Thread: Stay away from General Motors in its death spiral

Stay away from G M in its death spiral
Posted Mar 14 2008, 11:40 AM
by Robert Walberg

While the old saw "as goes General Motors, so goes the nation" no longer holds much relevance, it's interesting to note that with oil prices skyrocketing to $110 per barrel, gold prices reaching the $1000 per ounce pinnacle and the economy on the brink of recession, that GM's shares have plunged to levels not seen since Ronald Reagan was president. So even though GM and the auto industry no longer drive the U.S. economy, they most certainly are victims when it crashes.

Of course, like the passenger that gets seriously injured for failing to fasten their seatbelt, much of the pain GM feels today is the result of its own bad decisions. When gas prices were cheap (hard to believe that we're only talking a few years ago), GM and its brain trust decided that bigger was better. So it gave us the Cadillac Escalade, GMC Yukon and Chevy Suburban. If that weren't enough, the company decided to acquire the Hummer brand name -- the very symbol of SUV excess, especially with regard to burning gas.

Considering that margins were higher in these oversized vehicles, and that consumers couldn't buy big enough, you could hardly blame them for chasing the almighty dollar. Unfortunately, management's job is to not only address the current needs but to envision where the marketplace is going -- and on that front GM failed miserably. It didn't foresee the relentless climb in energy prices, leaving it with a boatload of unwanted inventory and a dearth of smaller, gas/green friendly cars.

Compounding these bad decisions is the current state of the economy in which consumers are going to want to spend less and get more -- mileage in particular -- out of their cars. So it came as no surprise that GM -- despite some nice new product like the Buick Enclave/GMC Acadia line -- posted miserable sales figures in February.

As a result of the bleak sales picture, GM did what it always does: it announced more production and job cuts. Of course, the one job it didn't cut was that of CEO Richard Wagoner. In fact, GM's board gave Wagoner a package that could total as much as $5.7 million in 2008. I'm sure that news sat well with all the union workers that made concessions or lost their jobs for the sake of restoring GM to profitability.

How in the name of good conscience does the company reward Wagoner with a compensation package of that size when all he has done is help oversee the demiss of this once great company? He failed to match production with demand; he failed to chart a bold course when it comes to design (all GM models look alike); he failed to predict the shift in consumer demand (forcing the company to follow rather then lead) and he failed to make the tough decision to reduce the number of brands. What he succeeded in doing is selling off the company's money-making financing arm, demoralizing the workforce, overseeing a sharp drop in sales and shareholder value and making gobs of money for himself in the process.

Obviously all of GM's woes don't fall on Wagoner alone, but he's the captain of the ship and the ship is sinking. It's time for a mutiny before it's too late and there's nothing left to salvage. Until there's a change at the top, there will be no change in the bottom line -- and that is to avoid GM shares even at today's depressed price.

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Comments

The US is finished as the worlds super power. The US thanks to Bush and company have become the laughing stock of the world. I sold all my US investments and traded every single USD a few years ago. The US economy and stock market are fake just like the fake and soon to be worthless USD. The corporate elite have sold you stupid Americans out and the depression will be very hard on you . Many Elite in your country have moved over seas to Asia the New super power of the world. The US is crashing like Gm and bear sterns.
timmy (Posted 03.14.08 1:13 PM)
Timmy didn't get his nap today.....

I do think that GM debtholders are destined to become the shareholders. Hopefully some fresh ideas will get things rolling again. My suggestion to any car manufacturer is get some basic cars out there. I can't be the only one that wants a small reliable sedan that doesn't have all the bells and whistles or a super charged engine or any of that. A to B type transportation. Going into recession it should sell extremely well.
Al (Posted 03.14.08 1:49 PM)


okay Timmy.. how do you really feel about the United States?

p.s. friend, the US has the hardest working work force on the planet. we are also the most free. be glad we're still #1, who would you rather have on top?? Hugo Chavez...
DJDawg (Posted 03.14.08 6:08 PM)


GM is doing some seriously cool stuff with the Volt, their long distance hybrid concept car.

They ARE thinking outside the box on this one, holding town meetings and reaching out with blogs, etc. www.ecogeek.org/.../69

This gives me hope...
SR (Posted 03.14.08 6:39 PM)
I buy gm anytime here. time to buy now man NICK.
nick (Posted 03.14.08 6:40 PM)
Timmy obviously is living in a bubble with all his eggs in one basket and begging that his bet is right. Well Timmy or whatever your calling yourself with the American name don't cry too hard when the economy rebounds and you find yourself upside down in your what looks to be good position now. You have a few points about the market but your overall viewpoint couldn't be more misguided.

Alan (Posted 03.14.08 6:41 PM)
GM is getting what it deserves. I will NEVER buy a GM car, not even if you paid me to.
Frank Frink (Posted 03.14.08 6:41 PM)


GM`s woes, along with the rest of the US economy, and US business in general can be laid at the feet of the fools on Wall St. Their insatiable demand for the fast buck has caused great companys to make extremely poor choices. Their idea of long term planing is thinking about lunch during breakfast! Add 8 years of GWB and I don`t see the good old USA with much of a future
JT Klein (Posted 03.14.08 6:49 PM)

As goes...... All pyramids must collapse... Especially ones that are in the shape of a mushroom... GM's nest mushroom will be the cloud of dust when it finally implodes next year. Here is the question of the day? If Big engines and all GAS guzzling is the reason for GM’s death alone….. How do you explain Toyotas hot sales of HUGE TRUCKS and SUV? I guess its more the quality of what you pay for.
My Name (Posted 03.14.08 7:08 PM)


Timmy ain't too far off. The US is headed the way of Rome....and so is GM. Even though I have a Chevy (truck no less) I can see the writing on the wall. Big business is just that. BIG BUSINESS!!!! There is no middle class, just haves and have nots. Unfortunately, it is only a matterof time before the US goes down like the Titanic...
Eric (Posted 03.14.08 7:10 PM)


I am all for GM and Ford, only wished they were more competive within the industry, however I will still only buy a GM or Ford - I can not and will not support a forigen car manufacture. How soon we have all forgotten that Japan attacked our shores and Germany tried to take over the world, and many of our farthers and grandfarthers were killed to keep America save for us.

This whole idea of gobal economy is great for the corporations and stock holders, however it not to great for the American worker. Soon the only thing left in this country will be service industry jobs, we won't be making a thing just buying and with what I don't know.
Ron (Posted 03.14.08 7:11 PM)
Timmy,

I am from the US. I agree we are headed for a depression. However, if you think the US will be alone in this spiraling cataclysm, you are sadly mistaken. No economy is going to ride this one out. The upheaval that the collapse of the US dollar will bring wide spread chaos to all the markets. Hey, we were not the ones to issue serious threats to the Arab oil countries if they dropped the US dollar.

What GM is experiencing right now is because of short sighted views of the economy. These views seem to be shared by many. (Al, whatever happy pill you are on, can I have some.) Before you slam the GM managers too much, remember who has all the money. One does not need to look too far to find other apparently shortsighted management moves that allowed for upper management to profit at the expense of the working class. (Mitsubishi comes to mind.)
Rick (Posted 03.14.08 7:11 PM)


if GM is so bad that you would never buy this american product then maybe Frank you would be better served in another country and God bless you there. its interesting to read from these professional writers on GM and how bad they are, but they fail to tell us of their successes and they do have some even in todays world. i have driven GM products for over 30 yaers and speak very highly of their products. By the way we enjoy our full size Impala thats getting over 31 MPG on our family trips. If we all got perhaps what we deserve we might all be in a bad way.
Robert (Posted 03.14.08 7:28 PM)

GM has made arrogant mistakes no doubt. But in 5 years I think alot of people will say Wow!! But never, never bet against the United States. Remember just 20 years ago Japan was buying all our real estate? We bought it all back for pennys on the dollar.
Carlos (Posted 03.14.08 7:31 PM)

Is Timmy another of our fair weather overseas friends? When all is said and done maybe this time we can remember who stood beside us and who didn't and quit supporting countries that in reality want to see our destruction. They all seem to be big boys and not need us anymore so can we finally cut off all the"goodwill" and aid that doesn't seem to work? Don't count GM out and this is coming from a Toyota guy. Now that the unions are working with management and GM design is coming to the forefront they have a fighting chance, if they think long term...
Tony from the Midwest (Posted 03.14.08 7:32 PM)


Had a Honda what a Honda had to push it to the door now I will not by a Honda not a Honda any more. Have a Chevy have a Chevy drove the first won 200k or more and it never let me down no it always got me to my door. So bought a Chevy in 2003 and am happy evermore always runs and gets great mileage and it has always got me to my door . So as the song goes BUY AMERICAN YOU JERKS SUPPORT THIS COUNTRY FOR A CHANGE. That Honda I had was the one and only foreign car I will ever own and it was A PILE OF CRAP.
Chevy Man (Posted 03.14.08 7:35 PM)


I'm not sure who is goingto get in for pres.come election time,but I hope its a democrat.I've sold geneal motors for years,it seems every time they get a automobile just right,they discontinue it.It sem like they wait for Ford to come out first,then follow suit.About a year and half or so the economy wil be back,Hold on,

god Bless the USA,and no one else!Oh one more thing,we could test our vehicles at the new bonneville salt flats in Iraq.Hint!Hint!
Sam (Posted 03.14.08 7:38 PM)
I wonder if Timmy's real name is Achmed.

I've owned nothing but GM's for the last 30yrs, had good luck with all of them and plan to stay a GM customer. Some of the new models they've come out with i.e

Chevy Malibu, Cadillac CTS, etc. rate as well if not better than any of the foreign models, I think they are close to turning the corner and actually catching up with the Japanese and Germans on quality issues. It's going to take a couple of more years though. Unloading debt issues on providing health care for retired workers should help free up capital. No, I don't work for GM.
John (Posted 03.14.08 7:42 PM)


So many clueless people. I buy GMs exclusively. All of my GM vehicles have gone well beyond 200,000 miles. My sisters both have Suburbans with well over 300,000 miles. All original! I make sure the that the final assembly point is US. Currently... Indiana, Texas and Wisconsin for my Chevys. If you want your country to be great, spend your money here. You might see GM as this corporate monster, but really, it is thousands of hard working Americans with families just like you. The same applies to Ford and Chrysler. Go ahead and keep spending your hard-earned cash over seas. Your job can go there too.

Ahn nyung hee ka se yo, sayonara, zÃ*i jiÃ*n, alvida!
Joe (Posted 03.14.08 7:46 PM)


GM is not going to implode, perhaps some people should do some research about the company, and learn where GM is going in the future. Toyota has no answer for the Volt thats being tested this summer. Toyota has the momentum for now, things can always change long term. Stay tuned.
Pete W. (Posted 03.14.08 7:50 PM)


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