Billwzw

The Ultimate Value Trap

American economic history is full of once-great companies that have died, partly due to strong unions, and partly due to changing economic circumstances. GM is one of these and may well go the way of the railroads, steel, shipbuilding, newspapers, airlines, etc (and now financial houses)

The analysis of GM shows the WISDOM of the UAW, who has collected many plums while the shareholders got coal. Like all unions the UAW is run for the benefit of it's CURRENT workers, not it's future workers. So a deal to take 50 billion out of the company to guarantee benefits for current workers at the cost of the company's future makes sense from their point of view if not Miken's. So if the company goes under the union can honestly say that they got theirs (and the heck with the shareholders).

The highly cyclical automotive industry has a lot of negatives not mentioned in the article - for example it is one of the most regulated industries, has huge capital demands, has long product implementation periods, and currently has too many players (some of whom are government supported). GM's current management has done a better job than many in the business and they have made great strides to address the legacy issues. But that doesn't make the company an attractive investment. The entire industry is questionable.

I refer you to Warren Buffet's comments about airlines and propose that the auto industry is more of the same.