Your Opinion: Will You Buy GM Stock or Cars?
In April, I noted that General Motors repaid taxpayers for the company’s government-initiated bailout loans in full. There has been quite a discussion about this repayment, but the main points are that the loans accounted only for a small portion of the bailout, and one could consider that the loan repayment was possible only due to more government money inflows.
Though the loan portion has been repaid, the U.S. Treasury still controls the company through its ownership of 61% of outstanding shares of common stock and $2.1 billion in preferred stock.
Whatever your perspective, GM is continuing its plans to move away from the Treasury’s controlling stake. They will buy the preferred stock back from the government, which has been earning taxpayers a 9% dividend. GM plans to re-introduce common stock to the public later this year and the Treasury will sell its shares on the open market. The company will pay its union debt and will soon open a significant credit line it doesn’t plan to use.
So here are the questions: Will you buy GM stock? Will you buy GM cars? And what do you think of GM’s bailout? Is GM even a relevant manufacturer today?
I have nothing against GM cars. I have no major experience driving one. My current car is a Honda Civic, the second Honda Civic I’ve owned. My first car was a very used Toyota Celica.
CNN Money, Chris Isidore, October 28, 2010
Article comments
People, please stop perpetuating the myth that the gubmint saved the auto industry by bailing out GM and Chrysler. The only thing the gubmint structured bankruptcy did was force the American public to reward the failure of management AND labor while screwing the bond holders. Why the hell would anyone want to invest in this company is beyond me. The gubmint is selling off its shares at a loss, what does that tell you? The gubmint doesn’t care about selling at a 50% loss because it ain’t their money! They’ve fulfilled their obligation to the UAW at our expense.
Companies file for bankruptcy protection all the time while they continue to operate under chapter 11 rules. And they do it without “government assistance”. GM and Chrysler would still be in business today even if the gubmint didn’t spend all of our money on them. They both would have been forced to make some hard decisions quickly. Injection of our money just kicks the can down the road a bit, but legacy labor costs and crappy management will come back to bite them again.
While I have owned GM and Chrysler vehicles (currently own two Chryslers), and I have been happy with them, I will never buy another UAW built automobile ever again. (sorry Ford) I refuse to support this special interest group that carries so much power in Washington by buying the things they make. The unions have raised the wages and benefits of unskilled workers to an unsustainable level.
Oh yeah, while I’m on a union rant, public sector labor unions (like the SEIU) should be outlawed. Why? Because government officials too easily cave into their demands – why? It ain’t their money! (I know, ain’t ain’t no word…..remember, I am an illiterate tea party member!) Labor unions are obsolete, with current labor laws and regulatory agencies like OSHA, the labor unions have become just another layer of government for the sheep that become their members, and pay their dues to fund the “fat cat” salaries of their leaders. All while raising the cost of labor forcing companies to move those jobs overseas. It isn’t cheap to ship stuff across the world, yet our labor here is so expensive that it is still more cost effective to build something overseas, ship it halfway around the world, and pay import taxes to the gubmint. Think about it……….
I would buy GM’s stock and the cars. The company is finally on the path to viability after so many years in the doldrums.
It’s amazing how people hold a grudge against a great American company because the company became complacent for a while and their quality suffered. At least they didn’t cover up a major flaw while people continued to die like Toyota recently has. Yet, people forgive them for that and continue to buy Toyotas. It’s crazy. GM has made great strides with their products and their quality. Test drive their new vehicles and then talk.
As for the claim that they don’t make cars that people want to buy, then why do they have the highest marketshare? I know fleets buy some of that volume but if the vehicles were so troublesome, would fleets buy them?
How many American companies have lasted 100+ years!? And this is amidst major changes in trade, economy, environmental standards, safety standards. The financial crisis was clearly the fault of the banks and that exacerbated GM’s struggles. At least they provide good wages and benefits unlike other companies. Isn’t that what we all should want with our jobs? That’s why the company was worth saving. Had GM gone away, the government would have spent more on unemployment, welfare, healthcare, and new job creation efforts.
I don’t know whether I would buy the stock, have to look into the circumstances a bit more. But we are Americans. Why all the anti-American sentiment? If New Orleans has a hurricane, we help. If Detroit has a financial hurricane, we should help too.
Full disclosure in that I used to work for them.
“As for the claim that they don’t make cars that people want to buy, then why do they have the highest marketshare?”
That marketshare goes down every year.
Many people buy GM cars because their daddy bought GM cars and their grand-daddy bought GM cars. Or because their uncle and brother work for GM. Or because they aint buying those damned foreign Japanese cars. Or whatever the rationale is. If it wasn’t for these kinds of buyers, GM would have died a long time ago. Younger people have been leaving them for a long time and continue to do so. If they don’t improve themselves they will continue to get smaller and smaller. It looks like they have finally started working to improve themselves, but the jury is still out.
I heard a good quote about GM that I think is entirely accurate to this situation. It goes like this: It took GM 25 years to convince the American people that they produced crap cars. It will take them another 25 years to convince them that they don’t.
I definitely am considering the stock purchase, I just can’t decide if it will open low and skyrocket, or if will open and sink immediately. The timing of the federal government selling their portion will have a large impact as well as obviously the decided share price, which is reportedly somewhere around $15, which is a little higher than what rival Ford trades at. All too often I have seen IPOs occur and the stock price shoot up immensely that first day, but for some reason my gut instinct says this one is different.
Never bought an American branded car….and honestly I don’t think I will any time soon.
There could be stretches when GM stock does well. But GM is still a pension plan that makes cars, and most U.S. trading partners persist in suppressing their currencies to encourage exports to the U.S. The U.S. so far, seems to have missed the opportunity presented by the financial crisis/economic downturn to loosen the grip of the unions and currency manipulators in foreign countries. In short, the unions keep costs high for GM and foreign governments keep costs low for their auto companies through currency intervention. Give Americans free markets and they’ll skate circles around the competition but unitl then…
I owned 400 shares of GM and got hosed when they declared bankruptcy and gave part of the company to the union. Even though it was important to not let GM and Chrysler fail, I won’t be buying any more of their stock. I agree with other posters, the GM bankruptcy deal didn’t pass the smell test nor do their claims of having paid the government back. More important, GM hasn’t resolved a lot of systemic problems in the company and they could fail again in the future.
Cars? Yes. Stock? Not Sure.
We have GM made vehicles in our household (a 2007 Chevy Impala with 80,000 miles, and a 2002 GMC Envoy with 140,000+ miles). Both have been wonderful, reliable cars. So I wouldn’t hesitate to buy another GM product (even though we hope for both our current vehicles to make it to at least 175,000-200,000 miles).
I don’t have any plans to buy stock in any automakers, GM or otherwise. Not an industry that I really want to throw my money into. I am not in the market for any cars either, but I’m doubtful I’d buy a GM.
I think the auto bailouts were a good thing for America. I am not too concerned about bond holders who were mostly big banks who were speculating by buying junk bonds. Junk bonds have high risk and high yield, anyone buying them has to realize they could lose their money. Thats the risk you take for the fat yields.
I see,
So since they were big and they were banks and they were speculating, if the rules were changed in the middle of the game and they were not first in line for the assets as they were supposed to be that’s OK because well, they were big, and banks, and speculating. SO SCREW ‘EM.
My only hope for you is that one day you get the chance to be on the receiving end of your sentiment.
GM has really closed the quality gap with the Japanese over the past 5 years. I’ll definitely consider them next time I’m in the market.
I would consider buying GM stock in the future if it was a value. I would never buy their cars. I think their quality track record is very poor. I stick to Japanese. I currently have a Nissan Sentra with 190,000 and 9 yrs. old. No major breakdowns and just had to maintain things like the brakes. Great car.
Would I buy a GM Car? I have no idea, I wouldn’t be against looking at one but I have only owned Japenese and the parents only owned German growing up.
Would I buy the stock? Not at initial IPO I’d have to see the underlying fundamentals. I don’t have a particularly bad taste like some do, it just seems like a whole lot of unknowns
Interesting the complete dichotomy of opinions.
I would buy the stock if I thought it was a good value. Hard to know since it hasn’t went public yet but my gut feeling is I don’t trust the company enough to feel comfortable in the stock yet. I would buy the cars if they were interesting and of quality. I have seen no evidence of either of those yet (other than the new camaro which looks killer, but can’t comment on the interior or the quality since I haven’t sat it one or seen any quality indications on it yet).
So currently the answer is likely no on both fronts but only because I don’t think either is likely to be a good value at this time. Hopefully that will change.
My entire family has had many GM vehicles. With the exception of a good 1988 oldsmobile 98 with the quality 3800 engines that GM used to produce, every one of them in the last 15 years has been a huge pile of crap with regular repeated expensive breakdowns to key systems like the engine, fuel system, transmission etc.
I own nothing but Nissan and Honda and have never had any kind of breakdown on any of the vehicles I have had (some minor sensors have failed). All of those cars have went over 100K (1 I traded at 100K to get a more family oriented vehicle). One got totalled at 180K with no problems and the two I have now have 170K and 140K with no problems. I stick with what works so I won’t be switching to the experiences of my family over my own unless there is a very good reason to do so.
As to the comments that the govt will get its money back out of GM. That’s some nice wishful thinking but some fans of the big three automaker companies and their workers. But in order to do that GM has to be worth 80 billion dollars. (They have almost 50 billion left invest in them at 61% the math on that shows 80 billion to break even). For reference point that is twice the value of Ford and Ford is a way more valuable company than GM right now. When GM IPOs I expect it will be easily valued less than half of what Ford is worth. That means GM is going to IPO at a price that gives the government 25 cents on the dollar at best.
People can disagree on whether or not the bailout was a productive use of govt money but please don’t pretend its going to be something that the government doesn’t lose money on.
Neither. They trashed contract law. They hosed bond holders. Those tactics were un-American. I am hoping they finally, once and for all, go bust. It will be a personal holiday forever.
Then, when they’ve risen from the ashes and redeemed themselves and stopped paying temporary CEOs 9 million a year, stopped using the political process to thwart justice, and started running a profitable company that makes cars people want to buy, yes. I’ll buy both.
But not before.
I won’t go out of my way to buy GM stock, but I’ll have no problem buying another GM vehicle. Creeping up on 150k miles on my Pontiac and other than some basic and simple repairs you’d have with any car it’s great. Besides, almost my entire extended family is either directly or indirectly employed by GM, Ford, or Chrysler so it’s nice to use their discounts.
I think once it’s time for the Grand Am to die I’ll be looking for a slightly used Chevy Traverse. It will make hauling two kids and a dog around much easier.
I probably own some small % of GM stock in the mutual funds that i own, but the only way i’d ever buy a GM car is if the company takes over Subaru. And leaves it alone.
Car – yes Stock -no. I’ve had good luck with all three of the Buicks I’ve owned which is a result of engineering and manufacturing. Unfortunately little change has been made to the executives and managers at GM, so it will probably remain a poorly run company, regardless of bailouts or government ownership levels. If they had been allowed to collapse completely a new company with new leadership might have emerged in the model of 3M, Boeing or any other solid manufacturer that maintains strong management and solid financial leadership.
Neither.
My grandfather owns a 2000 S10 and the suicide door breaks annually. IMO, GM has lost the cred and the mojo it had in the 70’s of building a solid machine (my father’s 76 Suburban had 600,000 miles on it before he got rid of it because the entire body was rusting away).
My opinion of the Volt is that GM went the Microsoft route – promise the sky then delay it over and over again then give up and deliver a half-assed product.
I have owned GM products my since my first car. I currently have a Pontiac with 150k miles and have never completed a major repair and the car, I’m told, looks like new. The bonus is, I love the car and when I ride in the foreign cars of others, I love it more. From the less rattles, even though substantially older, to the bonus comforts of heated, leather seats, my car is quality in my eyes.
This is not just a lucky purchase either. My husband drives a GMC with 130k miles, my oldest daughter has a Pontiac, my oldest son has a Chevy and my youngest son has a Pontiac(this car with the least miles of 90k). All vehicles are over 9 years old and all have had only regular maintenance. My youngest daughter is driving a Dodge with over 170k miles and we have the same quality from this vehicle. Without even looking into prior owned vehicles these that all still look beautiful, run beautiful and are solid in comfort and construction provide me with the very firm belief that I will never own anything else.
NOTE – my oldest daughter has a VW and we have had nothing but problems with it. All of which have cost a huge amount of cash and the car is newer and has less miles and there is a definite difference in ride and sound while driving.
I agree with your first commenter that claims the auto bail out was much more successful than the banking – true beyond belief.
Definitely no on the question of buying GM stock. I own a GM car now, and it is my most troublesome vehicle so I won’t be buying another one. I’d buy a Ford, or an American made Honda or Toyota.
As for the bailouts, they were a great help to the autoworkers unions, but a pretty lousy deal for the bondholders (glad I wasn’t one of these people). The bailout also prevented GM from restructuring its business to reflect the realities of 2010, so expect more trouble sometime down the road. Prediction: the Volt will be the butt of many jokes, and will be tough to sell once the public recognizes the total cost of ownership problem and all the shortcomings.
The auto ‘bailouts’ were actually very successful, more so than the bank bailouts or the stimulus. The auto bailouts saved hundreds of thousands of jobs. If GM and Chrysler had been allowed to fail, jobs at those companies and countless suppliers would have been lost. The ripple effect here would have been devastating. The tax loss from the companies and the employees would have impacted everything from the federal and state governments to local municipalities (who are already finding it tough as it is). Consumer spending would have decreased across the board and the recession would have been much worse than it is/was. As it stands now, GM is making money and structured in a way for long term success. Chrysler is also picking up the pieces and on the right road. The government will get most, if not all, of the money they put into the companies back as well as having saved hundreds of thousands of jobs.
GM would have been much better off to have re-organized like the Airlines.
They are burdened with The same union and other albatross they had prior.
I hope they succeed, but they are have mountains to climb and the Govt Motors image is a major impediment. I would but Ford over GM, we will never see all our money back never.