gonzo

GM's Last Fatal Mistake

I think the writer is missing the big picture. GM hasn't traded this low since October 1974. Not surprisingly that was the height of the oil crisis back then too. Sure, there is also a credit crisis going on right now and the consumer is weary of buying ANYTHING. Big ticket items like autos suffer the most under these conditions. By the same virtue we might assume that consumer lenders and airlines will go bankrupt too.

It is a typical sell-off at the height of a recession, fuelled by oil. It is not prudent to compare GM to Bear Stearns, whose demise was a crisis of confidence. GM's survival does not depend on short-term investor confidence. They are downsizing and doing the right things under the circumstances that will lead to huge cost cuts in the years to come.

Sure the auto business is contracting under the circumstances as is expected in a consumer lead recession. It is not the end of the world though. GM is going through a down cycle like in 1974. and unlike Ford, they are profitable under normal business conditions. At some point the stock will bounce and bounce hard.