The last few weeks have seen lots of articles attempting to bash General Motors (GM) and its stock prospects. Some, I must admit, have been excellent, but others, frankly, could use a bit of help. It is in the magnanimous spirit of helping that I offer these humble suggestions and a sure-fire formula to bash GM stock properly!
Are you ready?
What to Write--a Simple 10-step Formula
Before I give you my secret formula, here is the underlying principle: when writing, be sure and focus on lots and lots of little details that obscure the bigger picture. Hit 'em one after another with lots of little things that actually are true (well, mostly) and your readers will be so disoriented that I promise they'll never see the forest through the trees! Plus, by using the salesman's technique of getting the reader to agree with you again and again on little things, they will be more likely to agree with you when you announce your sweeping conclusion at the end.
OK, here goes the formula--along with a "Note of Caution" at the end of each one, just to help you get this right:
1. Always, always start with the bailout and politics. Call it "Government Motors" (readers love that!) and repeat over and over how much money us hardworking taxpayers have lost because of that darn bailout! Remember, the IPO priced at $33 a share and "breakeven" is much higher still! And where are we at today? Exactly! By making it political, maybe we can get more Republicans to short the stock! Word of Caution: Since investors live in the moment, this one is a sure fire winner, but...do be sure and keep your readers focused on the problems of today so they don't think about valuations or future earning power.
2. Talk about China's "collapsing" economy and how "dependent" GM is on that market. Sino-phobic American readers just love to read about Chinese accounting (an oxymoron?), ghost towns being built just because, and...and how they eat with chopsticks!! Word of Caution: Tread carefully here. We do want to talk about GM's dependence on China but don't want to bring undue attention to how astute GM management has been in making China a growth driver and especially how well GM was doing even before the recent anti-Japan backlash. Above all, remember to keep the reader grounded in China's present problems--the last thing you want them to do is focus on what will likely happen when China finally stabilizes (or wait a minute, it never will, right?)!
3. Volt! Volt! Volt! Oh boy, this is another sure-fire winner. Emphasize how many millions of dollars (or something like that) GM "loses" with each Volt produced. In fact, try to bring Solyndra into this too, if you can, so that all of the Anti-Obama crowd gets worked up about those nasty bailouts and subsidies. Talk numbers of vehicles sold vs. projections; bring up competition, etc. Word of Caution: None really. We really got 'em on this one!
4. Losing hundreds of millions in Europe! Simple! Use lots of words and phrases like "headwinds" and "stupid xy%z! Opel" and "mistake to be in Europe." Please don't waste this valuable opportunity to bash the bailout yet again, talking about how management and Obama could have jettisoned Europe during the reorganization, but oh boy, greedy management is now stuck, aren't they?! Word of Caution: Remember it is all about the present, so don't talk about any future rebounds or the like. Take advantage of human nature's predisposition to extrapolate whatever is in the here and now and make it last forever--just like with China--and your readers should love you.
5. 26% of GM shares are still owned by the government! So write about how disastrous their eventual exit will (surely) be on share prices! Throw in Wall Street truisms like, "Investors hate uncertainty," emphasizing how "paralyzed" we all are "by not knowing when" the government will finally unload a "flood" of GM shares on the market. Word of Caution: Don't bring up AIG and how smoothly that "flood" is going.
6. To make your article appear more intelligent, talk about where we are at economically in the United States "cycle" (investors just hate anything that doesn't go up forever so use the "cycle" word a lot). I especially like the phrase "upper mid-cycle" (be sure and have that knowing look on your face as you type the words) and pontificate about how close we are to that inevitable top with a terrifyingly steep drop undoubtedly coming right after. This should scare people! Word of Caution: Don't explain how you "know" what the heck a cycle really is anyway. And be a little careful here--you will see why when you read my first point below in "what not to write."
7. "It's all about market share, stupid!" We already know that American cars just can't compete with the Japanese built-in-America cars from Toyota (TM), Honda (HMC) and Nissan (OTCPK:NSANY), so hammer this home again and again. I mean, GM and Ford (F) have probably lost another percent of market share since you started reading this article, for crying out loud! So emphasize this in your article. Word of Caution: Be sure and omit pertinent information about the natural disasters that temporarily suppressed Japanese auto production last year. And whatever you do, please don't bring up the massive product refresh GM will have in the next few years that might slow those losses just a teensy-bit. Remember, it's all about the present, baby!
8. Unions, unions, unions! I mean, we all know it was really the UAW (and not GM) that was bailed out, right? And besides, we all know that union labor can't compete in this day and age anyway. So make sure you emphasize this too! Word of Caution: None! Again, we've got 'em with this one too.
9. How 'bout those billions owed on pension liabilities? I mean, I am pretty sure they owe more billions on this than McDonald's has made hamburgers! So you have got to write about this one a lot because it threatens an investor's sense of security--like it should! Word of Caution: If a reader comments on the steps currently being taken by management to address this, just label whatever GM does as "inadequate" and "counterproductive." That should do the trick. Oh, and ignore any present or future cash flow generation that will cover those liabilities. What your readers don't know won't hurt 'em!
10. And finally, go for a sensational title, like, "General Motors Is Headed for Bankruptcy, Again!" or something like that--you should get lots of page views and attention! Dig up some data points--um, like the failure of the Malibu to be a real winner in the D class, or hammering again that train wreck we call the Volt. Word of Caution: Choose wisely when picking the product to bash. We definitely don't want readers to know about GM's newfound momentum with smaller cars (like the Cruze, for example), Chevy's continuing strength in bigger cars and trucks, gains in the luxury space with Cadillac, and that in aggregate, their lineup is shaping up quite nicely for them. No self-respecting writer tells his audience everything he knows, right?
What Not to Write
1. This is easy--the last thing we want people to know is how simple the car business really is, especially in North America (still GM's most important region by far)--that it is simply a function of the trifecta of (A) North American SAAR (the seasonally-adjusted annualized selling rate of light vehicles), (B) GM's market share, and (C), the resulting breakeven point based on GM's internal cost structure and expenses. What we will never write about is how much things have changed for GM with this trifecta: that GM's old breakeven (Q3 2007) was a SAAR of 15.5 million vehicles and a 25% market share and that it took a fairly robust economy with lots of cars sold for them to even make any money; or that the GM of today breaks even at a SAAR of a mere 10.5 million vehicles with an estimated 18-19% market share (statistics courtesy of Morningstar and GM)! This all has to be kept hush-hush!
And for heaven's sakes, don't be telling anyone that the new, much leaner GM (regardless of what your readers think of the bailout) now makes a lot of money today at what is still a historically depressed rate of sales, and that at whatever point the economy returns to a normalized SAAR (16.5 million, in my opinion) in North America, GM will be making bank! And when emerging markets and Europe finally recover...? Well, it just makes me shudder to think about!
2. Refuse to write anything about any internal initiatives to save money--like delving into Ford's playbook and developing global platforms to save billions of dollars annually! Maybe this can be our little secret, too... um, along with also centralizing advertising to save another couple of billion dollars--but what's a billion here and there between friends?
3. Ignore, ignore, ignore! There are lots of things you just can't afford to bring up: growth opportunities for GM in Russia (please don't tell your readers that management appears to be doing in Russia what they did with China), GM's cash on hand and strong balance sheet, some very smart investors are buying shares (Who is this Einhorn fellow anyway? And besides, remember it wasn't Buffett who did the buying for Berkshire Hathaway--it was "just his lieutenants!"), and, well, I'll stop there. Don't want to give you any ideas.
What Not to Do
This one is easy--whatever, you do, don't short the stock! I mean, heaven forbid, what if you were wrong? After all, as a writer you have to be somewhat dispassionate, above the fray, as it were. We are not in the business of putting our money where our mouth is!
But alas, all good things must come to an end! Armed with the above list, you should be well on your way to bashing GM properly! And when in doubt, remember, "no forest, just trees." Repeat that a few times and I'm sure you will do just fine...