Management of General Motors Corp. couldn't be faulted for pining for the good old days, a time before globalization when Chevys and Oldsmobiles ruled the road and foreign competition was still decades away. But while it is impossible to turn back the clock on competition, the company's shares did fall to levels last seen in the 1950s, losing 20% of their value in early trading Thursday.
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Auto sources had a number of explanations for the decline. They said investor fears that a worsening economy could depress auto sales well into 2009 were growing, and worried the automaker could face rising auto loan defaults. Some also blamed the expiration of the short selling ban, of which GM was a part, saying the company's equity value in recent weeks had drifted out of balance with GM's bonds while the restrictions were in place.
GM CEO Rick Wagoner, speaking to investors and consumers in a video posted on YouTube, acknowledged the challenges but insisted the automaker's future remains bright. He points out the steps the company has taken to reduce its costs, including a plan to shift retiree healthcare responsibility to a union-managed trust, and said General Motors continues to make gains in international markets and in next-generation technologies like electric cars.
Wall Street has long understood the challenges facing GM and its Detroit brethren, and few had any hope for a quick turnaround even before the economic downturn accelerated this fall. The fear now is that a turnaround, which some had hoped to begin to bear fruit by the end of next year, will be pushed back into 2010 or beyond.
At some point, General Motors has to show signs that it has the vehicle portfolio necessary to win back market share in the U.S. Until that time, there seems little reason to expect a dramatic reversal that will lift GM shares out of their 1950s-era funk. - Lou Whiteman
See Wagoner's YouTube video
See Dealwatch: Autos
