General Motors (GM)

Bull Case

-Talking about restructuring/downsizing unprofitable European business and renegotiating labor/pension agreements

-Average US car life is high: 10.1 years. So, people are likely to buy cars if the general economy gets better

-Impossible to go bankrupt, given US government support. US has incentive to promote pro-GM policies, as 1) elections mean politicians will pander to unions, and 2) US owns 26% stake and wants to sell. So, they have incentive to drive the stock price up.

Bear case

-Rival companies (like Hyundai) getting better

-UAW still has them by the balls, though not as bad as before

Anyone?

not for me…earnings came out in the last24 hours…this is one company i will problably never get interested in…the car life thesis can be expanded to car parts supplier etc if you want to play that…

UAW is actually in stronger position than they were before GM went bust.

Just because GM “can’t” go bankrupt doesn’t mean equity holders won’t get wiped out. They did once already.

26% government ownerships sucks any way you dice it. You don’t want to be business partners with them, nor do you want them selling a quarter of your company. It’s a bad situation all around.

GM doesn’t make cars people want to buy.

Economy isn’t improving enough to push car demand anytime soon.

Did I mention the UAW? Funk that.

Inventory/“sales” manipulation (i.e. channel stuffing).

No, no…Do not want.

Brutally competitive market, high capital outlays, union pressure, damaged brand name, and poor reputation for quality.

Bad investment.

i have seen some prominent value guys jump on this…

Well everybody was raging about it pre IPO like it was the holy grail.

The argument that they have the govt ‘backing’ is also the thing that will limit the upside - as they will want to get out of their GM stake if the price rises. They need to show improved product leadership, have the Govt out before it can become more compelling. I’d rather go with Ford, even with the much worse balance sheet, Alan Mulally has shown that he can do great things.