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GM to cut dividend by 50%
Old 02-07-2006, 09:52 AM   #1
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GM to cut dividend by 50%

GM just slashed their dividend in half, along with some exec pay and will be cutting health benefits and "restructuring" their pension system.

So much for buying a beaten down stock with a good dividend and being 'paid to wait for the recovery'.
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Re: GM to cut dividend by 50%
Old 02-07-2006, 10:33 AM   #2
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Re: GM to cut dividend by 50%

and tell me (as a biased GMAC bondholder) why a company with a negative EPS is paying a dividend at all?

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Re: GM to cut dividend by 50%
Old 02-07-2006, 11:07 AM   #3
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Re: GM to cut dividend by 50%

Probably because nobody would own the stock otherwise.
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Re: GM to cut dividend by 50%
Old 02-07-2006, 02:28 PM   #4
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Re: GM to cut dividend by 50%

Would not like it right now if I owned the stock, but they had/have to do what is necessary to preserve the company. Now it they can keep up the cost cutting, and start to make the cars that people will want, then maybe there'll be a turnaround.
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Re: GM to cut dividend by 50%
Old 02-07-2006, 02:43 PM   #5
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Re: GM to cut dividend by 50%

They also need to focus on design cars that have appeals to the oversea market.
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Re: GM to cut dividend by 50%
Old 02-07-2006, 03:11 PM   #6
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Re: GM to cut dividend by 50%

Quote:
Originally Posted by (Cute Fuzzy Bunny)
So much for buying a beaten down stock with a good dividend and being 'paid to wait for the recovery'.
Brewer went on vacation so the GM board probably couldn't reach him to discuss the dividend cut.

UncleMick2, did you get a call or did they not have your new phone number?

Well, anyway, talk me down here. I feel like Warren Buffett looking at an airline stock.

Kirk Kerkorian has his man on the GM board and the board has started implementing his 9.9% "suggestions". One of the first things to go is the dividend, but even at the new dollar per $23 share per year that's still a 4.3% yield. It's not hard to imagine buying a few hundred shares, reinvesting the dividends (Fidelity does that for free) and walking away for a couple years.

One of the next things to go might be GMAC, but GM shareholders would presumably be compensated for holding GMAC shares until the sale.

The company still has plenty of cash and Bob Lutz' creativity. A bankruptcy filing is the only thing that'd break the union, but a BK might also be deemed unecessary?

Of course GM still has plenty of problems, a horrendous burn rate, a severly underfunded pension plan, and turnarounds can take a couple of years-- even when they're done right.

And then there's the stellar examples set by the airline & steel industries.

But still...
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Re: GM to cut dividend by 50%
Old 02-07-2006, 03:15 PM   #7
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Re: GM to cut dividend by 50%

Quote:
Originally Posted by (Cute Fuzzy Bunny)
Probably because nobody would own the stock otherwise.
No, I get that. There is a certain segment of the investing population (including some talented billionaires) who will still buy this stock. I wouldn't touch it with a ten foot pole.
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Re: GM to cut dividend by 50%
Old 02-07-2006, 03:18 PM   #8
 
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Re: GM to cut dividend by 50%

GM's dividend is now the same as its' competitors, about 4%, it also sent a message to the Unions.

I am overweight GMAC Bonds, I believe this sale will be next, expected to bring in about $10 billion.

I would not rule out a GM sale to a Toyota?
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Re: GM to cut dividend by 50%
Old 02-07-2006, 09:25 PM   #9
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Re: GM to cut dividend by 50%

Wish I was wrong, but BK seems the most likely scenario.

I wager we'll only have one U.S. car company in 5 years.
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Re: GM to cut dividend by 50%
Old 02-07-2006, 10:45 PM   #10
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Re: GM to cut dividend by 50%

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Originally Posted by Charles
I wager we'll only have one U.S. car company in 5 years.
And for good reason. I was born and raised in Michigan but not around Detroit. In college, most of the people I met were from the Detroit area. I kept hearing about the high paying jobs on the assembly line. I think the unions and poor decisions pretty much killed the auto industry.

I don't buy American made cars. I don't have the confidence in them that I do in Honda and Toyota. I buy new cars and drive them into the ground. My Honda Civic had 170k miles on it when I was rear ended. It still had the same clutch. I changed the oil every 3 - 4k miles and had one tune up, did one brake job and had new tires put on, that was it. Wait, I did do the timing belt every 60k miles.

I just don't have the confidence in the quality of American made autos. I'd be very nervous if my pensions were with any of the American auto companies.

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Re: GM to cut dividend by 50%
Old 02-08-2006, 12:01 AM   #11
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Re: GM to cut dividend by 50%

I bought my 92 Camry new which I still own and it was made in good ol USA. The difference between a company like GM and Toyota is not the auto worker but management.
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Re: GM to cut dividend by 50%
Old 02-08-2006, 08:57 AM   #12
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Re: GM to cut dividend by 50%

Quote:
Originally Posted by Howard

I am overweight GMAC Bonds, I believe this sale will be next, expected to bring in about $10 billion.

I would not rule out a GM sale to a Toyota?
I'm also overweight in their bonds, and I believe a sale will bring in even more than $10B.

Also, what in the world would a lean running, well managed company like Toyota want with an outdated beast like GM with gigantic pension and retiree obligations?

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