Wednesday, December 24, 2008

Navistar Inventory Mistake

Navistar (NAV) announced today that it will restate its financial results for the nine months ended July 31, 2008. As a result, the company expects to increase reported net income by $50 million to $70 million ($0.68 to $0.95 per diluted share) for the nine months ended July 31, 2008. The need for the restatement relates to overstatement of costs of products sold and the understatement of inventories and accounts payable in Navistar’s Truck segment.

This is truly astounding news. A company like Navistar has made a $50 million dollar mistake and wants the investors to be happy that they have supposedly made more money. The mistake is so great that earnings were increased by over 300%. Management needs to be more forthcoming on financial controls. This time the mistake made a profit. Next time will we see red ink?

Tuesday, December 23, 2008

GM & Ford Bailouts Will They Survive Outside The US?

If General Motors (GM) and Ford (F) and Chrysler get emergency bail out financing that allows them to survive and thrive. What is to stop Toyota (TM) and Honda (HMC) from securing emergency financing to counter the renewed threats of the Big 3. The Big 3 were defeated in the market place and the US Government is now looking for ways to prop them up. Will Japan or other countries with huge sovereign funds decide to provide extra backing to ensure that the winners stay winners. Strategic thinking can go in any direction. Everyone is desperate and sharp eyed.

Monday, December 22, 2008

AIG Fire Sales Hartford

AIG (AIG) sold its Hartford Steam Boiler unit to Germany's Munich Re for $742 million, a steep discount from what AIG paid for HSB in 2000. AIG is under intense pressure to sell off assets to repay government loans and backstops. But if government loans total over $100 billion and prime assets such as Hartford are going for deep discounts are there the assets to effect a recovery? At this rate they will need to sell off the financial equivalent of 135 Hartford styled/sized deals.