GM Headed for Bankruptcy Again: Forbes Op-Ed

GM Headed for Bankruptcy Again: Forbes Op-Ed

Recently we reported that the auto bailout cost had increased to $25 billion, mostly due to General Motors‘ plummeting stock price. Things could, however, get worse for GM before they get any better – if they get any better.

That at least is the opinion of Louis Woodhill, a contributor to Forbes magazine, who has penned a controversial proclamation that America’s largest automaker is headed for bankruptcy once again. Here’s Woodhill’s reasoning:

In the past couple of years since GM went public 0n November 17th, 2010, the American automaker has failed to recapture a significant amount of market share, and some of it newest models have been a little underwhelming to say the least – the Chevy Malibu in particular. Thanks to the bailout, the federal government owns half a billion shares of GM, or about 26-percent of the automaker. While GM’s stock went public at $33 a share, it’s currently hovering around $20 a share, meaning it has dropped in value by a significant 39%.

As a result, in order to break even on the bailout, shares would have to reach $53 each for the government to sell.

Making matters worse is the fact that GM’s stock has underperformed relative to the market. During the period since GM went public in November of 2010, the DOW Industrial Average has risen 20 percent, meaning the current shares have actually lost 49% of their value relative to the DOW.

Woodhill puts the blame on poor products and poor leadership. Initially seen as a flop, the Chevrolet Volt has seen rising sales this year, though it’s hardly enough to keep GM appealing to the masses. The bigger issue is the new Chevy Malibu, the Malibu Eco in particular, which is regarded as uncompetitive with industry leaders.

And then there’s the spate of changes in senior management, most notably the recent departure of Global Marketing Head, Joel Ewanick. According to Woodhill and his crystal ball, CEO Dan Akerson just rearranging the chairs on the deck of the Titanic.

[Source: Forbes]