Posted on Tuesday, October 10, 2006 - 4:32 pm:

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DETROIT (ResourceInvestor.com) -- In spite of the concern about General Motors [NYSE:GM] recently, caused by the very public breakdown in the Kirk Kerkorian-sponsored "alliance negotiations" with Renault-Nissan, and the potential for a brutal proxy battle over it down the road, I am beginning to think GM is undervalued. One of the things that the Wall Street analysts, the investment community and most small investors have not taken into account is that GM appears to be leading a "sea change" in strategic resource recovery and conservation that began near the end of 2004.
This program has been kept very quiet, quite uncharacteristic for the American OEM auto industry, which seems to issue press releases on every issue, big or small, in an attempt to cultivate favour with the media.

Resource Investor, however, knows this is about to change. Not because there will be some big announcement made by the GM Chairman, Rick Wagoner, but because some of the changes now in process have the potential to alter the very fabric of the American scrap industry and its market.

RI learned some details of GM?s new revenue generating program by interviewing individuals at GM, a number of scrap dealers and a steel mill in order to bring you the following first look.

In November, 2004, A polymath at GM was appointed to a job, which is in all American Fortune 500 corporations, looked upon as a dead end for a young person or a final resting place for a good soldier to safeguard him into retirement, scrap management. As one GM CEO after another has said of the job since the beginning of time. ?We make cars not scrap. It?s just a cost to be minimized however and whenever possible.?

This time however GM purchasing chose a Professional Fellow, an unclassified rating the corporation bestows upon exceptional people who don?t fit any one mold, to oversee global scrap management. The result has been to change dramatically the way in which GM handles scrap and to uncover, for the company, a fount of revenue that was in plain sight but overlooked even by most scrap dealers, the value of the alloying metals (everyone of them a strategic metal) content contained in industrial ferrous, i.e., majority iron or steel, metal scrap.

For now the program is focused on stamping, cutting, piercing, extrusion and forging dies, typically of many tons weight. These had been traditionally sold for less than the cost of transporting them away, but have now been dramatically re-priced upward by GM to reflect the market reality that their embedded alloy metal values have increased in price by factors between 5 and 10, that?s 500% to a 1000 percent since 2001.

Scrap dealers used to self congratulating gestures for being able to keep secrets among themselves and mostly afraid of the light of day shining on their transactions were sceptical and even now only a few have seen the light, but GM doesn?t care. If scrap dealers fail to meet the new much higher minimum bid prices set by GM then the material can be shipped directly to the end user steel mills and foundries by GM and physical swaps and/or deductions against new material prices can be taken by GM for its own account.

GM has discovered and is mining a source of strategic metals equal to the output of many new mines and smelters and it is located entirely in the U.S. even though some of the metals recovered are not normally found in the U.S. Mining this source requires neither the using of digging tools to pierce a pristine plot of soil nor any furnaces to belch additional sulphur dioxide into the air. GM is to be applauded for the development of the greenest ever strategic metal mine.

This has occurred with no additional costs to GM at all!.

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