"Mary, Mary, why ya buggin'?"
Run-DMC's classic remake was running through my head this afternoon as I read the news of GM's (GM) massive buyout program for its office employees. Mary, of course, is Mary Barra, GM's CEO.
The Detroit Free Press is reporting that GM will offer "voluntary separation agreements" to up to 30,000 North American salaried workers. That is an extraordinary proportion of the total cohort of 58,000 office workers that GM employs in North America. Of course the actual take rate will be much lower, but GM shares have not had the typical "quick bounce" that accompanies corporate cost-cutting moves. GM is being pounded in afternoon trading Thursday.
I have followed GM in some way, shape or form since I burst onto fax machine duty for Lehman Brothers' autos team in 1992. So, spare me the "GM is big and bloated" narrative. Always has been, always will be. That fact is totally irrelevant to analysis of GM stock.
The existential problem at GM, though, is hinted at by another story on the "Free Press" homepage: The headline notes that Ford (F) did terribly in the latest JD Power survey (to be fair, GM performed well) and the "Detroit can't make high-quality cars" narrative raises its ugly head again. Chronic problem, and, again, almost irrelevant to an analysis of GM stock.
What is not irrelevant was the JDPower survey's revelation that electric vehicles, as a group, posted a customer satisfaction percentage that is 40 percentage points, yes, 40 percentage points, lower than traditional gas-powered cars. Again, GM's EVs outperformed the industry, and Tesla (TSLA) was not included, because its lack of a dealer network does not fit Power's methodology for this particular survey.
But, honestly, the bloom is off the rose with EVs. Tesla has reliably performed horribly in all surveys, such as Consumer Reports, in which it is actually included. GM's problems with its Bolt EV are too many to list here. Frankly, Barra should be embarrassed that GM produced such a substandard product, even in a small niche.
And that's where the final story from the "Free Press" that caught my eye Thursday enters the picture. The weather page predicts it's going to snow in Detroit tonight.
It's a little late in the season for that in Southeastern Michigan, in my experience. It's also a very strange occurrence in the midst of the "catastrophically-melting planet," or whatever nonsense is being spouted by amateur climatologists this week.
The Earth will be fine. GM stock? I think not. Barra bet the future of the company on an unwise and, in my opinion, totally unwarranted transition to EVs. She should have just focused GM on its core skill-set, which is making gasoline-powered pickup trucks and SUVs.
Barra and GM's Board have made a colossal strategic error. Laying off salaried workers is a by-product of this, and let's not forget that the former GM filed for Ch. 11 bankruptcy in 2009.
In every generation there is some whiz-bang idea that is supposed to transform GM. EVs are just the latest fad -- yep, I think they are a fad -- that GM is launching later and with much less success than its competitors.
Anyone with any experience would tell you that an environment of rising interest rates and a slowing consumer is a horrible time to initiate a position in a car stock. So, stay very far away from GM stock here. Also, if you believe that the macro environment will keep lining up against GM, it is actually worth a short here, as well.
