GM - Valens Credit Report - 2022 08 23
Credit markets are overstating GM's credit risk with a YTW of 4.658% and a CDS of 171bps relative to an Intrinsic YTW of 3.598% and an Intrinsic CDS of 64bps.Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Management's compensation metrics should focus them all on three value drivers: asset efficiency, margins, and top-line growth, leading to Uniform ROA expansion and increased cash flows available to service debt obligations. In addition, while most management members are not material owners of GM equity relative to their annual compensation, CEO Barra's significant holdings indicate she can likely persuade other NEOs to align with shareholders for long-term value creation.
Valens qualitative analysis of GM's Q2 2022 (07/26/2022) earnings call highlights that management generated an excitement marker when saying they are focused on long-term supply partnerships. Meanwhile, they are confident US dealer inventory remains tight at around 250,000 units, with a large portion in transit.
General Motors designs, builds and sells trucks, crossovers, cars and automobile parts. The company also provides automotive financing services through its subsidiary, General Motors Financial Company, Inc. (GM Financial). GM Financial provides retail loan and lease lending across the credit spectrum. GM Financial provides commercial lending products to dealers including new and used vehicle inventory floorplan financing and dealer loans, which are loans to finance improvements to dealership facilities, to provide working capital, and to purchase and/or finance dealership real estate. Other commercial lending products include financing for parts and accessories, dealer fleets and storage centers.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
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- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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