Short Story: Why I’m Skeptical About GM

17 Nov

I tweeted this earlier but for those who missed it, let me throw out a few reasons why I don’t buy the “hype” behind the GM IPO/”successful” restructuring/turn-around, in no particular order.

  • Government still has huge role.  As Michael Steinhardt said on CNBC yesterday, “I don’t think one should be a long-term holder of Government securities, especially equity securities.”
  • Still a bit opaque.  Sure, they’ve disclosed alot of the things I had questions about (pensions, etc) but its not only a lot to process, with so many moving parts – many of which could turn into problems down the road – that I’d be hesitant to buy into the story (stock) for anything other than any IPO pop + subsequent pop from index purchasing.  For more, see this great post I somehow totally spaced on (thanks @rmsnickers!) from Francine McKenna.  Preview: Unaudited financials are just a wee bit of a red flag.
  • GM’s early leadership position in China is under alot of pressure.  Buick is a big draw there, but rest assured, Volkswagen and GM’s other competitors won’t let them enjoy that position for long.
  • A successful IPO does not a successful reorg/turnaround make.  GM’s employee count is down about 75,000 from pre-bankruptcy and they’ve closed about a dozen plants, but as I said above, its a huge, sprawling company in an intensely competitive industry.  Throw in a history of bureaucratic bloat, questionable (at best) product design and basically every aspect of the company from the past 30-ish years and I’m nowhere close to buying into the lean & mean story the company, its underwriters, and the media would have you believe.
  • The Chevy Volt is doomed for failure.  I’d just as soon chalk up all the recent attention from the Automotive Media up to IPO-related pre-excitement rather than any realistic expectation that it’ll be a commercial success.  Without heavy Government subsidies (here we go again with that Government thing again), no one would even consider buying it, save for the most economically ignorant tree-hugging types.
  • UAW
  • Only time will tell.  Not nearly enough time has passed to see this story play out.  I seriously advice ignoring anyone who claims otherwise.

Remember, this is just a very short take, each of these bullet points can easily be its own post (if not several).

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24 Responses to “Short Story: Why I’m Skeptical About GM”

  1. Mikalee Byerman November 18, 2010 at 11:09 am #

    Interesting assessment. And, as you note, “only time will tell.”

    In the meantime I’ll continue to lament my old Saturn and what could have been…

  2. runtobefit November 18, 2010 at 11:10 am #

    I hope things are getting better for them!! We need something to go right during these tough economic times.
    http://www.runtobefitwordpress.com

  3. dearexgirlfriend November 18, 2010 at 12:25 pm #

    your post mustve inspired some economic positivity – dow up almost 200! hah. congrats on freshly pressed.
    http://dearexgirlfriend.com/

  4. notesfromrumbleycottage November 18, 2010 at 12:50 pm #

    I have to admit, I was beginning to feeling a little giddy hearing about GM stock price going up this morning. Should I not do so? Is there no hope for our ecomonmy to rally back?

    • Anal_yst November 18, 2010 at 4:51 pm #

      There is hope, but not the hope the Government and most of the media would have you believe. As I said, a “successful” IPO does not a successful turn-around make. Remember, the Gov’t has to sell the rest of its shares for ~$53/share to break-even on the GM bailout. The company/gov’t expect that to happen sometime next year. I’m not so sure we’ll see a 60% share price increase by then (frankly I doubt it highly, but who knows).

      Notice how effectively nowhere in the main stream financial media you hear any talk about several of the concerns I’ve listed here. Hype much?

  5. Matt SF November 18, 2010 at 1:01 pm #

    Great post. But don’t know if even the most clueless of treehuggers are going to be a fan of the Volt. Battery life of only 40 miles is probably way below what they were hoping for.

    • Anal_yst November 18, 2010 at 4:52 pm #

      That battery life number doesn’t capture the whole picture and is a bit off, but your concern is not lost on me regardless.

  6. gvanguard November 18, 2010 at 1:34 pm #

    As a sales consultant for a company in the GM Family. I think most people need to put some faith into GM. Maybe a public IPO is not the best way to make folks feel more secure, but it will help to pay the pensions for the retirees. Not to mention with the future sales of the convertible Chevy Camaro, the new Cruze, and the Volt coming to dealerships near you. I have more consumers tell me how great looking our new lines of products have come a long way. I also forgot to mention how we just took the Heavy Duty Diesel Lines and made a truck that’s top rated. Give us a look, you’ll be plased.

  7. gvanguard November 18, 2010 at 1:34 pm #

    As a sales consultant for a company in the GM Family. I think most people need to put some faith into GM. Maybe a public IPO is not the best way to make folks feel more secure, but it will help to pay the pensions for the retirees. Not to mention with the future sales of the convertible Chevy Camaro, the new Cruze, and the Volt coming to dealerships near you. I have more consumers tell me how great looking our new lines of products have come a long way. I also forgot to mention how we just took the Heavy Duty Diesel Lines and made a truck that’s top rated. Give us a look, you’ll be pleased you did.

  8. Jay November 18, 2010 at 1:55 pm #

    Are just normally pessimistic? Or did you oppose their being saved/bailed out in the first place?

    • Anal_yst November 18, 2010 at 4:53 pm #

      I’m guardedly optimistic normally, however, I’m intensely on-guard for blind optimism and fanatical hype, both of which the GM story has in spades.

  9. Wading Across November 18, 2010 at 2:26 pm #

    I own a GM and a Chrysler vehicle – both used. I’ve never bought a new car (still cannot afford one, besides buying used is a better investment since the value of a new car drops as soon as it leaves the dealer’s curb).

    GM makes some good vehicles – or at least they did until two years ago.

    What’s hurting them though is their management practices, which they’ve still apparently not learned their lesson on. Government and union involvement does not increase my hope for GM.

    And as for this IPO… yeah, how many regular shmucks like us could even afford to get in on it? Are we even allowed? It’s bad enough my taxes are in it, but if they really wanted GM to pull thru, they’d make it easier for the general public to buy back in if they wanted.

    GM should have been allowed to tank in the first place. There is no such thing as “too big to fail.” That is a lie. Let the markets decide. Had we allowed the markets to sort this all out, yeah, it’d have been rough the last two years, but we’d be climbing out of the hole a lot better and faster than the double dip and slow decline to the precipice we’re having now. The buyouts and bailouts have only slowed the inevitable and increased the coming economic tsunami.

    Blech.

  10. Shanna VanNorman November 18, 2010 at 3:44 pm #

    Thanks for posting relevant info! Congrats on being freshly pressed!

    Please take this quiz to find out what fear, if any, is holding you back in life:

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  11. My Camera, My Friend November 18, 2010 at 4:57 pm #

    Hope is good, but so are caution and reason. I can see why you’re still skeptical.

  12. J. Eric Smith November 18, 2010 at 8:27 pm #

    How do you rate “New Chrysler”‘s chances? “Old Chrysler” fell harder with even more inept management . . . but with Fiat poised to hold up to 51% of Chrysler Group LLC stock eventually, they may actually manage to manufacture and sell some decent autos . . .

  13. ryoko861 November 18, 2010 at 8:53 pm #

    I really hope GM can get the ball rolling again. It’s a glimmer of hope at least.

    Unfortunately, I’m not feeling the Chevy Volt either.

    Chrysler does have a nice new car out – The 200. Nice looking. I’m wondering if it’s the predecessor to the Sebring. Hopefully, that’ll bring some sales and stocks back.

  14. raymund123 November 18, 2010 at 10:33 pm #

    elow everyone how are u

  15. John J November 19, 2010 at 12:45 am #

    There is no doubt they cooked the books. Please everyone don’t buy this stock for the long term at all!!!! Maybe, for a short term trade!!!

  16. nobilexpertimob November 19, 2010 at 8:03 am #

    You may use these HTML tags and attributes:

          

  17. Ralph Starling November 19, 2010 at 10:10 am #

    I have no idea if GM will be a success. I do hope so for the good of us all!

  18. Steve November 19, 2010 at 3:18 pm #

    Apparently the stock is doomed to failure also judging from today’s post IPO “performance”.

  19. mct88 November 20, 2010 at 5:35 pm #

    The main reason I disregard GM is because of the government’s role in GM. Get out of there! The goveernment isn’t supposed to run businesses they’re only there to govern and make sure things don’t end up like Gotham City!

  20. allovernews November 21, 2010 at 5:44 pm #

    Congratulations on being Freshly Pressed from all of us here at http://www.allovernews.wordpress.com consider it an honor to be Freshly Pressed.

  21. great stocks November 22, 2010 at 1:39 am #

    I hope TSLA squashes GM.

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