I know the auto stocks sure have been taking a beating lately. GM had a little rally today, but F is at historic lows. I know all the advisers out there are say stay away from the big 3, but they are such big companies with so much potential. I also question whether the government would let them fail if one of them went to pot. Of course, in a bankruptcy they'll shed the stock and the shareholders will be screwed. So that's the real question here, will bankruptcy be declared? I think its a given that any bankruptcy declared will be that of the Chapter 11 variety, not liquidation. At the price, I think they are historic buys. But my bull is tempered by the real possibility of bankruptcy.

Unlike airlines, which have NEVER been profitable without infusions of cash and subsidies from the government (building of airports and facilities, etc) the automakers were at one time profitable but have recently had an extended bad run. Now, I am a realist and I know no company can maintain an uphill climb forever and never fall back. If a company has proven to me that it can turn a profit, I am usually willing to . Same as at the horse track, when a horse has shown me it can run the mile at a given time, I am apt to believe that it is capable of doing so again. So I am willing to cut some slack to the autos for the recent woes.

I see it as a very long term investment, probably 5 years or longer, but at $5 a share for a company I think could return to $70 a share someday with proper management and reform (which is already underway to a degree)  and I think that they'll eventually get there. Might be alot of stumbling around in the dark before then, but we'll get there. One positive aspect of GM is its finance unit, GMAC which I think has been hit very hard in the housing issues, perhaps slightly unjustly. I think as things start to pickup, we'll see this very negative sentitiment on fiance companies wash over and GM should recover. GM is trying to get rid of its Hummer unit, a smart move.

Anyone have any thoughts on this? What are the chances of them shedding their stock in a bankruptcy should it be filed, what are the chances of filing, do you think we'll see lower prices before we see higher ones, inducting it would be best to look at some buys later?

Hi, Keith:

I see it as a very long term investment, probably 5 years or longer, but at $5 a share for a company I think could return to $70 a share someday with proper management and reform (which is already underway to a degree)  and I think that they'll eventually get there.

I like your reasoning in the earlier paragraph. Car companies hold so much potential these days with gasoline at over $4/gallon this summer. Yes, the big 3 are trying to get their costs in line with their Asian competitors. It will take quite a while but it will get there. Yes, GM, F need to get their mindset changed to build cars that customers want.. If they can get these together, you will get a handsome return on your investment. Although, I wouldn't expect share price to go from $ 5 to $ 70 at all. 

However, time is running out for US automakers. They had mostly used up their resources, selling off unprofitable divisions. There are more to come. But, whether this downturn is severe enough to put them out of business, that is anyone's guess. Even GM is raising cash to last it through 2010. The game has become survival instead of revival. Thus, if you would like to put your assets in this risky sector, just put money that you can afford to lose. At this point, it looks bleak. But, things always look bleak before it can give you excellent return on investment, doesn' it?

 

Well it looks like Detroit is lobbying for a $50 billion dollar bail out in low interest loans.  If you look at this as a government investment towards two companies with a combined second quarter loss of over $22 billion dollars that doesn't seem like the best investment.  Politicians are worried about the loss in jobs, but I see the start of a spiral.

The combined market cap is 15.5 billion. By comparison Toyota is 140 billion alone.  I don't know if we should continue pouring money in to these unprofitable companies.

market cap means squat

ronrice:

market cap means squat

I respectfully disagree. 

honestly i don't know what I'm talking about...I think i was in a bad mood

How does market cap affect whether the company is going to go bankrupt? I suppose they can use the capital to stay afloat and if their market cap suffers like it has in the case of F and GM they don't have the flexibility of all that capital? or is this wrong?

How do you reply with out having to quote ;;;
Anyway as cars are one of my passions we have to look to the past and into the future with ford...
If and only If the Ford family will let the people they have hired actually run the company they will end up with a profit for not only them but the share holder also...
let look at just todays news
http://sev.prnewswire.com/
give me a break I don't want a  "More-muscular, faster-looking Mustang pony emblem"
I want a Mustang that will lay my buddy in the back seat when I stomp on it...
I want to be able to tinker with my car to make it fit my desires... Not have a darn computer degree just to
change the spark plugs...
Now given the times I don't see the later happening... But
http://business.theage.com.au/business/real-key-to-viable-hybrid-is-in-its-battery-says-ford-20080827-443i.html
hybrid vehicles  are going to come to market by 2010 and it would do Ford good to join the new generation of autos... Just look at the http://www.fiskerautomotive.com/ Fisker 120 MPH Not bad due out
in the not to distant future.... If the likes of ford and gm want to be alive in the next 10 years they had better
get on board... Ford Could look to the composite  tech that Boing is putting into their new planes...
NOW look into the future and back to the past

The Q-Drive Motor with a new composite 1967 Shelby  body .... Ummm now that would be a Statement....
We'll see
brwtrpilot






 

well i always thought ford and gm would have to be good investments, that is until i started living overseas in various countries and no matter where i go I only see toyota, nissan and mitsubishi.... and none of the countries i been to were japan..... unless ford or gm move their facilities entirely to mexico or somewhere else cheap, or come up with something special, then why bother, they can't compete, japanesse cars have for a while now been much better, longer lasting, and cheaper, i still drive a nissan from 1969 and has 600,000 miles on it, my ford escort died at 100,000 and cost much more. of course i doubt companies like ford and gm will ever go away but seriously, they have some catching up to do..... as I said, i never realised just how bad till i moved overseas

umm ford is profitable in europe.....Ford Fiesta is one of the highest selling cars in some countries

Ford explorer---got it a while back for cheap--had the worst reliability ratings---180,000 miles without a problem....and i mean no problems. I dont think the difference is really that big...once ford retunes things it will be in competition again.