It is amusing. Those American dinosaurs that used to roam the earth imperiously hoovering up any little automotive morsel that crossed their path, have choked.
It’s part indigestion, part exhaustion, part end-of-imperialism. The latest regurgitation is the DaimlerChrysler stake in Mitsubishi Motors Corporation.
That’s three big ones in six months now. GM, the most arthritic of the dinosaurs, first got rid of its stake in Fiat. Then it spat out Subaru. In both cases it was left with a nasty after-taste.
GM had to restate its earnings and give a profit warning for the year after it became clear that the stake in Subaru parent, Fuji Heavy Industries, had been valued in the books at $1.5bn while the ultimate sale price (to the far wiser Toyota) was $650m.
Just to rough GM up a little further for its error, the credit rating agencies used the occasion to downgrade the GM junk bonds to even-junkier bonds.
And the Fiat disposal of course was for less than nothing. Having paid $2.5bn for the 20%, GM then sat through $6bn of trading losses before handing over $1.6bn to Fiat for them to take the shares away. Spectacular.
So what’s next?
GM has the most left to unbundle if unbundling is unfinished business. It still has substantial stakes in Isuzu and Suzuki and it still has full control of Saab and Daewoo. Swedish Saab, of course it wishes it didn’t have, because it is still losing loads of money without conferring any benefit on GM whatsoever. The platform sharing that was in progress between Saab and Subaru will probably now lose momentum.
GM’s most recent full acquisition was Hummer which is the perfect toy for a dinosaur but excruciatingly embarrassing now that it is time for everyone to grow up a bit and consider all the disadvantages of needless fuel consumption.
DaimlerChrysler’s remaining embarrassment is smart. That little morsel is a substantial stomach ache, but the internal forecasts still say that it can be forced into profit within two years.
And then there is Ford, still frozen in the headlights of onrushing legacy costs and doing little obvious that is compatible with deflecting financial crisis. To be fair, it does seem that Ford is due for campaign medals for its funding and management of orphan brands. Jaguar still needs a fix to flip 15 years of accumulating losses into a business. But Land Rover, Volvo, Mazda and Aston Martin look pretty sharp. There are no negative equity values in that little bunch of badges.
The other interesting thing about the disposal of 12.42% of MMC is the manner of its disposal. Goldman Sachs has bought it. You may remember Goldman Sachs as that bunch of tassle-shoed sweeties who are merchant bankers of choice to some of the world’s biggest companies.
It turns out that Goldman Sachs IS one of the world’s biggest companies and worth $8bn more than DaimlerChrysler ($50bn) at today’s prices.
It is now rich enough to be able to put the MMC shares on its own balance sheet while it finds a buyer (or buyers).
It’s American, it’s roaming and it’s hoovering up morsels.