I tweeted this earlier but for those who missed it, let me throw out a few reasons why I don’t buy the “hype” behind the GM IPO/”successful” restructuring/turn-around, in no particular order.
- Government still has huge role. As Michael Steinhardt said on CNBC yesterday, “I don’t think one should be a long-term holder of government securities, especially equity securities.”
- Still a bit opaque. Sure, they’ve disclosed a lot of the things I had questions about (pensions, etc) but its not only a lot to process, with so many moving parts – many of which could turn into problems down the road – that I’d be hesitant to buy into the story (stock) for anything other than any IPO pop + subsequent pop from index purchasing. For more, see this great post I somehow totally spaced on (thanks @rmsnickers!) from Francine McKenna. Preview: Unaudited financials are just a wee bit of a red flag.
- GM’s early leadership position in China is under alot of pressure. Buick is a big draw there, but rest assured, Volkswagen and GM’s other competitors won’t let them enjoy that position for long.
- A successful IPO does not a successful reorg/turnaround make. GM’s employee count is down about 75,000 from pre-bankruptcy and they’ve closed about a dozen plants, but as I said above, it’s a huge, sprawling company in an intensely competitive industry. Throw in a history of bureaucratic bloat, questionable (at best) product design and basically every aspect of the company from the past 30-ish years and I’m nowhere close to buying into the lean-and-mean story the company, its underwriters, and the media would have you believe.
- The Chevy Volt is doomed for failure, mark my words (which I’d gladly eat if it actually worked out sans subsidies, etc). I’d just as soon chalk up all the recent attention from the automotive media up to IPO-related pre-excitement rather than any realistic expectation that it’ll be a commercial success. Without heavy government subsidies (here we go again with that government thing), no one would even consider buying it, save for the most economically ignorant tree-hugging types.
- The UAW.
- Only time will tell. Not nearly enough has passed to see this story play out. I seriously advise ignoring anyone who claims otherwise.
Remember, this is just a very short take, each of these bullet points can easily be its own post (if not several), and very well may be in the coming weeks, so stay tuned!
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