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The REAL reason for General Motors (GM) stock drop today

Today's Financial News - Posted April 7, 2009

Was the reason behind GM’s drop today really revived talk of a bankruptcy filing? Or was it a ridiculous new car concept?

by J. Christoph Amberger

Baltimore—TFN: Shares of General Motors (NYSE:GM) plummeted over 13% today. Newswires quoted a source that implied “the automaker was in ‘intense’ and ‘earnest’ preparations for a possible bankruptcy filing.”

You could’ve knocked me over with a feather.

Just imagine: After the President of the United States deposes the CEO and publicly ponders bankruptcy… and after the new CEO publicly dicusses the distinct probability of filing for bankruptcy… investors get cold-cocked by the news that GM is preparing to file for bankruptcy??

I often think that business journalists truly have no clue what motivates investors to buy or sell a stock!

Of course, the contingency of GM filing for Chapter 11 has been priced into the market since… well, last November! There is a reason why the stock costs less than a gallon of regular!

In fact, the news that there’s a plan to split the company into a new entity consisting of the most successful units, and an “old company” of its less-profitable divisions, would be reason enough to put down some money on the GM rebirth!

If we were to look for a news-based element to trigger a sell-off today, it was the news that GM is teaming up with Segway Inc. to build a new type of two-wheeled vehicle.

Now, Sedgway is the purveyor of the obnoxious, self-balancing scooters first made popular by pony-tailed computer geeks in the waning days of the Internet bubble. The new contraption will look like the unholy bastard of a wheelchair and a Little Tykes Princess Cozy Coupe, run on batteries, and be stuffed to the gills with wireless technology “to avoid traffic backups”.

(My money is on them causing the back-ups!)

It has all the charm and appeal of recliner bicycles (or “recumbents,” as the cool, middle-aged dudes call them that ride them to worlk and concerned citizens’ committee meetings). And nobody who has ever bought a car or truck from GM will be caught dead in one.

GM didn’t say how much the things would cost. But according to insiders, the price tag would be one-third to one-fourth of the cost of a “traditional vehicle”.

I’m telling you here and now that if we needed any more indication of GM losing its mind, it’s this annoying piece of politically correct gimmickry. Unless they stick it into the corporate loser bucket, there is no way in jehenna to pedal your way back into a respectable market position with this eco princess jalopy.

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Posted by J. Christoph Amberger · Filed Under US Stocks and Markets 

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