Time to Go Long on Auto Stocks: Industry Expert
Automotive industry expert Paul Ingrassia told CNBC Thursday, one day after the successful GM IPO (initial public offering), that it’s time to "go long" on auto stocks and invest in the industry.
“When you think about it, companies are making money now—decent money at real volume,” said Ingrassia, who is a journalist and CNBC contributor.
He said that auto industry suppliers and index funds concentrated on automakers and suppliers, such at the Fidelity Select Automotive fund, are also solid investments.
Experts and observers of the GM IPO, the largest restructuring of a company to date, offered their reactions to the auto icon's return to the market on CNBC Thursday.
Ingrassia praised the Obama team for spearheading the move to save the troubled auto giant.
“This is arguably the one thing the Obama administration has done right on the domestic economic front,” said Ingrassia.
“The reason is, this was no sweeping takeover of General Motors. The government was a reluctant shareholder, the goal was to get in and restructure it on strict commercial terms.”
Steven Rattner, who was Obama’s point man as the auto task force chief, said he didn’t expect the restructuring and IPO to happen so quickly and response to be so "enormous."
“We approached this as a private equity assignment, as we say on Wall Street,” he said.
“We wanted to invest the taxpayers’ money in a way we thought would be fundamentally sound. That meant having the right management team, that meant having the right balance sheet and having the right cost structure. And once we had all those elements in a business plan, we felt comfortably putting this money into GM and Chrysler.”
Rattner is no longer part of the Obama administration. He is currently dealing with other entanglements related to his business dealings.
New York Attorney General Andrew Cuomo sued him for allegedly paying kickbacks to win investments from the state’s public pension fund. And in a separate, but related, action, Rattner reached a multi-million settlement with the Securities and Exchange Commission.
Michigan Governor Jennifer Granholm, a Democrat, told CNBC that the expression, “so goes GM, so goes Michigan,” carried an upbeat meaning in light of the IPO. (Watch the full interview with Granholm by clicking here.)
“If the federal government had not stepped in, we would have lost in America, 1.4 million jobs,” she added. “It not only comes back and allows jobs to be saved—there were a lot lost in the reshuffling, clearing of the books—what it means is that the taxpayers get paid back. The American manufacturer remains an icon.”
UAWPresident Bob King told CNBC that even though auto workers have made many concessions, some of which the union would like to restore in future contract negotiations, that the most important issues for workers are job security and longevity. (Watch the full interview with King by clicking here.)
He added that the union remains committed to working with GM, so that it can stay competitive in a global economy.