Tuesday, June 9, 2009

GM's Reinvention

GM's new marketing campaign certifies that this is not GM's end, but rather its reinvention. Unfortunately for shareholders, however, this is the end, as the company's shares are virtually worthless. But shareholders should not have been caught off guard. As the following chart shows, for the last several years this company has not brought in earnings commensurate with its increasing debt:

Since 2004, GM has clearly been a company in trouble. Was GM in a position to best its competitors? Not likely! The following chart illustrates the reckless and risky nature in which this business was being run, as early as 2004: 

As we discussed a few months ago, GM and Ford are not value investments that have just gone wrong, as they made almost as little sense as investments then as they do now. While some bankruptices can catch shareholders off guard, this is not one such example - except for the shareholder who does not do his homework.

Disclosure: None

1 comment:

Anonymous said...

The Debt to Equity chart begs the question as to how can Ford compete with their debt??

Follow by Email