Is GM a good investment?
Since I have dealt with Ford in the past, it seem appropriate to deal with GM too.
I am amazed that so many folks are just itching to invest their hard earned dollars into Ford and/or GM. Many of you sincerely believe that there is no way that the government will allow them to fail. Well, no one can be sure, but the facts about GM are disturbing.
I’m going to outline for you what can be found in public records (public companies must provide financial statements and results to the investing public) and let you decide for yourself.
- General Motors does not make an operating profit, on average, on any car that it sells.
- GM has over $40 Billion Dollars in debt on its books
- GM, through internal estimates, believes the Enterprise Value of its company to be just north of $30 Billion Dollars…what is left when you have assets of $30 Billion but you owe other people $40 Billion?
- Over 15% of GM shares are currently being sold short (that means people have borrowed GM stock to sell it because they believe it is going to go down even more and they can then buy back the borrowed shares later at a much lower price than they sold them for…thus making a profit.
- The CEO of GM said on television and before Congress that his company is burning through about $5 Billion dollars a month.
The list can go on and on. The bottom line is that some of us will be right on GM, some of us will be wrong. I just suggest that you proceed with caution!
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December 31st, 2008 at 2:35 pm
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December 31st, 2008 at 8:13 pm
I don’t invest in individual stocks (too risky for me), but if I did, I don’t GM would be anywhere near the top of the list for me. The details look pretty scary to me!
Jeff@MySuperChargedLifes last blog post..Links For Super-Charged Living - December 20, 2008
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January 1st, 2009 at 7:56 pm
Some staggering facts in there! I worked for a GM subsidiary in Europe for five years and the waste was simply astronomical. The only answer is to out the business into the hands of a genuine entrepreneur and task him or her with making it profitable, whatever it takes, within 5 years-
Mikes last blog post..Eight Things I Hate about Twitter
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January 2nd, 2009 at 5:25 am
It is not a wonder that GM doesn’t make a dime off of any of its cars. Let’s look at it in its most basic elements. GM produces at least 40 models per year over a wide range of price and function. Their resources have been spread thin to meet the current demands of the public. They have been building cars over the past two decades that lacked innovation and forward thinking. What did they get in return, just enough cash flow to keep them operating. When the perfect storm brewed up this past year, their cash flow all but dried up. The numbers speak for themselves, and the numbers a re a result of bad business decisions. Have a look across the Pacific to Japan, and although they are getting beat up as of recently, Honda and Toyota are cash rich and ready to buy up distressed assets and continue their long term innovation best practices.
The US government will not allow GM to die for many reasons, but one that has yet to be brought up is National Security. Mark my words in the coming months this will be thrown around all over major media.
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January 2nd, 2009 at 3:04 pm
Great input. I’m with you Joe, I can’t see the Gov’t letting GM fail, but I do believe that the common shareholders will be wiped out. Do you think they will retain any shareholder value?
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January 2nd, 2009 at 3:42 pm
I don’t think GM can survive without a complete purging; union contracts, at least 4-5 of the weaker brands, etc. Like Joe just mentioned, you have to be an idiot to fail to realize that GM’s scattered efforts across so many brands will never, ever compete with Honda and Toyota. GM has all these commercials about how they have ‘more models that get 30 mpg or better than any other car company’. Hmm, I wonder why…
If this trip to the chopping block is allowed, or forced, to happen, I really don’t know what would happen to current shareholders? I just think that is what GM desperately needs, although they (and the UAW) will fight tooth and nail before giving up so much of what they’ve built.
As for a government takeover, I don’t see shareholders being left with much, if anything. AIG’s shares are incredibly diluted now, aren’t they?
Blakes last blog post..2008: My Financial Progress
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January 2nd, 2009 at 4:53 pm
My guess is that any company that chooses to take TARP money is basically putting current shareholder value to zero. Be very careful when investing in ANY company that is utilizing TARP.
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January 2nd, 2009 at 11:09 pm
After reading the facts that you provided it sure doesn’t seem like a good deal. The thing is even if they do get bailed out there isn’t any guarantee that they won’t do the same thing all over again, so no, I don’t think I will give them any of my money.
Sires last blog post..Happy New Year & Birth Of Link Love
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January 7th, 2009 at 2:12 am
I’ve got to say that investing ANY money into ANY US auto company seems like building a campfire using $100 bills to get the fire started. Just don’t do it. Invest in a company that has a chance, or give your money to the poor or something. Just don’t throw it away!
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January 10th, 2009 at 4:34 pm
Such shares can make or break it. Either they will make you a millionaire or bankrupt. I really think its not worth investing in GM stocks. They are lots of good stock out there which will give you stupendous returns once the market recovers and moves in uptrend.
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January 12th, 2009 at 11:44 am
Yet I have not planned anything for investing, but neither I am sure that I’ll be investing in GM. For me there are chances for GM to rise. So it depends on the market that GM will rise or will set down in future.
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April 7th, 2009 at 3:00 am
This was bound to happen, for decades Ford and GM were not focusing on innovation, while Japanese automakers were. I listened to Barack Obama speak about how car manufacturing was a cornerstone of the American economy and has a great place in America’s history, but I think the time is over and the US can get out of this business if it just going to continue losing money. There is nothing wrong with moving to a service based economy and many countries are already 100% service or close.
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May 13th, 2009 at 3:11 pm
Well…..I agree with most of the things you said. Anyway, thanks!
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August 12th, 2009 at 3:48 pm
Hey Hey Hey … What do we have here.. Speaking about automobiles, You heard about the Electric Car?
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August 15th, 2009 at 8:57 pm
[...] darn close! I’m still getting a ton of traffic from old posts especially the ones about General Motors and Why Capital One Sucks…so that is [...]
November 20th, 2009 at 5:03 pm
Isn’t the US car industry going belly up? Probably there are safer options.
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