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Your Choice: Buy Something From McDonald's Dollar Menu Or Buy A Share Of GM Stock

General Motors stock took a very depressing dive again Friday as the awful news surrounding the company cut another 41cents off the price per share sending this stock down to a mere $1.45 a share. It is almost unbelievable and very depressing to think that this megacorporation's stock value is now approaching McDonald's Dollar Menu pricing.

For many years, I lamented that major sellers in the marketplace such as GM and Campbell's Soup dominated their markets and were near monopoly powers. It seemed like a daunting to impossible task for competitors to ever challenge these industry giants. I even assumed that the nature of American capitalism meant that some entities were to become dominant sellers, and that marketplace competition is nearly eliminated once these giants control the marketplace. I began to wonder whether "free enterprise" was an empty concept that meant nothing because the trend in the marketplace was for the big to become bigger, and for the small to collapse.gm_general_motors_logo.jpg

At one time there were many American automobile brands. However, by the 1950's those brand names began to rapidly shrink once Kaiser and Willys left the car making business, and Hudson and Nash formed little American Motors Corporation, and Studebaker and Packard hung on for dear life as two weak brands with serious money troubles, almost like two drunks trying to hold each other up. Within time all of these brands were gone and it was just down to the "Big Three".

During the 1960's it would have been absolutely unthinkable that GM would ever be out of the car business. The big full size Chevrolet models sold 800,000 units one year in the 1960's. This was a number more than twice the number of total cars sold by little American Motors for example. And with such a dominant market share advantage, it seemed impossible to ever accept that GM might be gone as a car maker.

But a number of interesting changes too place over the years. Gas prices sometimes hit huge highs hurting larger American car sales. Import cars chipped into the U.S. market and sometimes exceeded the build quality and reliability of some U.S. brands. Younger buyers lost the sense of brand loyalty of their parents and grandparents. And American automobiles seemed to lose their historic identity and styling cues as well, and often not really looked like the Chevrolet, Buick, Pontiac or other cars that they really were. And automobile executive took huge salary increases for their work, while often making a series of bad business decisions. Some will even blame the autoworkers and their unions as well for seeking great wages, benefits and retirement programs. However, it was the car company management that agreed to these union contract terms. And all seemed well until American car sales plunged and the recession really ruined the industry recently.

Right now, it looks highly likely that GM could be forced into declaring bankruptcy very soon. And whether that means that GM will continue to produce cars in the future or not is a very good question. They will no doubt try to. However, it may not be possible to hold the dealer network together and have enough assets to pay suppliers, etc. GM might now me a lost cause. And Chrysler is another brand that might have great difficulty surviving the worst American economic downturn since the Great Depression as well. Only the careful management over at Ford seems to be keeping this company afloat as the only likely survivor of this huge economic downturn.

It is indeed frightening when the once high priced GM stock is now approaching the price of items on the McDonald's Dollar Menu. American Motors stock was delisted before it hit such absurd lows as this when it was selling in the $3 area. A $1.45 stock price is a very serious bad omen.


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Comments (6)

Lee Ward:

I'd choose a quarter pounder with cheese over GM stock. It is a sad day for America that an entire industry was allowed to waste away like this... but it is to be expected under Republican rule.

Anytime oil is the highest priority you'll find the government encouraging gas-guzzling SUVs. It would have been easy for the Bush administration to encourage increased production of hybrids and electric alternatives, but Republicans are only interested in higher profits for Exxon et.al.

"It would have been easy for the Bush administration to encourage increased production of hybrids and electric alternatives..."

Why? When gasoline was $1.25 a gallon, who would want to drive a glorified go cart, when large, smooth-riding and comfortable vehicles were plentiful?

Congress could have legislated until it turned blue in the face, but I think people would have simply stopped buying cars if the government made the Big 3 produce cars that people didn't want. Then who would have been forced to buy those cars? The government? If that happened on a large scale, we would have turned the car industry into yet another fully socialized market sector like agriculture. During the 1930's the government paid farmers to grow wheat, then paid farmers to till their fields under, or bought grain and let it sit and rot in storehouses, in order to keep commodity prices artificially high.

"Republicans are only interested in higher profits for Exxon et.al"

Well thank God somebody is making a profit. If the government decides to punish industries or sectors of the economy that are successful in the midst of a recession, how exactly does that help recovery?

Lee Ward:

"Why? When gasoline was $1.25 a gallon, who would want to drive a glorified go cart, when large, smooth-riding and comfortable vehicles were plentiful?

Because oil is a finite resource, and we import so much oil and send those dollars outside the country. Being as dependent as we are on foreign oil is downright stupid. And of course global warming is a myth according to the Republican Exxon-kissers, so why be concerned about 12 mpg vehicles when we could be driving 30 mpg vehicles, right?

Lick, lick...

"Congress could have legislated until it turned blue in the face, but I think people would have simply stopped buying cars if the government made the Big 3 produce cars that people didn't want."

Congress did turn blue in 2006, and the CAFE standards were increased. No big deal - no pain - lots of gain. It was easy, just not on the the Republican agenda - lick, lick.

Exxon made record profits while the economy tanked -- $4 a gallon gasoline contributed to the recession -- and you "thank God" for that? Millions unemployed and retirees wiped out? It's ok as long as crporat eprofits are protected...

Game, set, match. Thanks for the assist, Republican Laprarie.

Chad:

The problems with "the big three" can be laid squarely at the feet of the unions, and bad management. If GM, Ford, and Chrysler didn't have to pay at least twice as much as Nissan and Toyota for an hours labor, they might be able to break even. Building good cars with decent economy values would be nice, as GM is just starting to get it. Dodge and Chrysler are building some pretty decent cars (finally, see aries K, and reliant k) and might be able to pull it out. I understand that worker's rights need to be protected, but 95% of the reasons unions were invented are now regulated by federal employment laws.

Lee Ward:

Interesting figure -- 95% -- I did some googling and couldn't find a source that supports your claim, Chad. Do you have one, or is this something you heard on Rush Limbaugh's radio show - or on Fox News.

And what is the remaining 5%. Hours, working conditions, and wages - right? Seem like pretty important points.

Oh - and that figure about Toyota workers making half what GM workers -- that's bullshit - according to the UAW.

Q: Are UAW members really paid $73 an hour?

A: No. Wages for UAW members at Chrysler, Ford and GM range from about $14 an hour for newly hired workers to $28 an hour for assemblers to $33 for skilled trades workers.

Typical hourly wages at Honda, Nissan and Toyota are only slightly lower. Due to the effect of profit-sharing formulas, however, there have been some recent years in which a typical Toyota worker has taken home a larger annual paycheck than a typical GM worker.

The $73 an hour figure is outdated and inaccurate. It includes not only the costs of health care, pensions, and other compensation for current workers, but also the costs of the pensions and health care benefits of retired employees spread out over the active workers. Active workers never receive any of this compensation in any form, so it is not accurate to describe it as part of their "earnings."

Or do you have a source that supports your "twice as much" claim? Feel free to include that as well.

Doubting Thomas:

"Active workers never receive any of this compensation in any form, so it is not accurate to describe it as part of their "earnings."

Perhaps not, but isn't that still a cost which must be added to the price of each auto made? The money's got to come from somewhere - and maybe you've got a link otherwise, but it makes sense to attach it to personnel/pension costs.


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Publisher: Kevin Aylward

Editors: Lee Ward, Larkin, Paul S Hooson, and Steve Crickmore

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