Don’t cry for GM, it’s already dead
Today's Financial News - Posted March 5, 2009
General Motors (NYSE:GM) is plunging today on the news its auditors say the company’s chances of success are minimal. Now it is up to Obama and his team to admit the same.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): I cannot wait to see how the Obama administration reacts to this news. Politically, it makes sense to keep pumping money into General Motors (NYSE:GM). But financially, as its auditors tell us today, it may be a grave mistake.
After a few weeks of speculation, the automaker’s auditors finally stamped GM’s annual report with the words no investor or politician wanted to see, “substantial doubt.” That means when you look at the actual dollars and cents and scratch away all of the political maneuvering and pandering, GM has very little chance of survival.
It is a fact most of us have known for quite some time. Now it is up to our lawmakers (I refuse to call them leaders at this point) to determine the next move. Should they pump in more taxpayer money or let the company head to bankruptcy court?
As I said yesterday, it does not matter if the government weaves a $30-billion parachute, the natural forces of the economy will still win. GM will still hit the ground. Washington is merely slowing its descent and cushioning its fall with taxpayer money.
So what impact will all of this news have on the market? Fortunately, very little.
It’s already dead
Sure, GM’s shares are down by over 15% right now, but the company’s impact on the rest of the economy has been greatly discounted and minimized over the last six months.
If the company fails, it will be a great blow to America’s manufacturing heritage, but it will mark the reset point for the country’s new economy and way of life. The biggest problem for most investors will be adjusting to the new America, with its big government and political-versus-financial motivation.
One day soon, Detroit will wake up and General Motors will be bankrupt. The pain will be strong, but will be mostly emotional. Investors should not worry about the company destroying their portfolios. That happened a long time ago.
If you want a company to worry about, focus your energy on General Electric (NYSE:GE). Now there is a company representative of the American economy. Its seven-dollar share price says it all.
The mighty have fallen.
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