Chevron's Hefty Hess Handshake, GM's Guidance Gone, Subprime Slide Surges

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Happy Tuesday to our automotive community as we unpack GM's financial turbulence amidst the UAW strikes. We also dive into the alarming rise in subprime car loan delinquencies as well as Chevron's big move in acquiring Hess Corp.

• GM has pulled back its 2023 profit and EV production projections. The ongoing UAW strikes are costing the automaker a hefty $200 million each week this October.
  • GM's Q3 net income dropped by 7.3%, standing at $3.06 billion, though revenues rose by 5.4% to reach $44.1 billion.
  • UAW strikes have cost GM $800 million combined for Q3 and Q4 thus far.
  • Amidst the cautious market environment, GM is reevaluating its EV strategy, prioritizing profit margins over strict sales volume targets.
  • GM is stepping away from its aim to produce 400,000 EVs from 2022 to mid-2024. The new primary focus is to reach 1 million EVs by the end of 2025.
• Subprime borrowers are increasingly defaulting on auto loans, marking the highest delinquency rates in nearly 30 years. Economic challenges, including interest rate hikes and an uncertain job market, have made newer loans more burdensome for many, signaling distress in consumer spending patterns.
• September's delinquency rate for subprime auto loans hit 6.11%, the highest since 1994, as per Fitch Ratings.
• Factors like higher car prices, elevated borrowing costs, and Federal Reserve's stance on rates contribute to the issue.
• Repo rates are on the rise, with Cox Automotive projecting 1.5 million vehicle seizures this year.
• Borrowers face high interest rates based on credit scores, with some rates reaching 21.38% for used cars.
• Economic pressures have also led to challenges in the job market, with many struggling to meet auto loan payments.

• US oil producer Hess Corp, originally founded by Leon Hess, has been acquired by Chevron Corp in a deal spearheaded by Leon's son, John Hess. The all-stock transaction values Hess at $171 per share. Post-acquisition, John Hess, the longstanding CEO of Hess Corp, is slated to join Chevron's board and has expressed intentions to retain the family's stake in the company.
  • Hess Corp's inception traces back to Leon Hess's buying a secondhand truck during the depression and delivering fuel oil during the depression. The company's current sale to Chevron values the Hess family's stake at approximately $5 billion.
  • Once the deal is closed, John Hess, Leon Hess’s son, who has held the CEO position at Hess since 1995, is expected to join the Chevron Board 
  • John Hess, alongside family trusts and members, holds 29.2 million shares in Hess Corp.
  • Dividends for Hess shareholders will see a jump from the current $1.75 to $6.50 a share next year.

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