Blues for a Blue Chip: General Motors Needs to Go Further

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I can still remember driving around as a kid in my dad's Chevrolet sedan, one with tail fins. Later, we had a Pontiac Ventura, and my mom drove a Chevrolet Malibu.

My first car in high school was a 1966 Pontiac Le Mans that I rebuilt myself. And my brother drove a Pontiac Firebird – all General Motors Co. (NYSE: GM) cars.

Besides the cars in my family's driveway, I broke into the financial industry as a young analyst in Detroit covering GM. As such, I talked frequently with the chief executive officers, the heads of all the major divisions, and top auto dealers and union reps.

I visited auto plants around the country and saw how GM was leading the robotics revolution that greatly improved the quality of American-made cars. I also traveled to Germany to drive GM's European models and talk with top execs there.

In other words, I cannot overstate what a big role General Motors has played in my life.

So, it saddens me when I see the headlines about recalls over the past few years – this year alone, about 29 million worldwide.

Last year, GM sold 2.8 million cars and trucks. So, these recalls are the equivalent of a decade's worth of production.

Many on Wall Street and in the mainstream financial media are saying this is a "buy" opportunity.

For instance, Daniel Howes, a business columnist at The Detroit News, says the recalls are giving GM millions of opportunities to lure customers back into showrooms and show off shiny new vehicles. "You can't buy that kind of traffic," Howes writes.

And The New York Times recently spun slightly increased sales as a huge victory for the company.

Now you know that I'm a GM guy. So you know that I'm not making this next statement lightly.

I just can't join along with Wall Street's talk of a turnaround.

You should not look on GM's recall problems as a new buying opportunity. In fact, you should avoid this stock.

And today, I'm going to tell you exactly why adding GM to your portfolio right now would be a bad decision.

It hurts to do so, but I feel I owe it to you…

This Company Was Rotten to the Core

Most recently, on June 30, GM said it would recall some 8.45 million cars and trucks and that it would take a total of $1.2 billion in charges this quarter. I was already writing this column when this latest announcement popped up in my inbox… sigh.

As bad as all these recalls are for the company's bottom line, GM's corporate culture is what's really harmful.

The company's own internal investigations didn't blame manufacturing or engineering problems for the faulty ignition switches that led to recalls of decade-plus-old Chevrolet Cobalts. Instead, the report focused on "cultural failings" – namely, a massive bureaucracy that led to slack safety standards.

True, GM is coming clean on a number of safety issues, ones that have left at least 13 dead around the United States. New CEO Mary Barra, who took the job in January, recently fired 15 employees and disciplined five others involved in the faulty switches.

But GM as a whole seems to be in a state of denial about how extensive its problems really are – and I just don't think Barra has a firm grasp on quality control at her company yet.

She's talking tough and making quick moves, but Barra is facing, as she put it herself just last month, "a history of failures" for which "nobody took responsibility."

Some GM officials knew of these problems and covered them up for years.

And this cuts right to the heart of my five-part system for creating wealth…

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About the Author

Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.

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