Friday, November 18, 2005

GM: Step Up and Step Down ?

At this point, besides Kirk Kerkorian, who do you think actually wants to, and does, own GM stock?

Some wags refer to GM as a company ‘run for the benefit of its retirees’ health care expenses.’ Perhaps so. According to information mentioned on CNBC yesterday morning, a significant portion of the stock is owned by employees and retirees. So maybe it’s justice that the firm seems to now exist to pay their medical expenses.

Seriously, who in their right mind would hold or buy this stock now? Does anybody really feel it is a comparatively attractive equity play? GM’s situation has gotten me to muse about why people still hold a stock like this. And that, once issued, someone has to own the shares. How odd. You could have all this equity out there in one company being used in a gigantic game of pass the financial trash.

And what about the board endorsing Rick Waggoner in his role of presiding over the slide toward bankruptcy of what was once the world’s largest automotive enterprise? Are they sticking with the devil they know, simply because a new CEO would take even more time to sort this mess out? Or because, embarrassedly, nobody else would take the job now?

I saw an interview with one portfolio manager who actually holds a lot of GM stock. When asked by CNBC interviewers what he hoped would happen, he kept saying he expected the board to “step up” to the task. This was echoed by a corporate governance pundit as well. When pressed, neither would elaborate.

Do they really mean that Waggoner should “step down?”

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