Buffett sold heavily! Time | Stock God | Buffett

General Motors, which has shown strong performance, has suffered a significant reduction in its holdings by the "stock god" Buffett.

According to a quarterly report released by the US Securities and Exchange Commission on August 14th, Warren Buffett's investment firm Berkshire Hathaway recently sold 45% of its holdings in General Motors, reducing its holdings from approximately 40 million shares to approximately 22 million shares.

Over the past few decades, Buffett has consistently adhered to value investing by buying high-quality companies and holding long-term investments at reasonable prices. Buffett believes that buying high-quality companies and holding long-term investments at reasonable prices. Since 2012, Berkshire Hathaway has purchased 10 million shares of General Motors, and after several increases, Berkshire Hathaway holds 40 million shares of General Motors, accounting for approximately 2.3% of all shares.

Meanwhile, General Motors has maintained good performance in the past two years. In the just concluded second quarter, General Motors achieved a net revenue of $44.746 billion and a net profit attributable to shareholders of $2.566 billion, a year-on-year increase of 51.65%. The company also raised its 2023 full year profit guidance.

Why did Buffett sell General Motors significantly at this time point? As of the time of publication, neither Berkshire Hathaway nor General Motors has responded.

David Whiston, a stock strategist at Morningstar Research Securities, pointed out that the motive for Berkshire Hathaway's stock sale may be the threat of strikes. Deutsche Bank analyst Emmanuel Rosner believes that the market has shown negative sentiment towards General Motors Q2 performance and the 2023 upward guidance. Given General Motors' ambitious plans but stalled negotiations with unions, the possibility of its performance strengthening in the second half of the year is limited.

Strike threat

At the second quarter financial report communication meeting, General Motors raised its 2023 full year profit guidance. Based on current performance, General Motors' net profit attributable to shareholders for the full year of 2023 was between $9.3 billion and $10.7 billion, compared to its previous expectation of $8.4 billion to $9.9 billion; The adjusted pre tax profit is expected to be between $12 billion and $14 billion, compared to the previous estimate of $11 billion to $13 billion.

However, General Motors Chairman Mary Bora also stated at the financial report communication meeting that the expected full year performance is based on the assumption that there will be no labor strikes this year.

The Federation of Automobile Workers in the United States is currently in new contract negotiations with the three major car manufacturers in Detroit. UAW Chairman Shawn Fain stated that UAW has been in 30 days of negotiations with General Motors, Ford, and Stellantis NV, and the parties have not yet discussed economic terms. Earlier this year, Fain presented a list of requirements to each car manufacturer, including a salary increase of over 40%, implementing inflation protection measures, improving the treatment of temporary workers, and improving the welfare of retirees.

It is worth noting that in the past 10 years, General Motors has continued to implement strategic contractions, which have led to improvements in General Motors performance but also worsened relations with unions.

In 2014, the Chevrolet brand withdrew from the European market; In 2015, General Motors closed its factory in Indonesia and withdrew the Opel brand from the European market; In 2017, General Motors sold Opel, Vauxhall, and others to PSA for 2.2 billion euros, and almost all of General Motors withdrew from Europe; Subsequently, General Motors withdrew from markets such as South Africa, Vietnam, and India.

In 2019, General Motors successively discontinued several sedan products such as the LaCrosse and Regal in the US market, and invested more resources in pickup trucks and SUV products that local users prefer. In 2020, General Motors announced once again that it would further reduce the size of its sales, design, and engineering departments in Australia and New Zealand, and gradually cease sales of the Australian Holden brand by 2021.

In addition to shrinking or divesting its business in regional markets, General Motors is also implementing its own reform plan through streamlining management positions, reducing vehicle platforms, closing four factories in the United States and one factory in Canada, closing three factories in Asia, and laying off 14000 employees.

It should be pointed out that it was due to dissatisfaction with the contraction of General Motors business, factory closures, and layoffs that on September 16, 2019, nearly 50000 General Motors workers began a 40 day strike from midnight under the organization of UAW, resulting in a loss of $3.6 billion for General Motors. And 2023 is also the time when the four-year labor management agreement expires and a new agreement is being negotiated.

However, General Motors' strategic direction has not been adjusted. Mary Bora once said that General Motors would focus its investment on its most strategic internal combustion engine and electric vehicle projects, as well as its most promising growth plans, including its autonomous vehicle division, Cruise LLC, and the BrightDrop electric vehicle fleet and cars defined by software

Significant changes and uncertainty

Between 2020 and 2025, General Motors invested over 35 billion US dollars in the electric vehicle and autonomous driving sectors. The Ultrapower pure electric platform launched by it can fully cover the needs of various brands and models under General Motors, such as the GMC pure electric Hummer super pickup truck, Chevrolet Silverado EV pickup truck, BrightDrop pure electric logistics vehicle, GMC Sierra EV electric pickup truck, and Cruise Origin autonomous driving shared car launched in North America.

By 2025, General Motors plans to launch over 15 electric vehicle models based on the Autotronic platform in the Chinese market, covering the three major brands of Cadillac, Buick, and Chevrolet, fully meeting diverse consumer needs.

General Motors' strategic transformation and investment have achieved results in North America. In 2022, General Motors sold a total of 5.939 million new cars worldwide, making it the largest car company in the United States and the fifth largest in the world. In the United States, General Motors sold 2.27 million vehicles, a sales increase of 2.5%, surpassing Toyota to regain its position as the largest selling car company in the United States.

This year, after the easing of the "chip shortage" problem, General Motors continues to make strong progress in the US market. In the second quarter of this year, General Motors delivered 691978 vehicles in the United States, far higher than the 582401 vehicles delivered in the same period in 2022. Meanwhile, General Motors' market share in the United States has been increasing for four consecutive quarters, in sync with the increase in sales.

According to the financial report, General Motors North America's adjusted pre tax profit for the second quarter of this year increased by 38.9% year-on-year to $3.194 billion, contributing the majority of General Motors' profits.

But unlike the rapid growth of the domestic market in the United States, General Motors has withdrawn from Europe and has also faced huge challenges in the Chinese market. In 2022, General Motors sold a total of 2.3 million vehicles in China, reaching a five-year low in sales. In the second quarter of this year, General Motors sold approximately 520000 units in retail sales in the Chinese market.

According to an article by American media, General Motors' business is at a time when it is about to face significant changes and uncertainty.

In the past few years, two Autotronic factories dedicated to electric vehicles have been built in China, and three products based on the Autotronic pure electric platform have been launched. However, due to the development mainly based on overseas road environments, intelligent driving assistance systems such as General Motors Super Cruise and Ultra Cruise have not fully demonstrated their capabilities after being introduced to China. Compared with Chinese solutions such as Xiaopeng NGP and Huawei ADS, General Motors' intelligent assisted driving system has not shown significant advantages. This has led to General Motors' sales performance of electric vehicles in China falling behind that of local Chinese car companies. In the current rapid adjustment of the Chinese automotive market structure, General Motors is under pressure to break through on a new battlefield, while also facing the challenge of the continuous contraction of the Chinese fuel vehicle market.

Since the beginning of this year, General Motors has changed its previous pricing system in China. The fuel powered Buick LaCrosse has significantly reduced its price range, with electric vehicles ELECTRA E5 and ELECTRA E4 priced almost the same as fuel powered cars of the same class, achieving the same price for both fuel and electricity; The Cadillac Lyriq, which was first listed, has recently lowered its price by 60000 yuan across the entire lineup. After a significant price reduction, the sales of Buick's pure electric products have increased, with the Buick pure electric family delivering 8692 vehicles in July.

It is worth mentioning that after the disclosure of Berkshire Hathaway's sale of General Motors stocks, the stock price of General Motors has fallen slightly for two consecutive days, closing at $32.82 per share on August 16th.