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Behind The Wheel

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May.12

1:06 PM ET

Tuesday, 12 May 2009

GM Shareholders, Executives Run For Cover

Posted By:Phil LeBeau

Sectors:Oil and Gas | Technology | Automobiles and Parts

Companies:Toyota Motor Corporation | General Motors Corp | Honda Motor Company, Ltd. | Ford Motor Company

General Motors
CNBC.com
General Motors
It's kind of like watching a car crash. You know it's sad. You know it's awful. But you can't stop looking at it.

I'm not trying to be trivial about the plunge in GM shares this week.

While it should not come as a surprise to anyone, it is still tough to see shares of the automaker slide to their lowest price since April of 1933. No wonder six GM executives have cashed out of their GM holdings.

The six executives:

Bob Lutz, Vice Chairman
Thomas Stephens, Vice Chairman
Ralph Szygenda, CIO
Troy Clarke, President
Gary Cowger, Group Vice-President
Carl-Peter Forster, GM Europe

I can't blame any of them for cashing out before GM shares drop any further. Whatever gains they made from their holdings are a small percentage of what their investment once represented.

Take Bob Lutz. He sold 81,360 shares for $130,990 dollars.

For most of us, $130 K is a king's ransom, but put it in perspective. A year ago, when GM stock traded at $21.37 and bankruptcy wasn't even on the radar for the auto makers, those Lutz shares were worth $1.73 Million.

Now THAT is a true King's ransom.

The GM execs have liquidated their holdings because this is the "window" that has opened on insider trading. I'm suspect if they could have pulled the trigger sooner and at a higher price they would have.

The writing is on the wall when it comes to GM. While the company says it wants to avoid bankruptcy, and the President says he would like nothing more than to restructure GM outside of Chapter 11, the signs all point in a a different direction: bankruptcy court. And in case you've forgotten, if GM goes bankrupt, the stock will almost certainly be wiped out.

This is the reason shares are now trading at levels last seen during the Great Depression.

I'm often e-mailed or asked by people, "Is there a chance GM share can come back?" My answer is always the same. Sure, there's a chance, but it's not likely. Even if GM avoids bankruptcy and all the parties agree to the debt exchange offer, GM shares will become so diluted current shareholders will find their investments will be worth a fraction of their current value.

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