Will GM go bankrupt again?

That’s the question posed in a recent Forbes article that’s worth reading.

Here are some of the underlying facts … read the article for the editorial stuff …

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Stock Market

The federal government owns 500,000,000 shares of GM, or about 26% of the company.

The stock is trading at about $20/share, so the government is holding about $10 billion worth of stock

The government’s GM stock is worth about 39% less than it was when the company went public at $33 /share

Since GM’s IPO almost two years ago, the broader S&P 500 has gone up about 30%.

During that period, Ford shares have gone down about 15%, Toyota up about 15%, Honda up about 5%, Nissan up about 35%, Hyundai up about 60% and Volkswagen up about 85%.

It would take about $53.00/share for the gov’t to break even on the bailout.



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Car Market

As a company, General Motors peaked in 1965, when it commanded 50.7% of the U.S. market, and made a stunning-for-the-time $2.1 billion dollars in after-tax profits.

In the 1960s, GM averaged a 48.3% share of the U.S. car and truck market.

For the first 7 months of 2012, their market share was 18.0%, down from 20.0% for the same period in 2011.

GM is flailing in the D-car segment (Malibu, Camry) which accountd for about 20% of the U.S. car market.

Recent (and forthcoming) versions of the Malibu score dead last in Car & Driver reviews.

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One Response to “Will GM go bankrupt again?”

  1. Yours Truly Says:

    First, I LOVE your blog.

    I’d be very interested in your opinion on a topic related to this post.

    GM is more than one hundred years old, and has been saddled by collective bargaining agreements and legacy costs (pensions) far greater than any company I can think of. It supports a disproportionate amount of retirees for its number of active employees. Its global operations are U.S. based, which means high U.S. wages (as compared to wages in other countries).

    During the decline in market share you cited above, we have seen incredible globalization of the economy. Foreign manufacturers were subsidized to build in the US at the taxpayers’ expense. Imports came in from countries with low wages. These companies were (are) at a competitive advantage – no retiree base to support, no unions, lower wages – all supported and subsidized by the US government.

    Consumers voted with their dollars and went with the cheaper vehicles. Competition is always great for the consumer. Over time, they get a better product at a better price.

    Two questions:
    1. How do you think the globalization of the economy impacted the U.S. automotive industry’s ability to compete, considering subsidies to implants, U.S. manufacturer legacy costs and collective bargaining agreements?
    2. Let me preface this by saying I completely agree with the idea of a free market….. How is the bailout of American manufacturers any different than the subsidies to foreign manufacturers?

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