For GM, a Well-Regarded Honk of Approval

This is probably points to part of Einhorn's thinking: In the long term, after the pension issues are more thoroughly resolved and the Treasury sells its shares on the open market, the stock price will have better flexibility. That said, the Treasury recently resisted a proposal from GM to repurchase about 200 million of the 500 million shares currently held by it. Further, until the company's share price performs well -- perhaps to above $30 from its present mid-$20s level, if higher-ups in the U.S. government are to be believed -- the Treasury will be less than happy to realize a huge loss in selling the shares.

In our view, playing the auto market is a long-term call almost by definition. The short-term catalysts still hang in limbo for Ford and GM, so we think valuation is an important consideration. Both of these stocks are trading at about 6x to 7x forward earnings, and they both have similar price-to-sales ratios. While GM is highly qualified with its debt burdens, we think Einhorn's idea here is interesting -- though perhaps not clearly superior to an investment in, say, Ford.

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