417globalauto063dppt3851

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Global Auto Industry

Franklin Guo

Dat HongRex LiuReya Lu


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Auto Manufacturing Industry Agenda

Auto Manufacturing History & Regulation

Business Strategy & Characteristics

Global Auto Supply Chain

Global Auto Sales & Production Analysis

Industry Future Forecast


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Auto Manufacturing History

Eras of Invention (late 17th century 1890s):

A small steam car was demonstrated in 1678

The early automobiles manufacturing companies: Panhardet Levassor, Oldsmobile, Cadillac, Winton, Ford, etc.

After 1930, the number of auto manufacturers declinedsharply as the industry consolidated and matured.

By 1960s, foreign competition arose as Japaneseappeared as a serious auto manufacturing nation.

Captive imports and badge engineering swept throughthe U.S. and UK, resulting in major acquisitions andmerges by the end of 1960s.


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Auto Manufacturing History

As the 1973 oil crisis, automobile emissions controlrules, Japanese and European imports, and stagnantinnovation changed American industry.

Small imported cars outperformed large American ones,and the domestic auto industry began to fail. Smallperformance cars from BMW, Toyota, and Nissan tookthe place of big-engined cars from America and Italy.

Major M & A, alliance:

GM---SAAB, Daewoo; Isuzu, Subaru, SuzukiFord---Jaguar, Land Rover, Volvo; MazdaBenz---ChryslerRenault---Nissan


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Regulation History

Emission Regulation Act

Since 1970, emissions from motor vehicles were regulated byTransport 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), automotiveemissions regulations have become the responsibility ofEnvironment Canada.

In 2001, Canadian government published the Canada GazettePart Ito develop and implement services and measures over thenext decade to further protect the health of Canadians and theenvironment by reducing emissions from vehicles, engines andfuels.


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Industry Overview


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The Automobile Design and Development Process


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Auto Industry Business Strategy


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Global Auto Ownership


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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


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Supply Chain


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Auto Suppliers

Facing a number of challenges including:A lack of pricing power, high labor costs,

decreasing volume and increasing rawmaterial costs;

NAFTA-only suppliers are losing marketshares to global suppliers.

Suppliers are trying to increase value-addedcontent, supply systems instead ofcomponents, technology innovations, etc.

Acquisitions, joint ventures, etc.


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M & A of Auto Suppliers


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Gasoline Prices Impact on Auto


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Changes in Gas Price vs. SUV & Hybrid AutoSales

Gasoline price has a positive correlation with the sales of hybrid

auto and a negative correlation with the sales of SUV.


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Global Auto Sales

http://www.scotiacapital.com/English/bns_econ/bns_auto.pdf


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Global Auto Production


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Current Auto Manufacturing


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Manufacturers Unit Price Comparison

On average, vehicles from US car makerswere sold for $21,597 in 2005, which was

13% below the comparable sales price forthe Japanese car makers. It was mainly

due to:

Missed design opportunitiesHeavy employee-level discounting

Higher labor costs


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Manufacturers Operating Margins

Comparison

US automakers operating margins are lower than their

major competitors.


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Manufacturers Profits Per Unit Comparison

Profit/Unit in $, 2005

-$1,500.00

-$1,000.00

-$500.00

$0.00

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

Honda Toyota Nissan Chrysler

Group

Ford GM


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Cost Structure - CAPEX


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Cost Structure R&D


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Cost Structure Health & Pension

The U.S. Big Three reported that pension and health

cost them $1,500 per vehicle produced currently.


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Interoperability Costs

Imperfect interoperability impose costs due to highercosts of design and production and slowerimplementation of design changes.


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Vehicle Ownership Forecast


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U.S. Market Forecast


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Auto Market Forecast


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Global Auto Sales Forecast

Asia Pacific will lead in


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Other

2%

NA

26%

EU

33%

Asia

Pacific

35%

SA

4%

2004 2011

Global Production59.8 million

Global Production74.6 million

Asia Pacific will lead inproduction volumes by 2011 European production

levels will grow at 2%and most of it in CentralEurope, Turkey andRussia.

North American growthwill be coming fromtransplant operations of

Korean, Japanese andGerman OEMs.

China will expand itsproduction base at anaverage annual rate of12%. Exports of

Chinese cars to Europeand US will commenceby 2008- 2009.

South America will seerecovery and growth

specifically in Brazil.

Source: CSM Auto Production Forecast

Regional CAGR 2004-11

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

Asia Pacific

EU

NA

SA

Other

Global

Other2%

SA

5%

Asia

Pacific

40%

EU

31%

NA

22%


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Emission Standards Comparison


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ACEA agreement is a voluntary agreement between Europeanautomobiles manufacturers association and the EuropeanCommissions. Its goal is to reduce 25% of 1995s level of vehicleCO2 emissions by 2008. Automakers are questioned for failing todeliver the emissions cut.- Japan automakers joined the agreement later and aimed to reduce23% 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 by2010.

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 forautomobiles, currently under legislative review.

New York: Clean Cars Bill proposing to follow California standardsis currently in committee. Several other NE states have indicatedthey will follow CAs lead.


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However, automakers are questioned for failing todeliver the emissions cut.

Nissan, Suzuki, Mazda, Audi, Volvo, BMW and

Volkswagen are the worst performers among agroup of 20 manufacturers surveyed by theInstitute for European Environmental Policy(IEEP) for T&E, the European Federation forTransport and the Environment.

There will be additional manufacturing associatedwith CO2 emission constraints.


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BMW Group


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BMW GroupSymbol : Common [BMW] Preferred [BMW3]Primary Exchange: FrankfurtCurrency: Euro ($1 EUR = $1.27 USD)

Key Share Information:


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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/AHigh: 44.36 Ask: N/ALow: 43.86 EPS: 4.23Volume: 21,311 P/E: 10.43

52 Week 52 WeekHigh: 45.97 Low: 35.68Yield: 1.45% Beta: 0.80Dividend per share: 0.64


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BMW Common Stock 5 Year Performance

Source: Deutsche Brse AG / Interactive Data Managed Solutions


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BMW Common Stock 1 Year Performance



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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/AHigh: 44.04 Ask: N/ALow: 43.28 EPS: 4.23Volume: 3,367 P/E: 10.71

52 Week 52 WeekHigh: 45.01 Low: 31.95Yield: 1.50% Beta: N/ADividend per share: 0.66


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BMW Preferred Stock 5 Year Performance



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BMW Preferred Stock 1 Year Stock Performance



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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 asfinancing/leasing and asset management

Conducts sales in approximately 40 international markets

Has 15 production facilities spanning 7 countries

Employs over 100,000 people globally


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Important Company Milestones

1972 - BMW ventures into South Africa and sets up first production plantoutside Germany

1992 BMW ventures into North American and sets up first productionplant in South Carolina

1994 BMW acquires the British based Rover Group, landing the brandsRover, 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 MINIbrand

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 inShenyang, China


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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 (SouthCarolina)- 2000 - 2006 Member of the Board of Management; Production


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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

BMW Group Shareholder Structure Overview


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BMW Group Shareholder Structure Overview

17.4

16.7

12.5

53.4

Stefan Quandt

Johanna Quandt

Susanne Klatten

Free Floating

STEFAN QUANT JOHANNA QUANDT SUSANNE KLATTEN


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BMW Group Shareholder Structure OverviewInvestor Type

46.6

44.6

8.8

strategic investors institutional investors other investors

Institutional Investors by Region

10.8

6.6

12.8

9.8

4.7

Germ any Europe UK & Ireland N. Am erica Res t of World


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BMW Share Buyback Program Approved by shareholders on May 12, 2005

BMW to buyback common shares up to a maximum of 10% of the companyshare 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 foremployee stock plan


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BMW Group Production Figures


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BMW G V hi l M d l A l i


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BMW Group Vehicle Model Analysis


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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


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0.4

0.46

0.52 0.52

0.58

0.620.64

0.42

0.48

0.55 0.55

0.6

0.640.66

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

1999 2000 2001 2002 2003 2004 2005

Date

Euro Common shares

Preferred shares

Dividend Payout 1999-2005

Factors Affecting Profitability


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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

Large capital expenditure costs


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BMW Group Capital Expenditure andCash Flow Data


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Financial Statements


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BMW Group IncomeStatement for the periodof January 1 to September30, 2006


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BMW Group IncomeStatement for 3rd Quarter


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BMW GroupCash FlowStatementfor the periodJanuary 1 toSeptember30, 2006


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BMW Group BalanceSheet


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BMW Group BalanceSheet


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BMW Group Growth Strategies Objective: increase volume of automobiles sold

Producing more fuel efficient vehicles


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BMW Group Growth Strategies

Increasing consumer demand with by producing safer and morereliable vehicles

BMW NightVision


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BMW Group Growth Strategies Introduction of the first luxury hydrogen hybrid car 745hL

September 2005, BMW joins hybrid technology sharing partnership withGM and Mercedes to build gas-electric engines


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Continued sales network expansion to meet the needs and demands oflocal 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


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Continued roll out of new updated versions of existing vehiclemodels

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
http://www.topspeed.com/cars/bmw/bmw-x5-ar11970/IMG/jpg/6/BMW_X5_4.8i_2007_001w.jpghttp://www.topspeed.com/cars/mini/mini-cooper-and-cooper-s-ar11301/image89041-0.html


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Fishers Analysis

1) Financial Skill- Great financial performance with increasing profits- Industry product leadership

2) People Factor- Great management team; relatively good employee relationship3) Investment Characteristics- Limited growth space due to intense competition- Low industry profit margin

4) Investment Price- P/E ratio is relatively low

R d ti


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HOLD

Recommendation

H d M C d


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Honda Motor Co., Ltd.


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Agenda

Current Financial Position

Company Analysis

Financial AnalysisSemi-annual Financial Statements

Annual Financial Statements

Fishers Analysis Recommendation


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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


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Chart: 1 Year (Daily)

Source: Globeinvestor.com


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Chart: 10 Years (Weekly)

Source: http://money.cnn.com/

Ch t 3 Y St k P f


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Chart: 3 Year Stock PerformanceCompared to DJTA

Source: Globeinvestor.com


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Credit Ratings

As of March 31, 2006

Agencies

Credit Ratings

Short-termunsecured

debt securities

Long-termunsecured

debt securities

Moody's Investors

Service P-1 A1Standard & Poor'sRating Services

A-1 A+
http://www.moodys.com/http://www.moodys.com/http://www2.standardandpoors.com/http://www2.standardandpoors.com/http://www2.standardandpoors.com/http://www2.standardandpoors.com/http://www.moodys.com/http://www.moodys.com/


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Company Analysis


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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


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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


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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 marketthe independently developed HF118 jet engine

2006 Implementation of two-for-one stock split for common shares

Corporate Governance


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Takeo Fukui

President, CEO, and Rep DirectorAn engineer

Joined Honda since 1969

President since 1998CEO since 2003

Satoshi Aoki

Executive VP and Rep DirectorJoined Honda since 1969

Promoted to Executive VP in summer 2005


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Lines of Business

Motorcycles

Automobiles

Power products and Others Financial services


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Fields of Business

Research & DevelopmentASIMO

HondaJet

Next generation powertrains

Manufacturing & Distribution Local production plants to meet local demand

Sales & Services Emphasis on customer satisfaction


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R&D Efforts


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Key Regions of Operation Japan

Centers for R&D, manufacturing, and customerservice

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


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Unit Sales Breakdown

~53% from motorcycles, ~17% from automobiles, and ~30%from power products


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Revenue and Operating Margin


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Business Segment Information

Revenue Breakdown by


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Revenue Breakdown byBusiness Segments (%)

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%60.00%

70.00%

80.00%

90.00%

2002 2003 2004 2005 2006

Motorcycle Business

Automobile Business

Financial Services

Power Products and

Others


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Geographic Segment Information

Revenue Breakdown by


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Revenue Breakdown byGeographic Segments (%)

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

2002 2003 2004 2005 2006

JapanNorth America

Europe

Asia

Others


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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


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Growth Strategies

Motorcycles Equipping scooters with automatic transmission

Equipping more models with PGM-FI and other

features that provide superior environmentalperformance

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


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Growth Strategies

AutomobilesLaunching new model of SUV and refine

existing models

Expanding light truck models

Expanding sales and services centers in Asiato meet increasing demand

Expanding production capacity to meetdemand in Brazil



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Growth Strategies

Power products

Supplying cost-competitive general-purpose

engines from AsiaExtending sales of compact, home-use

cogeneration system from Japan to the US



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News

Nov. 21, 2006

2007 Honda CR-V and Pilot Earn InsuranceInstitute for Highway Safety TOP SAFETY PICKAward

2007 Acura RDX Earns an Insurance Institute forHighway Safety TOP SAFETY PICK Award

Nov. 7, 2006

HondaJet Named Winner of Popular Science's2006

Sept. 27, 2006 HondaJet Goes on Sale at National Business

Aviation Association Convention


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Financial Analysis


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Financial Highlights


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2006 Capital Expenditure Breakdown


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2006 Capital Expenditure Breakdownby Business Segments

Forecasted 2007 Cap Ex Breakdown


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Forecasted 2007 Cap. Ex. Breakdownby Business Segments


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Semi-annualFinancialStatements

S i l Fi i l Hi hli ht


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Semi-annual Financial Highlights

Fi i l R lt


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Financial Results

I t t F t


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Important Factors


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Annual Financial

Statements


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Fishers Analysis

Superiority in Financial skills,


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Production, Marketing, Research

Clear, easy to read annual reports and financialstatement

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 R&D

People Factor


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People Factor

Experienced management team

Promote from within

CEO is customer-oriented Executives and managers make up the

board of directors, this may decrease theeffectiveness of corporate governance and

increase risk for stakeholders

Investment Characteristics of Some


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Business

Strong market position

Diversified into related businesses where

there are strategic fits and benefited fromeconomies of scope

P/E Ratio


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P/E Ratio

P/E ratio: 12.00

Competitor P/E ratios:

General Motors: 40.00BMW: 10.43

Ford Motors: 0.00 (negative EPS)

Toyota: 14.70Nissan: 0.00 (0 EPS)


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Recommendation


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BUY


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General Motors

Table of Contents


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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

Current Position on


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Nov. 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

5-Year Stock Price


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5 Year Stock Price

(from bigcharts.com)

1-Year Stock Price


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1 Year Stock Price

(from bigcharts.com)

GM vs. S&P/TSX Composite Index


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GM vs. S&P/TSX Composite Index

Globeinvestor.com

Definitions


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Definitions

GMAGM Auto GMNA - GM NorthAmerica

GME - GM Europe

GMLAAM - GM Latin America /Africa / Mid-East

GMAP - GMAsiaPacific

GMACGeneral Motors Acceptance Corporation

Background


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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 33countries

GMs Products


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In 2005, 9.17 million GM cars and trucks were sold globally under thefollowing 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.

GMDaewooHoldenHUMMER

Opel

PontiacSaab

SaturnVauxhall

BuickCadillac

ChevroletGMC

GMA & GMAC Revenue Share- Nine months ended September 30, 2006


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GMAC17% 1%

nanc

ing

0%

GMA82%GMA GMAC

Other Auto Other Financing

Global Partnerships Majority shareholder of GM Daewoo Auto & Technology

C f S


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Co. of South Korea

Has product, powertrain and purchasing collaborationswith 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

Type of Vehicle and Market Share


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Management


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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

The World's Largest Automaker

GM's largest national market in order:


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1. the United States2. China3. Canada4. the United Kingdom and Germany.

Global market share for vehicles sales:

14.2%(2005) from 14.4%(2004)

Declining Revenue


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ec g e e ue

High oil price

GM produce high horse power vehicles Used to be American consumers favorite

People switch to low oil consumptionvehicles

Japanese cars Korean cars

Competitive Position


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p


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Financial Statement Analysis

The 2006 3rd

Quarter ReportEnded at September 30, 2006


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2006 Quarter Revenue BreakdownAuto & Financing and Insurance Operations


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- Auto & Financing and Insurance Operations

2006 Quarter GMA Net Income by Region


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2006 Quarter GMAC Net Income byDivision


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06~07 EPS Estimates


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(Earning estimates from Zacks.com)

Segment Reporting


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GMA Revenue Share by Region


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9%GM LAAM

8%

GME

19%

GMNA

64%

GMNA GME GM LAAM GMAP

- Nine months ended September 30, 2006


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Financial Statement Analysis

2005 Annual Report

General Idea about thePerformance of GM in 2005


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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 thecompany performance

Breakdown of GMAs Loss by region in 2005


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Breakdown of GMACs profit in 2005


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Financial Highlights(In USD as of 12/31/2005)


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Total Revenue 192,604,000,000EBITDA 31,516,000,000

Net Loss (10,567,000,000)

Total Assets 476,078,000,000Current 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

GMs Main Challenges


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Huge legacy cost burden

Inability to adjust structural costs in linewith falling revenue

GMs Legacy Challenge

Huge retiree population Huge cost for health care & pensions


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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)

Estimated Future Employee Benefit Payments


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Consolidated Balance Sheet- Asset


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Consolidated Balance Sheet- Liabilities and Stockholders Equity


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Breakdown for Balance Sheet- Asset


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Breakdown for Balance Sheet- Liabilities and Stockholders Equity


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Consolidated Income Statement


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Breakdown for Consolidated Income Statement


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Loss from Continuing Operations


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2005 to 2004 Comparison


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Net sales fell to $192.6 billion from 193.5 billion

Net loss of $10.6 billion from Net income of $2.8billions

Unfavorable results primarily due to losses at GMNA GMAC net income declined to $2.4 from $3.0 billion

Reasons for Unfavorable results in 2005


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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

Factors for Loss in GMNA

Unfavorable product mix ($2.2 billion loss)


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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)

North America Turnaround Plan


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Keep raising the bar in the execution of great cars andtrucks

Revitalize sales and marketing strategy

Significantly improve cost competitiveness

Address health-care and pension legacy cost burden

GMNA Turnaround Plan Highlight


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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%


193/200

Consolidated Cash Flow Statement (cont.)


194/200


195/200

Supplementary Information for Cash Flow Statement (cont.)


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GM Profitability Plan


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Keep working on cost reduction

Growing revenue around the world

Invest in technology, better fuel efficiency

Revitalizing sales and marketing strategy

Significant Events


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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

GM-Fishers Analysis1) Fi i l Skill


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1) Financial Skill Bad financial performance in GMA Depending on profits from GMAC

2) People Factor Great management team

Relatively bad employee relationship (cutting pensionexpense)

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

Recommendation


200/200

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