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    Yes, I'm aware of the fudging of numbers, moving of capital, etc. from large companies listed on the stock market. I thought you were asking/implying something more along the lines of this being a "special bonus" for salaried employees or something and not just the normal annual profit sharing bonus. I only brought up the profit sharing bonus to counter the post I quoted that was commenting on traditional autos being almost bankrupt. I don't think they're almost bankrupt yet, they're all recording record profits as of last year. Some of our plants built essentially at full capacity with overtime all year, while other lower-profit vehicle plants were idled half the year "because of the chip shortage". I'm half-convinced it's greatly exaggerated and as long as the automakers can all keep claiming a chip shortage, they can stop building the cheap cars to provide the consumer with nothing affordable so they step up to the more expensive models which they're selling for $15k more than they were the year before (just an example number). If you used to sell them all $5k off and now they're all selling $10k over previous market value, it's now $15k more per vehicle, which they built 7 days a week 24 hours a day, like they do every year.

    Also, thank you for the positive comments in the following post too.
     
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  16. anotherdevilsadvocate

    anotherdevilsadvocate Well-Known Member

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    Ultimately, doesn't the chip shortage come down to the legacy automakers not being techonologically ready? I thought I heard there are enough chips, as Tesla has programmers that are getting them ready. But GM/Ford do not have their own programmers, so I guess they were contracting someone to make the chips for autos; and that someone was busy making chips for EVERYTHING, so GM/Ford weren't getting enough chips that they needed. Thus, they talk about a chip shortage, but it doesn't seem to be slowing Tesla.

    I'm not sure GM/Ford will die in 5-10 years. With the understanding that companies can go bankrupt while staying alive, of course.
    I do think that GM/Ford are way way way behind in being ready to compete in the modern auto industry, and maybe they're not even capable of being called modern yet.

    But gross incompetence, unfortunately, does not necessarily meet its just ending in a handful of years. These jackasses can leech for a looong time.

    If the short term future was 80% EV/20% ICE, I would certainly suspect some of the big automakers of dying (just not enough scraps for all of these dinosaurs). But even though politicians talk about cutting carbon emissions in half by 2030, I'm not one to trust politicians lol.
     
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  17. TomB16

    TomB16 Well-Known Member

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    I hate to be this guy but... I'm pretty confident GM will go bankrupt but I do not claim GM will go away. The government will have little choice but to bail them out as they are too big to fail.
     
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  18. Spud

    Spud Active Member

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    I'm a numbers man. Kicking the can down the road is not the way to balance the sheets.
     
  19. T0rm3nted

    T0rm3nted Moderator
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    I mean yeah, sort of. When the pandemic hit, most autos thought they would need less chips due to less cars being sold. Chips were also going heavily into tech as things started being done more electronically than they used to (work from home, virtual meetings, etc.). At the same time though, comparing the two is disingenuous for the "need for chips". Tesla delivered <1M vehicles in 2021, while GM sold just under 6.3 million vehicles.
     
  20. TomB16

    TomB16 Well-Known Member

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    We share this view, at least with regard to Stellantis/Ford/GM. Of the three, I believe Ford to be in the worst shape but nothing existential.

    Unfortunately, this is not predictive of long term survival. It's just a comforting short term statistic.

    I suspect BMW is in worse shape, as sales are 20% down from last year which was an off year for them. In a surprise to some, BMW just posted a great earnings report.
     
    #20 TomB16, Jul 15, 2022
    Last edited: Jul 15, 2022
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