-- Posted Tuesday, 26 April 2005 | Digg This Article
Rick’s Picks
Tuesday, April 26, 2005
For investors who’d rather be smart than lucky
NBC led the evening news Monday night with the rhetorical question, “Can a troubled GM save its bottom line?” We’ve discussed GM’s mounting and seemingly intractable problems here many times before, most recently under the heading “Shrinking to Survive.” General Motors is getting smaller, all right, but the process has a very different connotation to the company’s Japanese competitors, for whom shrinking means having a lighter, smaller and more economical car to sell to American motorists as they acclimate themselves to $2.25+ gasoline. In fact, Toyota, Lexus and Honda all offer hybrids that customers have been lining up to buy. The newest is a full-size SUV that, despite delivering considerably better mileage than the conventionally powered Lexus it is designed to replace, yields more horsepower and better overall performance.
How did Japanese car makers find themselves once agan in exactly the right place at the right time? It wasn’t blind luck, that’s for sure, and they weren’t responding to a spike in gas prices, as we hope GM eventually will a few years down the road. Rather, at least five years ago, Honda and Toyota (which makes the Lexus) evidently foresaw America’s swing back to fuel-consciousness – for whatever reasons – and decided to act. At the time, you may recall, GM was gearing up production of Hummers and Suburbans– behemoths that they later would have to practically give away to make room for next year’s models.
1.5M Cars Recalled
GM’s mounting problems are nothing new, and it would appear that the story NBC originally had planned to air concerned the manufacturer’s latest recall -- of 1.5 million cars with a possible seat-belt defect. But the editors must have decided the recall news would provide perfect cover for airing a much bigger GM story – one that, for lack of a conceivable happy ending, is almost too scary to talk about. Going for broke, as it were, the network’s reporters proceeded to dump the whole bucket or worms: GM’s $1B loss last quarter, the downgrading of the firm’s bonds to near-junk status, soaring healthcare costs, etcetera. We surmise that NBC wanted to be on record if, out of the blue, GM starts making UAL-like noises about needing help with its pension obligations.
The evening news being the evening news, NBC had to present a positive side to the story as well. And so they did, noting that the Pontiac Solstice would soon be in the showrooms. But to save the day? I have trouble imagining showrooms bustling with prospective Solstice buyers, all oohing and ahhing over a car that seems destined, like Oldsmobile, to go out of production.
In Europe, $150 Fills Tank
With all this as backdrop, NBC’s number two story played like a parody of a quintessentially American plan for saving General Motors. In case you missed it, President Bush spent the day with Saudi Crown Prince Abdullah, exhorting him to pump more oil, and reminding him of how important it is – to mankind – for the world’s swing producer to do its bit to keep gas prices reasonable. One wonders how much sympathy Abdullah will be able to muster for the supposedly beleaguered American motorist with Europeans are already paying $150 or more to fill the tank of a large car?
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2005, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Tuesday, 26 April 2005 | Digg This Article
