On Friday, after GM detailed the financial damage caused by the American Axle strike and union shutdowns at two of its plants, the American automaker's stock price slid to $17.38– it's lowest level since February 1982. Once again, GM saved bad news for the end of the week; the stock market couldn't fully react to the revelation. As the markets are closed for Memorial Day, it'll be Tuesday before investors [literally] take stock of the situation. They'll also take into account GM's busted accounts— a deficiency that caused numerous financial restatements, triggered an SEC investigation in October 2005, caused the ouster of CFO John Devine in December 2005, and forced the "resignation" of controller Paul W. Schmidt and chief accounting officer Peter R. Bible in May 2006. Meanwhile, in the here and now, the U.S. new car market is moribund (to say the least) and there's little prospect of immediate recovery. GM's high-profit trucks and SUVs are dead in the water. Suppliers are up against the wall, with a "run on the bank" scenario (cash on the nail, please) looming large, The stock market is waking-up to the perfect storm we've been predicting for months if not years.
UPDATE: GM stock hovering at $17; down three to four percent.
And whose fault is that?
I see that GM’s 3 Stooges are right on track with their “turnaround”. I’m so proud of them.
Does this mean that Rick Wagoner has to give back his $14 million?
$17.82 inflation corrected means $39.17 now to be on an even level with inflation. I think stocks are more complicated than that though. Not to mention everything else in the world does not cost the same relative to everything else like 26 years ago. Also the market is different, more complicated, more opportunities, different challenges. Stocks are only one part of the equation, A complicated one to understand and relate to overall at that.
Which one is Larry, Curly or Moe?
How ironic that the last time GM’s stock was this low was in 1982 when the infamous Roger Smith was GM’s CEO. Maybe they can get him to come back to work his magic at GM again. Better still, since he died last year, he’ll probably do a much better job of running GM this time around, too.
Roger Smith, oh my. Makes me think that GM can boost the stock price with another brand! Something way out of the GM mainstream, a new kind of car and a new kind of car buying process.
And plastic body panels…and robots, oh yes, lots of robots for assembly.
Guess the time has come to see a new GMCo which is ironic given once they had more money than god.
I Guess investing in R&D has its benefits, which GM realized very late. Its product mix is till very diverse (also vague) and like Ford it needs to focus on its core products, which given GM were trucks and mammoth SUVs (where lies all the problems).
A perfect case study for management students.
Hey, can’t blame them for not trying. They’re having a Memorial Day Sale.
http://www.gm.com/shop/
BTW – there should be no gm.com that sells cars. There should be cadillac.com, saab.com, pontiac.com, etc.
And that, my clueless trio, is where you went wrong. You forgot to build the best possible cars under each unique brand, and now you’re being punished for your omission. Deservedly so. Unfortunately, it’s tragic for the thousands and thousands who don’t get $14 million bonuses when you screw up.
Do you know, in 10 years’ time, car historians will look back on this sorry episode of Detroit’s history and ask the question:
What the hell were people thinking?!
All the lame cars, the fake accounting, bonuses for failure and lack of accountability.
The truth is ALWAYS stranger than fiction, my friends……
GM’s North American operations are a British Leyland style train wreck that is still in motion.
KatiePuckrik: “Do you know, in 10 years’ time, car historians will look back on this sorry episode of Detroit’s history and ask the question:
What the hell were people thinking?!
All the lame cars, the fake accounting, bonuses for failure and lack of accountability.”What the historians will marvel at is how GM’s decline happened not in years, but in decades, and it was so obvious what was happening from the very beginning (the late seventies), yet senior management, with all the massive resources at their disposal, either simply didn’t have a clue or care as to how to keep GM afloat for the long term.
The Alfred P. Sloan model for GM’s success worked, and it would have continued to work, if GM’s management hadn’t misunderstood and bastardized it so badly in pursuit of short-term profits for the stockholders (and that’s a failing of GM’s board of directors to properly oversee what the hell was happening).
When the GM board let’s a debacle like Roger Smith run the company for a full ten years, well, the writing was on the wall back then. Smith was a finance guy who was real good at doing one thing, and that was making sure there was a yearly dividend for the shareholders. The problem was all the book-juggling wizardry he used to do it was devastating to the actual long-term solvency of the corporation.
In short, GM deserves to be in the situation they are now.
GM’s North American operations are a British Leyland style train wreck that is still in motion.
Except that it’s orders of magnitude bigger!
GM has done so many things wrong for so long that it doesn’t seem likely that the situation can be fixed now. Just off the top of my head I can put together this list of sins that has put GM in its present state:
GM lacks competitive vehicles in hot sectors because it fails to anticipate predictable market factors such as the run-up in fuel prices;
For too many years GM gave away the store to the company’s unions. See the bewilderingly stupid jobs bank for a good example — Toyota wasn’t doing anything like this;
The automobile business is cyclical and GM had some fat times during the heyday of the SUV. But rather than using the profits to improve its core product, GM went on acquisition sprees buying businesses that had often had little to do with building cars (EDS?), or buying marques that duplicated niches in which GM already played;
GM has never heard of too much of a good thing. Rather than strictly maintaining the brand identities of its already too-numerous divisions, with only a few exceptions (Hummer, GMC) GM turned each one into a seller of a full line of vehicles across the pricing spectrum. You want a crossover? Would you prefer yours in the flavor of Chevy, Buick, Cadillac, Pontiac, or Saturn? The wild profusion of similar models dilutes GM’s development and marketing dollar. It makes the GM product line incomprehensible and ultimately forgettable to the consumer, and it means that GM models compete with other GM models as much as they compete with the offerings of other manufacturers.
GM lets its few existing hit products die on the vine by failing to systematically improve them over time. It has historically preferred to scrap a model name once it becomes associated with shoddy quality and start with something new;
GM has a mega-bloated dealer network that competes mostly within itself for a dwindling number of potential GM customers, virtually ensuring that nobody makes any money selling a GM vehicle;
GM has maintained a short-sighted adversarial posture with key suppliers, preferring to grind them and push them toward bankruptcy rather than treating them as partners in the production of a quality product. Its suppliers return the favor by treating GM as an adversary and supplying it with the lowest-quality parts they can get away with;
GM has burned too many customers with mediocre or outright unacceptable product quality and indifferent dealer service.
I’ve got no involvement in the car industry except as an interested observer but if I can put together a list like this the problems aren’t exactly a secret. Even so, GM still seems to have no coherent plan to address the problems.
At this late date it may be that bankruptcy is its only hope. That would be bankruptcy accompanied by the ouster of GM’s entire upper management. On one hand it would be damaging to public confidence in the company but on the other, it would be a dramatic change in direction that could be presented publicly as GMs effort to address otherwise intractable issues by starting with a clean slate.
You summed it up nicely Cicero.
rudiger :
How ironic that the last time GM’s stock was this low was in 1982 when the infamous Roger Smith was GM’s CEO. Maybe they can get him to come back to work his magic at GM again.
It wasn’t this low. I’m not going to bother to go to one of the current dollar calculators, but it was probably about 3.5 times this–maybe $60ish.
nature’s laws of survival of the fittest apply to the business world as well, despite government’s attempts to interfere. so if there’s any silver lining at all it is that GM’s demise will rid the car world of a diseased player or more likely result in a leaner and more healthy competitor. GM’s downfall has made room for the ever stronger hyundais and suzukis (have you seen their midsize sedan concept?- really nice) so overall the market is more diverse with only the best vehicles surviving. good news for everyone except GM employees and shareholders.
Clearly, it’s time to bring back the Citation, and for hilarity’s sake, the Phoenix.
No, no, no, Jordan! They’ve got to bring back the VEGA and the Corvair, not forgetting the original rope-drive Pontiac Tempest.
May as well make it 100% drek and put the Pontiac overhead cam six from later in the 1960’s in the “new” rope-drive Tempest instead of half of a V8, as well.
Heck, why not have an inline six version of the Vega engine in it? Oh, wait, that’d be 110% drek.
The Oldsmobile diesel V8 would have to be optional, of course.
I don’t think the Corvair, rope-drive Tempest, and Pontiac OHC 6 were anywhere near as bad as what GM came out with from 1970-on. Ed Cole was running the show back then and he spearheaded some of the better things GM ended up doing, like the Corvette, small-block Chevy V8, and front-drive Olds Toronado.
But then, Cole was a real automotive engineer instead of the finance guys who the GM board began to gravitate after he retired in 1974. Of course, I guess that means Ed Cole was at the helm when the Vega came out, too…
As far as GM engineering failures that made it to production go, a couple that were left out and were easily worse than the Corvair or Pontiac rope-drive and OHC 6 were the Cadillac V8-6-4 and the Pontiac Fiero.
The Fiero, although a sales success in the beginning, soon started to have an alarming propensity to catch fire at which time their innovative plastic bodies would quickly melt to the ground.
have an alarming propensity to catch fire at which time their innovative plastic bodies would quickly melt to the ground.
I actually saw one do this. It is amazing to see actually…out of each window there was this little tornado of flame. The tank hadn’t gone yet and the firemen were trying to douse it from a safe distance. Good times.
In any event, if you are going to look for a villain, pick most cars from mid-70s through the 80s. Take your pick. And I don’t just mean the cars.
Lowest in 26 Years? This is the lowest stock price for GM I can find EVER, at least since WWII (inflation adjusted).
“In any event, if you are going to look for a villain, pick most cars from mid-70s through the 80s.”
They weren’t all bad if you didn’t live in rust prone areas. The Japanese cars of that time were mostly well built, entertaining RWD cars. We owned a Toyota Celica and a Corona Mark II back in the day and they were both terrific little cars. BMW 2002s were great cars as well, even with the big ugly bumpers. Even the Saabs of that era were mostly decent vehicles. Most of the ‘merican stuff of the late 70s and into the 80s era was indeed junk.
DearS – $17.82 inflation corrected means $39.17 now to be on an even level with inflation. I think stocks are more complicated than that though. Not to mention everything else in the world does not cost the same relative to everything else like 26 years ago. Also the market is different, more complicated, more opportunities, different challenges. Stocks are only one part of the equation, A complicated one to understand and relate to overall at that.
This is WAY too hard on GM. In many ways, all of us at TTAC have talked this issue to death. Let me respectfully disagree with some of the above posters
(1) The run-up in gas prices was NOT predictable. No one foresaw in 2003/04 that oil prices would triple in four years. Not even the Japanese. In fact, the only car that was ready for the spike was the Prius, and maybe the Civic — because those cars had already been engineered for markets with artifically high fuel prices. The Yaris and Fit, both “world cars,” were simply hastily produced for North America in response to gas prices. Japanese mid-sized sedans (non-hybrid) are at best 1 to 2 mpg better than American equivalents. Toyota and Honda trucks and SUVs = no advantage. If gasoline were still $1.50, trucks and SUVs would still be kings. GM owned that segment from the mid-1990s until the mid-2000s.
(2) GM is figuring it out. GM had some nice-looking Opels that compete on quality and economy (Astra, Corsa, utility vans, etc.) — yet Opels were not ready for primetime in North America and Asia due to their relatively high-manufacturing costs. For that, GM went with Daewoo, whose designs and engines have been subpar. Now, for instance, the Cobalt XFE now approaches Civic mileage. The Malibu is a beautiful work of engineering, at least for a ground-up car. The 2010 offerings — when the new Delta and Epsilon cars show up will surprise many people.
(3) Maybe it’s easy to trash GM, since the majority of us cannot read Japanese, or otherwise know the inner-workings / conflicts in Japanese auto manufacturing. Further, nothing European, save for the Mini, is remotely competitive in fuel efficiency on this continent.
As I’m writing this GM stock is trading at a little over $17.
It appears, based on a quick scan of monthly prices since 1962, that GM slumped to $30 in the mid-70’s. If the price of GM stock had just kept par with inflation, it’d be about $125 today.
VW’s have decent mileage for a European car. The TDIs do quite well and get 40mpg real world.
Saying that the rise in gas prices is not foreseeable is very short sighted (just like the D2.8). Simply all you have to do is look back 30 25 years ago at the late 70’s – early 80’s where we had the same problem – or even further back during the previous 4 wars where we had to conserve to satiate our militaries demand for fuel. Then consider the world oil supply has not been increased yet world and US demand has increased unabated…here is a county where 8mpg suvs are commuters and daily drivers for a single occupant. It was foreseeable – but chance favors the prepared and the D2.8 were not (and snubbed their nose at small cars – often in a Lutz cocky fashion).
detroit1701: As opposed to your statement that no one forsaw the rapid price in oil prices three years ago, that is not correct, Toyota had announced about that time they were moving to a predominate hybrid fleet within ten years, where was GM? Still making plans for the next general of large vehicles.
GM caused this mess they are in, please explain the messed up financials, as reported on this site a few days ago? Explain the Fiat fiasco? The huge bonuses and salaries GM executives are receiving, despite the company continuing to lose billions? The bail out of suppliers?
You state: “GM is figuing it out”, that statement alone is kind of scary, a company that has been in business for a hundred years is just now “figuring it out”, it appears THEY DON’T HAVE THE TIME NOR MONEY to figure it out. Where did all the money they were making in the 90’s on the big high profit vehicles go? They were making thousands of dollars of profit on each vehicle, where did all that dough go?
Was GM making $$$$s of dollars of profit on those vehicles or just swapping around assets, goodwill, etc. behind closed doors? No one knows and with GM’s management’s high specialism in Accounting – one begs to wonder why they had such bad accounting.