GM has not been chronically non profitable
Yes it has been.
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Over the past decade, the capital destruction by GM has been breathtaking, on a greater scale than documented by Mr. Jensen for the 1980s. GM has invested $310 billion in its business between 1998 and 2007. The total depreciation of GM's physical plant during this period was $128 billion, meaning that a net $182 billion of society's capital has been pumped into GM over the past decade -- a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998.
As a society, we have very little to show for this $465 billion. At the end of 1998, GM's market capitalization was $46 billion and Ford's was $71 billion. Today both firms have negligible value, with share prices in the low single digits. Both are facing imminent bankruptcy and delisting from the major stock exchanges. Along with management, the companies' unions and even their regulators in Washington may have their own culpability, a topic that merits its own separate discussion. Yet one can only imagine how the $465 billion could have been used better -- for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.
online.wsj.com
GM Trailing 12 months EPS -38.74
finance.yahoo.com
GM earnings going back to 2000
123jump.com
Time to Pull the Plug on General Motors
realclearmarkets.com
Has General Motors Earned a Bailout?
November 26, 2008
Recently John Tamny wrote an article, Pull the Plug on General Motors (GM), in which he discusses the various reasons why it is essential to let GM fail. So we thought we would give you a graphical representation of GM's historical ability to create shareholder value, along with a Value Expectations scenario of what GM must generate to sustain its current price.
The Economic Margin chart below displays GM's consistent inability to earn its cost of capital and continuous destruction shareholder value.
Given such poor levels of Economic Margins there is no surprise its relative returns to the market have plummeted.
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As shareholders you have to ask yourselves, will GM ever be able deliver those levels of EBITDA Margins? As taxpayers we have to ask ourselves if a bailout would just be a waste of tax payers' money. Given GM's consistent destruction of wealth and the tremendous amount of restructuring it would need, a bailout looks more like life support.
seekingalpha.com |
