Comparing Automotive Companies Cash Positions

Until very recently, I was genuinely unaware the some of the world’s largest “businesses” have such insanely high long term debt & total liabilities with very little cash & ability to produce cash to back it up. I put businesses in quotations because I am genuinely curious: can something be considered a good venture if it has debt and liabilities that far exceed its cash? I understand that things like property, plants & equipment also have some cash value, but if those plants & equipment are making things that are no longer in demand, how valuable are they?

In addition, should a company that is many, many decades old, be returning cash to shareholders while taking on massive debts and clearly not producing near the same amount of cash? In my opinion, companies that are loaded up with debt and only produce enough cash to satisfy the debt service are tantamount to pyramid schemes. They will need to continue to borrow or issue shares in order to stay afloat. Or, in the case of many US automakers, rely on the government to bail them out. Think about that. A company is in “business” for nearly 100 years, yet still has massive debt to the point of needing a bailout…how is that a legit business? And to make things worse, as seen in my crude chart below, General Motors has learned nothing with nearly $80b in debt and more than twice that in liabilities since the bailout, while bringing just $16b to the bottom line in the past 2 years. How is this sustainable?

(all $#s in Billions)
Company2020 Revenue2020 Net Income2021 Revenue2021 Net Income2022 Cash2022 Long Term Debt2022 Cash less Long Term Debt2022 Total Liabilities2022 Cash less Total Liabilities
Volkswagen AG$254$9.5$296$17.5$74$166-$92$378-$304
Mercedes Benz Group AG (MBGn)$129$3.6$142$23$15$10$5$179-$164
Bayerische Motoren$113$4$131$14$30$60-$30$170-$140
General Motors$122$6$127$10$30$77-$47$190-$160
Which companies are best positioned to invest billions into EV factories?

Thankfully, there are people much smarter than me who also take a look at these ridiculous balance sheets and quantify just how bad some of these companies are. And once they do, it is clear that Tesla is not one of the companies at risk any time in the remote future. In fact, Tesla is one of the only companies with more cash than debt and it boasts the highest Altman Z-Score…by a mile. With a clear roadmap to 10m more vehicles in the next 3 years and industry leading margins (that can be reduced to cushion the recession much more than any other company), Tesla is in a great spot moving forward, despite what the stock market tells us.

Thank you to the Tesla Boomer Mama (haha nice name) for having a GREAT spreadsheet game. These links help to clearly explain that the mainstream media often fails to.


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