Economics

GM Stock Way, Way, Way Down

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General Motors stock is trading at a price not seen since 1933. So does that spell certain bankruptcy for the auto giant? Not necessarily:

Erich Merkle, an independent auto analyst in Grand Rapids, Mich., said he believes the government will still do whatever it takes to avoid a filing, particularly a move toward Chapter 7 and the disastrous consequences it could bring.

"There would be an economy before a GM liquidation and an economy after," he said. "In the latter, we'd be having this conversation with two cans and a string."

That's not a particularly compelling scenario, though I'm sure the feds will shovel more money at GM before it finally fails. Meanwhile, rival Ford is doing much better than Chrysler and GM.

Reason.tv looked at why GM was screwed long before the economy went into the shitter:

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  1. My Camaro! NOOOOOOOOOOOOOOOOOOOOOOOOOOOO!!!

  2. Buy, buy, buy!

  3. Sorry, I meant to say, “Bye, bye, bye!”

    My apologies to anyone who purchased any GM stock.

  4. Good Ridance! It couldn’t happen to a more diserving company.

  5. Diserving is right! They know nothing of service!

  6. “There would be an economy before a GM liquidation and an economy after,” he said. “In the latter, we’d be having this conversation with two cans and a string.”

    This makes me really, really want to stab him in the eye with my mechanical pencil.

  7. After watching this season of Damages, Darrel Hammond fucking creeps me out. For serious.

  8. Can someone honestly tell me why, if GM were to reach a real strategic low, a latter day Milken or something wouldn’t, or as the case may be, couldn’t buy a controlling interest of shares, sell off the unprofitable divisions, keep Chevy and Cadillac (maybe Buick-China, Holden, and any other eurodiv’s that turn a profit), give GMAC to the Fed, and call it a day?

  9. Unfunded health insurance and pension obligations.

  10. That’s not a particularly compelling scenario, though I’m sure the feds will shovel more money at GM before it finally fails.

    Earlier today I penned

    The choices are written on the wall for all to see, bankruptcy now or bankruptcy later for those two [GM and Chrysler]. Responsibility means manning up, facing facts, and doing unpleasent and unpopular tasks that must be done.

    Which sums up my opinions of those in the nation’s capitol. Pouring cash into GM and Chrysler is both cowardly and irresponsible. It was when Bush did it. It is now.

    GM going chapter seven would not be the end of the world. It would totally suck here in Motown, but it wouldn’t be the apocalypse so many are pissing their pants over.

  11. “There would be an economy before a GM liquidation and an economy after,” he said. “In the latter, we’d be having this conversation with two cans and a string.”

    Bullshit, plain and simple. If anything, things would improve (over the long haul) as this destructive (to wealth) entity were dismantled.

    How much wealth has GM destroyed in the last 10 years of operating losses?

    http://www.iht.com/articles/2009/02/26/business/26gm.php

    Hmmm….30 plus billion in just 2008 alone. In 2007, another 43 plus billion.

  12. “There would be an economy before a GM liquidation and an economy after,” he said. “In the latter, we’d be having this conversation with two cans and a string.”

    In Grand Rapids, yeah, probably, but why should give a shit about your pea-pickin’ slice of life? Take a peek into the rest of the world for a change, whydoncha?

  13. Can someone honestly tell me why, if GM were to reach a real strategic low, a latter day Milken or something wouldn’t, or as the case may be, couldn’t buy a controlling interest of shares, sell off the unprofitable divisions, keep Chevy and Cadillac (maybe Buick-China, Holden, and any other eurodiv’s that turn a profit), give GMAC to the Fed, and call it a day?

    Hear hear. It’s a measure of how stupid the Grand Rapids guy’s comment is that he has to use the most outlandish description he can think of to describe what wouldn’t even be the end of GM manufacturing, only a bankruptcy.

  14. “There would be an economy before a GM liquidation and an economy after,” he said. “In the latter, we’d be having this conversation with two cans and a string.”

    Hyperbole much? This guy is so right, if GM declares bankrupcty everyone’s telephones, cell phone towers, internet connections, cable companines, all of it gets confiscated and given to the Auto Workers Union as compensation.

  15. “Unfunded health insurance and pension obligations.”

    Good thing the government isn’t on the hook for retirement benefits and healthcare they can’t afford. That would not end well.

  16. Ch. 7, Ch. 11, continued bailout – pick one, it matters not. In every scenario, the pensioners get their pension and healthcare subsidized by you and me. Period. End of story.

  17. My prediction is that the US Government will purchase GM in order to keep it operating and maintain prevent the massive job losses.

  18. A friend and I were reading about oil loss in engines and what was “acceptable”. He found a link which basically said “It depends on who you ask.”

    Executive summary:

    GM feels that losses of 1 qt every 1000 miles was “within acceptable limits”.

    Nissan feels that any loss of oil is unacceptable.

    Coincidence? I think not.

  19. GM feels that losses of 1 qt every 1000 miles was “within acceptable limits”.

    Nissan feels that any loss of oil is unacceptable.

    I gave up on all “American” name plates after buying several very well used (100K miles or more) Subarus in the late 80’s and 90’s. I would go out in the dead of winter and turn the key and the car would start. They never left me stranded on the way to work or with a bunch of kids in the car on the way to a scouting trip.

    I’ve moved on to Nissans (because my favorite dealer sells both) and have never been concerned about heading out on a cross country trip in my Exterra with 116K on it.

    Fuck GM, Chrysler, and even Ford.

  20. How many shares exist? I’ve got a check book.

  21. The last “American” car I owned was an 88 mustang (4-cyl piece of shit). It had about 80K on it when I bought it. At about 100K, after replacing the clutch twice, it just plain stopped running. The service manager shrugged his shoulders and said “What can I say, it’s a late 80’s Ford . . . It just got tired”.

    I’ve had five Nissans since then. My 200SX was running flawlessly at 135K when I hit two deer on the freeway (at night, at 70 mph, with no opportunity to take my foot off the gas before contact). My son was beside himself; he had been waiting 7 years to get that car from me.

  22. I have a ’91 mazda protege’ with 205,000 miles. The oil looks like brand new when changed. I always get at least 36mpg with mostly city driving. Screw GM. Sometimes, in the real world, poorly run businesses fail. Fuck me runnin.

  23. Can someone honestly tell me why, if GM were to reach a real strategic low, a latter day Milken or something wouldn’t, or as the case may be, couldn’t buy a controlling interest of shares, sell off the unprofitable divisions, keep Chevy and Cadillac (maybe Buick-China, Holden, and any other eurodiv’s that turn a profit), give GMAC to the Fed, and call it a day?

    UAW contract provisions regarding shutting down or selling plants, which will make it incredibly expensive to do so.

    The only way to break those contracts is going to be through bankruptcy. The first thing bankruptcy does is wipe out the stockholders’ equity – that is, the latter-day Milken who just bought the company will see all his money go away.

  24. Can someone honestly tell me why, if GM were to reach a real strategic low, a latter day Milken or something wouldn’t, or as the case may be, couldn’t buy a controlling interest of shares, sell off the unprofitable divisions, keep Chevy and Cadillac (maybe Buick-China, Holden, and any other eurodiv’s that turn a profit), give GMAC to the Fed, and call it a day?

    When the shares get this cheap, the debt holders are really the ones who own the company. They are the ones who would want to restructure, or liquidate – and they are the only ones who have any incentive to buy the stock. They would buy the stock, knowing it would go to zero, but the amount they would lose that way is less than they would lose in disorderly liquidation. However, as long the govt keeps paying their interest bills, the bond holders have no legal means to force bankruptcy. There is zero reason for an outside investor to buy GM equity at this point.

  25. “”There would be an economy before a GM liquidation and an economy after,” he said. “In the latter, we’d be having this conversation with two cans and a string.””

    Note to self: invest in both can and string stocks.

  26. GM failing? What’s next? The dissolution of the East India Company? Preposterous!

  27. I’m done with GM and Chrysler, forever, because they took bailouts.

    I’m done with Ford because I won’t pay a nickel to a company that will just pass 4 cents of that nickel onto the UAW.

    Most recent car purchased: A Toyota FJ Cruiser, which I believe is the only vehicle they sell in this country that is made entirely in Japan.

  28. A Toyota FJ Cruiser, which I believe is the only vehicle they sell in this country that is made entirely in Japan.

    One of the bonuses of my 350Z is that it was 100% Japanese.

  29. The SUVs were the only vehicles that Americans were interested that were made by an American company. Other than that, Americans were done with American companies long before the current problem.

    I was looking at some past articles, and GM had a few really good quarters in the last few years. Why? The Mortgage business. One article mentioned that mortgages accounted for 80% of their profit. If that’s true, paying some people $75 hour isn’t the big problem with GM. They probably can’t afford the $49 rate Toyota pays. GM is dead due to their bet on mortages. We need a doctor that knows when to stop trying, and call time of death.

    “”””I’m done with GM and Chrysler, forever, because they took bailouts.”””

    Curious, who do you bank with now?

  30. Trickyvic, in the book, “American Theocracy” the author Kevin Phillips talks about big oil and the big three auto companies. He points out that GMAC and Ford Motor Credit were investing billions in various things to increase profits. It was those profits that allowed them to cave repeatedly to the UAW resulting in the astronomical, and now unsustainable legacy costs.
    It is a fascinating book. I would highly recommend it for all the good folks here. He follows the ascendancy of christianity into politics in america and particularly, its hold on the republicans.

  31. I bank with Keybank, who if I’m not mistaken was given the money and did not need it. Apparently, they are using it to piss off the Teamsters, therefore I will continue to bank with them. 🙂

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