Why won’t they just go away
Today's Financial News - Posted January 13, 2009
If you thought the problems in Detroit ended when Congress cut a check, you had better think again. We are entering the next chapter of an epic saga.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): When Congress sent General Motors (NYSE:GM) its first “bailout” check worth $4 billion earlier this month, few folks thought it would do the company much good.
But even fewer thought the company would be crying for help so quickly.
The taxpayer-funded check has barely cleared the bank and GM’s chief is hinting that Congress’ recent gift of $9.4 billion may not be enough. Not only is Wagoner saying the company may need more money, he is telling us that bankruptcy is still an option.
Just last month, however, he vowed it is absolutely not an option. Which is it?
It is the same old story in Detroit. General Motors is running around touting cars that nobody wants and the UAW is squeezing every drop of remaining blood from the company’s cancer-ridden body.
If you have turned on the evening news over the past few days, you have certainly seen the shots from the Detroit Auto Show. Wagoner has been grabbing any media attention he can to show off his company’s shaky billion-dollar investment, the Chevy Volt. The CEO needs to do everything he can to create demand for a $40,000 electric car when crude prices are plummeting.
But even worse than the Volt’s chances of becoming a bestseller are GM’s chances of solidifying a life-saving deal with the UAW. The negotiations between the employer and its employee representative will not start until Monday, but already trouble is brewing.
Here we go again
Ron Gettelfinger, the UAW’s fearless leader (I mean that in a bad way), told reporters that he wants Obama to remove some of the concessionary terms placed in Congress’ recent bailout legislation. In other words, the UAW does not want to negotiate.
We should not expect the UAW to be cooperative over the next few weeks. But it may not matter. Already, there is at least one bill making its way through Capitol Hill that will lower the requirements and terms of the loan furnished through the Treasury’s TARP.
Talk about changing the rules in the middle of the game. This is one big political fiasco.
When we boil away all the fat, this subject really is not about cars, the Big Three, or American workers. It is about politicians shoring up their next election. The contingency that can deliver the most votes will emerge the winner.
As investors, there are two ways to look at this situation. We can take a short-term stance and be ready to trade the news. Or we can look at the long-term stance and short the heck out of GM.
Either way, investing in GM is less about fundamental value and is increasingly becoming more of a political bet. That is something no investor should be comfortable with. Remember, dollar and cents add up. Politicians do not.
If you thought the GM story ended when it received its bailout, you had better think again. That was merely the end of the first chapter. There is much more on the way.
Next Article: What ever happened to Alicia Silverstone?
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January 13th, 2009 at 3:55 pm
To say you are full of crap would be an understatement. GM is doing great. I’ve recently gone long with them because they are going to come out of the recession a leaner company with a world class platform which is the envy of the automotive world. Their products are competitive with anyone’s now, and they are industry leading in mileage in more segments than any other manufacturer. The fact that they sell more vehicles than any other manufacturer in the U.S. says that they are building products that people want to buy. I sold my Acura TL and bought a 2008 Malibu, the finest midsized sedan on the market, beating Altima, Camry, and Accord. They even sold more “cars” than Toyota in December, and you can expect that to happen with increasing regularity. GM will be GROWING market share in 2009, with a very bright profitable future in the long run. I will be very interested in your apology article when GM gets through this economic turmoil with only $18B expended by the taxpayers getting 5% interest, with it all paid back, at the latest the end of 2014.
April 9th, 2009 at 11:44 am
An interesting view of the automotive industry. Where do you see the future of the industry, will it ever recover or will there be major casulties?