General Motors is the single greatest company that has ever existed. Every American should go out today and buy a GM car, buy two, and buy GM stock, and a GM baseball cap, and GM teddy bears, and…whoa, settle down, fella. Excuse me, there, got a little caught up in the hype.
GM, the company that once was the very definition of industrial America, and then became one among the many very definitions of corporate America’s failure, is back in the public market today, courtesy of a very big, very well-hyped IPO.
Shares are up in the 7-8% range this morning in its initial trading, but the real trick will be to see where the stock is at the closing bell. And the closing bell after that, and the closing bell after that, and the closing bell after that. But for now, this GM thing is being celebrated as a true success story.
But let’s not kid ourselves. GM still has a lot of hurdles. This isn’t some Google, some hot tech IPO for a company with a seemingly limitless future in front of it. This is a failed car company that is trying to get back into a highly competitive business, both here and overseas. We already know the very probable limits of what GM can achieve in an industry where the major competitors are Ford and Chrysler (I know, it’s Chrysler, still,) as well as Toyota, Nissan and Honda. Still, that’s not the main focus today.
“This was the single best decision of the bailout era,” Barry Ritholtz writes about GM over at The Big Picture. “It seemed to be the only decision that was not made in a panic. It adhered to the rules of capitalism — when your company is insolvent, it goes into reorganization or dissolution. The brutal, Darwinian rules of the market and of bankruptcy applied — not the influence of lobbyists, or special favors from Senators.”
(He ultimately compares the GM treatment to the bank treatment, which he ultimately concludes is a “national embarrassment.” We agree, but that’s a different story.)
The Detroit News is also feeling pretty good, and given the state of affairs in Detroit these days, we should let them enjoy it. “Today is a day to root, root, root for the home team. And if investor enthusiasm matches predictions, it will be a warming development for General Motors,” the paper writes in an editorial.
“GM is now genuinely in a good place,” the editorial writers opine. Shorn of the burdens that dragged it into bankruptcy court, it has “terrific” earnings potential, a strong line-up of cars and trucks, a better production model and a better pricing model. Risks still remain, though. The company’s biggest owners are the US government and the UAW, which leaves the potential for meddling. The company’s also bet a lot on the electric-powered Volt. “If it turns out to be little more than a novelty vehicle, it could sour GM’s prospects.”
Now, let’s be clear. I own two GM cars, pre-bankruptcy days cars, and have no major complaints about them. I also happen to think the Camaro is the best-looking car to come out of Detroit in 40 years, and the Malibu is a well-designed family car.
But this company is just one of the pack now. Can it be profitable? Sure, why not, it just jettisoned all its baggage in bankruptcy court. But the days of GM owning half the world’s market share are long, long past. The days of “What’s Good for General Motors is good for the country” are long past. I wish GM all the success they can muster. Just, please, don’t ever again come begging for a bailout.