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GM cuts fail to silence doubters

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Thursday, February 09, 2006

Struggles at General Motors

GM cuts fail to silence doubters

Prominent analyst 'disappointed by the limited cash savings' in restructuring effort.

Bill Vlasic / The Detroit News

DETROIT -- Shares of General Motors Corp. slid 4 percent Wednesday after a prominent investment analyst downgraded the stock and cast doubt on the effectiveness of GM's turnaround efforts.

GM stock closed at $21.99, down 82 cents, in trading on the New York Stock Exchange as Deutsche Bank analyst Rod Lache cut his rating from "hold" to "sell" and lowered his target price for GM shares to $17.

The report highlighted the concerns on Wall Street and among investors about the impact of broad cutbacks in white-collar benefits and a 50 percent dividend reduction. Following on the heels of negative reactions to GM's announcement by two major credit rating services, Deutsche Bank said it was "disappointed by the limited cash savings targeted by current restructuring efforts."

The report also offered a pessimistic assessment of GM's chances to rebuild its U.S. market share and to cut a deal with the United Auto Workers on the reorganization of bankrupt auto-parts giant Delphi Corp.

"Given the extent to which GM's business has deteriorated, it's not clear that GM can in fact be fixed, or whether their competitive disadvantages have already become too acute," the report said.

The report questioned whether GM and the UAW are pursuing "aggressive" solutions to issues of pensions and wages for unionized workers at Delphi, which was part of GM before a corporate spinoff in 1999.

At the same time, GM continues to face a barrage of national media attention, much of it focusing on whether the giant automaker will be forced to file for Chapter 11 bankruptcy protection.

The TV newsmagazine "60 Minutes" is preparing a story on GM and its uncertain future. Fortune magazine's issue reaching newsstands this week has the headline "The Tragedy of General Motors" on its cover set against a black background.

GM Chairman Rick Wagoner has repeatedly vowed that GM has no plans or intention to file for bankruptcy.

"These are challenging times for General Motors, certainly among the most challenging in our 100-year history," Wagoner said Tuesday.

"But we have solid plans in place to address our weaknesses and take full advantage of our strengths. And I'm convinced we'll emerge as a strong competitor."

But Deutsche Bank said the automaker's huge pension and health-care liabilities could sink the company in an economic downturn.

"All it would take is a modest auto industry downturn, additional market share losses or mix deterioration, or a few bad pension return years, and GM would likely be forced to seek protection from its liabilities via the courts," Deutsch Bank said.

GM on Tuesday said it would cap health-care benefits for about 100,000 U.S. salaried retirees, freeze pensions for salaried workers, and slash the pay of its five top executives and board members.

In addition, the company reduced its annual dividend by half to $1 a share, saving $565 million a year.

http://detnews.com/apps/pbcs.dll/article?A...UTO01/602090375

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the reason people are selling their shares is because it lost one of its greatest assets... a 8.5+% dividend... that was phanominal

now for sure its a long term only stock...

but now that york is abord, i think the stock will soon bottom and will consistantly rise, expecially with the old PR guy back on the line...

so i'll try to buy some with whatever money i can muster

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8.5% was ridiculous in a age where CD's are paying 4 and the prime rate in recent years had been .5%. I wonder what GM's employee turnover rate is. I suspect it's very low.

the reason people are selling their shares is because it lost one of its greatest assets... a 8.5+% dividend... that was phanominal

now for sure its a long term only stock...

but now that york is abord, i think the stock will soon bottom and will consistantly rise, expecially with the old PR guy back on the line...

so i'll try to buy some with whatever money i can muster

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At the same time, GM continues to face a barrage of national media attention, much of it focusing on whether the giant automaker will be forced to file for Chapter 11 bankruptcy protection.

The TV newsmagazine "60 Minutes" is preparing a story on GM and its uncertain future. Fortune magazine's issue reaching newsstands this week has the headline "The Tragedy of General Motors" on its cover set against a black background.

Looks like the media is set to assasinate GM.

As far as the 'analysts' go... They won't be satisfied until GM is liquidated.. And they'll continue to make their views public as long as they can make a buck off of theri demise.

"All it would take is a modest auto industry downturn, additional market share losses

Well, that's guranteed to happen... This is GM afterall

or mix deterioration,

Gas prices are certain to go up.

and GM would likely be forced to seek protection from its liabilities via the courts," Deutsch Bank said.

Goodbye GM... Of course, we all know that I've been predicting this for 3 years now.

but now that york is abord, i think the stock will soon bottom and will consistantly rise, expecially with the old PR guy back on the line...

York will order divisions to be cut (Not a good thing) and the new PR guy won't matter. The media will MAKE the news against GM regardless.

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