April Fool

GM’s CFO says that if debt-holders take a bigger haircut they can have a viable balance sheet within the 60 days.
Well color me skeptical. The problem for GM isn’t debt, it’s product. For years they’ve shed market share to higher-quality competitors. To subsidize bloated costs they pushed high-margin trucks and ramped up sales to rental fleets. But when gas prices tripled and everyone switched to hybrids, they were toast. No volume, no margin, and no more money.

How to make them profitable? Do what every sinking ship does: put out the life-boats. Spin off all the divisions as separate entities. Allocate costs and debt. Break up GM like the old Ma Bell. Let competition work its magic.

The alternative is to issue a bunch of stock to the Union and say, “It’s yours, fellas.” Kind of like handing the keys to the repo man. That’s essentially what Wagoner did when he cut his overly generous deal with the UAW five or so years ago. The company’s been run on behalf of the union ever since. One thing’s for certain: the old dynasty is gone. It’s time for a new play-book.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-04T17:14:29+00:00 March 1st, 2009|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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