- GM is replacing its CEO and preparing to sell equity to the public
- Don’t buy the stock. GM will not be a market winner
“GM reports $1.3 billion in Q2 profits, Preps for Stock Sale” is the Detroit News headline. So, are you interested in buying some GM shares? If you do, can I interest you in a bridge I have for sale???
In addition to reporting 2 consecutive positive cash flow quarters, the CEO Ed Whitacre announced he’s leaving the post to be replaced by a different telecommunications executive, Don Akerson. Are you excited?
There are at least xx reasons NOT to buy GM shares:
- The company lost market share last year. It’s slide from dominance has not stopped. It has less than half the market share it had just 2 decades ago.
- GM lost $12.9 billion in the same quarter last year. There is no doubt the company brought forward costs last year to worsen the financials, thus making them look better than they should be now. Financial machinations are common in poorly performing companies, especially around bankruptcies
- The departing CEO, and the incoming CEO, are retired telecom execs. How many successful (meaning growing revenues profitably) telecom companies do you know? Now wait a minute…. right.
- To hit revenue targets GM increased fleet sales. Interpret that as chasing low-margin business for volume. It also means selling on price, not the desirability of the products to end users.
- GMs pension funds are underfunded to the tune of some $26 billion. When will they fulfill it?
GM hit a growth stall in the 1970s. Since then the company has steadily lost market share while watching profitability deteriorate to nothing. Fewer than 7% of companies ever consistently grow a mere 2% after a stall, and there’s nothing saying GM will be in that exceptional group.
GM downsized its exciting brands. Chevrolet is about as exciting as….. The big “hit” car is a re-release of the Camaro – a car that was successful way about 40 years ago. GM isn’t a leader in any new car segments, or new technologies.
GM has no White Space. It is run by retirees that really should go to Florida – year round. They keep trying to do what worked for their personal careers 30 years ago – and not what will make a company succeed today. There isn’t a single thing about GM that would make me want to own it.
Go buy Apple. There you get innovation, growth, new markets and a leader in several segments.