GM Rallies, So Do You Buy It?
After getting hammered last week, shares of General Motors are starting this week moving higher.
Some of that is in anticipation of the company announcing Tuesday it will take steps to shift production from slow-selling SUVs and pick-ups, and moving more towards cars.
But another reason for the rally is a Barron's article outlining why the company and stock may be poised for a long term run.
The author of the article, Vito Racanelli, explains that there are certainly a host of well documented factors moving against GM right now. But he also writes about the positives (cutting costs, international growth, developing "green" cars) and concludes the article by saying, "....picking an exact turning point in the economy or a stock is a rube's game. The short-term factors are out of GM's control, but 12 months from now, the economy should be past the hump. More important, 'looking three to five years down the line,' argues (John) Casesa, 'the factors GM can control--labor costs, global scale and brands, and improved products will win out.' So while GM's 100th birthday party might not be particularly festive, its 102nd could be quite a bash."
Mr. Racanelli believes GM shares could reach $30-$40. Do you buy it? Are there enough people who see this stock and this company turning the corner?
Last week I asked you who's to blame for GM's problems (company leaders? the UAW? America's love affair with SUVs? GM's competitors?) and what you thought ofGM's response to my blog about placing the blame. I found your answers intriguing. There are definitely those who think GM's leaders are not the problem and there are other factor behind why we're not seeing the automaker's turnaround yield better results.
Jeffrey wrote, "GM's leadership over the past ten years has been good to amazing. The turn around the management has effected is borderline mind blowing. They have taken a apparent train wreck, turn it around on its own tracks and pointed it at profit."
Keith is tired of people suggesting GM should just go under. He e-mailed, "To even think that an American could possibly even suggest that GM deserves these struggles and should even shut down is so completely I am restraining myself enough to not throw my computer through my window."
Larry says reporters like me are to blame saying, "You forgot to mention, what I feel is the biggest cause of GM's problems, the media who continually degrade GM products when they do not deserve it."
But there were others who not only blame GM for it's current problems, but also take issue with the company's response to my blog.
Kelly told me, "GM competitive? Please. He (Christopher Barger, author of GM's response) is a perfect example of what is wrong with GM. Definitely removed from reality. He doesn't mention anything about the amount of money they've lost this year alone, but he talks about these sale records they have set. It doesn't matter how much you have sold, you're still LOSING TONS OF MONEY!!!"
Chris doesn't buy GM's response writing, "Mr. Barger is either in a self-induced state of denial, or blissful ignorance. Having just sold my Chevy Truck because of its ravenous appetite at the pump, I am certainly sympathetic to his plea that current economics including the price of fuel play a part in the strategy of restructuring GM. However, it has been the cars and trucks they produced over the past 30 years that have set the course for their misguided direction."
The e-mail's both in defense of and attacking GM do spell out one thing very clearly to me. This is a company that still generates passionate feelings. And why not? GM is an iconic American company and I do think that more people want to see it not only survive but thrive.
There's no doubt it finds itself once again at a crossroads. Can it transition it's North American business into becoming a known more for it's cars than it's trucks and SUVs? the next two years will tell us the answer. If GM is right, that perhaps Barron's is right and this is stock and company ready to rev it up.
Questions? Comments? BehindTheWheel@cnbc.com