I heard some good news this morning about General Motors aka Government Motors. ABC News reported that sales of the Chevy Volt hit a new record in August. But then came the bad news: the number sold was only 2500 cars. Then came even more bad news: GM lost $49,000 on each Volt it sold.
On my evening commute home, ABC News reported a spokesman for GM as saying that the company is committed to bringing down the cost of production of the Volt because it is so important to the future of GM and the country.
Once again our government backs a company whose business model is selling goods for less than they cost to produce. If you remember, the federal government gave billions of dollars in guaranteed loans to Solyndra which sold solar cells for $3 that cost $6 to produce. To the amazement of liberal Democrats, Solyndra filed for bankruptcy, shut down production and laid off all its employees.
My advice to the Obama Administration and liberals who like to claim credit for Osama bin Laden being dead and GM being alive: crow while you still can because if the Volt is the future of GM as their spokesman claims, that future won't be very long-lived.
Interesting article. Ken, did you look at Bryan's post on the auto bailout? Good stuff there and a lot of numbers. The U.S. treausury owns 500M shares of GM, and is underwater on their shares. GM can't make any major decisions without consulting the government. The breakeven price for the government is $53.00, and GM is at $24.00. Ouch!
ReplyDeleteTim I need to look back at Bryan's post. I don't see any way that they will turn the stock around when they keep crowing about business that they are doing like the Volt. They don't have a clue. They need more business sense and less ideology. They are making American cars not Soviet Volgas!
ReplyDeleteWith GM's problems in Europe, and the specter of the UAW owning an equity stake and the US Government holding a substantial amount of shares, I don't possible think that GM will ever be able to compete with the Japanese, the Koreans, and possible even Ford in the U.S. going forward. Only time will tell. As an investor, do you want to owns shares in a company that has unions and the government essentially controlling it?
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