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General Motors Is Headed For Bankruptcy — Again
President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.
Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion.
Right now, the government’s GM stock is worth about 39% less than it was on November 17, 2010, when the company went public at $33.00/share. However, during the intervening time, the Dow Jones Industrial Average has risen by almost 20%, so GM shares have lost 49% of their value relative to the Dow.
It’s doubtful that the Obama administration would attempt to sell off the government’s massive position in GM while the stock price is falling. It would be too embarrassing politically. Accordingly, if GM shares continue to decline, it is likely that Obama would ride the stock down to zero.
GM is unlikely to hit the wall before the election, but, given current trends, the company could easily do so again before the end of a second Obama term.
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. With a loss of market share comes a loss of relative cost-competitiveness. There is only so much market share that GM can lose before it would no longer have the resources to attempt to recover.
To help understand why GM keeps losing market share, let’s look at the saga of the Chevy Malibu.
h/t StrandedInSonoma
Chuck U Farley
August 16th, 2012
…and there’s this…
http://nlpc.org/stories/2012/08/16/auto-bailout-legacy-gms-european-nightmare
GM is a dog on Obysmal’s plate
…stick a fork in it, it’s done.
Xavier
August 16th, 2012
I can’t tell you how much I enjoy the way MMFlint constantly rails against the evil banks that are ‘too big to fail’ but somehow never says a word about his home state’s GM – which is about to be too big to fail, twice over.
Hypocrisy at it’s finest.
Katechon
August 16th, 2012
Who’s short GM among us folsk?
D-Bad
August 16th, 2012
Hey. Barack. Let. Them. Go. Bankrupt.
grayscape
August 16th, 2012
…But this Obama “success” story still owes America $27 Billion….
Does that make me a RAAAACIST?
Niggerizer
August 16th, 2012
As soon as Buffet will go long GM, you’ll know another bailout is coming.
Whom
August 16th, 2012
I drive a Camry (for some 5 gens in a row now lol sigh). Staying with the anvil-like durability for the daily driver until proven otherwise. But rented a new malibu on vacation a few weeks ago. It wasn’t that bad really. Could live with it easily and even enjoyed it mostly. Did have a very annoying, sluggish takeoff lag though- no excuse for that, and certainly part and parcel of GM’s problems.
OTOH the Camry has what must be the worst cruise control in the business, though improved finally lately (about time). I could program it better just in spare time on a Sat afternoon- it’s that bad. And shifting of the ECT, again improved lately is still pretty poor.
So nothing is perfect. The new Passat may be the media darling lately, but VW reliability continues to be a big question mark (deservedly so). I’ll pass, no matter how Forbes gushes over what they’ve read second hand (lol).
In a past life I did engine and vehicle controls development, programming and calibration rofessionally.
Unneutral
August 16th, 2012
Hey, Obutthead, if you want to bail them out again, use your own damn money.
GM Car Of The Future
August 16th, 2012
Not to worry!
The Volt, with its red-hot performance; the Camaro, with its Pandora’s Box of design flaws; and the 60th Anniversary Corvette, with its nearly 6-figure price tag…
will ALL save GM in the coming years.
Or maybe not.
Stranded in Sonoma
August 16th, 2012
You mean the stock will ride to zero because of Obama.
Bob M.
August 17th, 2012
The HEARTBURN of America… that’s TODAY’S, Obamamotorverks.
Or maybe, it’s JUST Obama…
Anonymous
August 17th, 2012
Coa fired volts for dolts.
Carlsonal
August 17th, 2012
Every time I see some new Chevy model out driving around, I always react in horror and disgust. Theymake some of the worst looking cars I’ve ever seen. Why can’t they stick with their trucks? I have a suburban, and it’s awesome.
Cruisin' Cat
August 17th, 2012
Fuck the UAW. Got rid of my GM shares back when they were around $36. Unfortunately Delphi shares didn’t get rid of soon enough.
scr_north
August 17th, 2012
Maybe GM will be allowed to go through regular Chapter 11 when Obama gets booted out of office and the GM management gets replaced with businessmen. Before this half assed bankruptcy that Obama interferred with, GM had been in contact with the premier bankruptcy consultant for a full two years planning on how they would take the company through the process and emerge slimmed down, stronger and more competative. Obama screwed all that up when he delivered Chrysler and GM up to their enemies (UAW).
Stranded in Sonoma
August 17th, 2012
@scr_north — Both GM and Chrysler need to move out of Michigan and into a non forced unionization state. I’m sure Alabama would love to have the jobs. And with the port of Mobile easily accessible, there should be no problems with overseas shipping. The St. Lawrence seaway is a long way to go just to get to the ocean. Mobile is on the Gulf Coast with the Panama Canal right across the Gulf. Easy access coming and going.
They need to get out of demmorhoid controlled Michigan and into an intelligent state.
The Doktor
August 17th, 2012
It appears that, along with all of the billions in bail-out money from US, “the man calling himself Obama” sent a bunch of his “business experts” to GM as well. And they’re doing just as good of a job with GM as “the man calling himself Obama” has done with the U.S. economy.
Slaphappypap
August 18th, 2012
The New and Improved YUGO. Shit car.