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Short Story: Why I'm Skeptical About GM

I tweeted this earlier but for those who missed it, let me throw out a few reasons why I don’t buy the “hype” behind the GM IPO/”successful” restructuring/turn-around, in no particular order.

  • Government still has huge role.  As Michael Steinhardt said on CNBC yesterday, “I don’t think one should be a long-term holder of Government securities, especially equity securities.”
  • Still a bit opaque.  Sure, they’ve disclosed alot of the things I had questions about (pensions, etc) but its not only a lot to process, with so many moving parts – many of which could turn into problems down the road – that I’d be hesitant to buy into the story (stock) for anything other than any IPO pop + subsequent pop from index purchasing.  For more, see this great post I somehow totally spaced on (thanks @rmsnickers!) from Francine McKenna.  Preview: Unaudited financials are just a wee bit of a red flag.
  • GM’s early leadership position in China is under alot of pressure.  Buick is a big draw there, but rest assured, Volkswagen and GM’s other competitors won’t let them enjoy that position for long.
  • A successful IPO does not a successful reorg/turnaround make.  GM’s employee count is down about 75,000 from pre-bankruptcy and they’ve closed about a dozen plants, but as I said above, its a huge, sprawling company in an intensely competitive industry.  Throw in a history of bureaucratic bloat, questionable (at best) product design and basically every aspect of the company from the past 30-ish years and I’m nowhere close to buying into the lean & mean story the company, its underwriters, and the media would have you believe.
  • The Chevy Volt is doomed for failure.  I’d just as soon chalk up all the recent attention from the Automotive Media up to IPO-related pre-excitement rather than any realistic expectation that it’ll be a commercial success.  Without heavy Government subsidies (here we go again with that Government thing again), no one would even consider buying it, save for the most economically ignorant tree-hugging types.
  • UAW
  • Only time will tell.  Not nearly enough time has passed to see this story play out.  I seriously advice ignoring anyone who claims otherwise.

Remember, this is just a very short take, each of these bullet points can easily be its own post (if not several).


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