Jerry Flint on Saving General Motors

To say Jerry Flint is a knowledgeable observer of the auto industry is a huge understatement. The gentleman has covered Detroit since the late 1950s. That doesn't make him right on everything -- and he'd be the first to tell you that. But it does make him worth reading and listening to.

Flint's latest Forbes column dwells on the perilous positions of the Big Three. He estimates Ford to be in the best shape (relatively speaking) and Chrysler in the worst. My portfolio holding, General Motors (GM/NYSE) is in the middle. It's good stuff (the column, not any of the companies) and you'll want to check it out if this subject interests you.

But it's an earlier column, dated June 24 (which means it was written earlier than that, and before Rick Wagoner's press conference earlier this week), that I've re-read. This is an even-handed examination of the company, refreshing compared to what you'll see and hear most places in the media. I especially like Flint's objections to GM's willingness to unload Hummer. It's not a good move for the company or its dealers, and there's a place for macho SUVs -- not nearly as big a place, but a place nonetheless. And I echo Flint's praise of Bob Lutz, who seems to be doing a brilliant job based on successes such as the Chevy Malibu.

Flint thinks GM is putting "practically all its chips" on the Chevy Volt plug-in hybrid. I don't know if that's true, or even if it should or shouldn't. But I caught Lovins of the Rocky Mountain Institute on Charlie Rose the other night. He's very bullish on GM's engineers and the things they're working on for the future in terms of alternative energy. I didn't catch if his remarks encompassed the Volt. I did catch his caveat of hoping GM is around long enough to see their work come to fruition.

But my GM investment is not, and has never been, a speculative bet on future technology. Or that it will reclaim its position as Number One is North America. It's that Rick Wagoner and Co. will slash expenses and costs until the North American operations stop bleeding red ink. My gamble, if there was one, was that the UAW would play ball because they know if GM declares bankruptcy it will strike a killing blow to the union.

Four dollar gas and the economic downturn are bumps in the road, no doubt, but not killers in my view. Holding GM stock has been quite a ride so far. I first mentioned it on this blog at $26.75 in April 2005. It went up a bit, then down into the teens. Then Wagoner got some union concessions and the stock reached $43.20 in October 2007. And today? It ended below $13.

Yes, it's been a wild ride. But I don't think the ride is over and I'm holding on. White knuckles and all.

Comments

[DaveinHackensack]

You might find this recent Atlantic article on the development of the Chevy Volt of interest, if you haven't red it yet: "Electro-Shock Therapy". I tried to post that as a link, but apparently your comments don't allow HTML. You can find a link to that article on my site, or simply go to The Atlantic's site directly.

[Sivaram Velauthapillai]

Here is the article from The AtlanticDave is referring to:

http://www.theatlantic.com/doc/200807/general-motors

[John]

Thanks, gents. Dave commented about the article previously, and I forgot to get around to it. But I've read it and appreciate pointing it out to me.