This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Obama and Akerson Take a Bow as GM Hits Another Milestone

Stocks in this article: F GM

DETROIT ( TheStreet) -- Now for GM (GM - Get Report), it's all about milestones.

After the closing bell Thursday, the automaker will rejoin the S&P 500 as well as the S&P 100 index. The prospect prompted the Treasury to say Wednesday that it will sell 30 million shares, while the United Auto Workers Retiree Medical Benefits Trust will sell 20 million. Being in the S&P 500 is a plus for companies because index funds buy all of the stocks in the index.

GM shares hit a milestone on May 17, closing above the IPO price of $33 for the first time since May 4, 2011. The IPO took place in November 2010. GM shares closed Wednesday at $34.02, down 94 cents. The shares are up 15% this year.

More milestones are in GM's path. Perhaps this year the automaker's debt will restored to investment grade, after being rated as junk since 2005. By early next year, the U.S. Treasury will have sold its remaining shares. And perhaps one day, GM will return to the list of 30 stocks in the Dow Jones Industrial Average. It was kicked out in June 2009 as it entered bankruptcy.

While hurdles remain, can anyone really doubt that GM is well on its way to restoration as a blue chip company or that its bankruptcy was a successful one or that the decisions by presidents Bush and Obama to bail the company out were good ones?

Sometimes it seems that the story of the GM turnaround gets lost in the shuffle.

Yes, Ford (F - Get Report) gets a lot of credit for going it alone. Ford never left the two S&P indexes. Shareholders who stuck with Ford got their biggest payoff back in 2010, when shares rose 334%. The Ford story is one for the ages, about how a superb CEO, Alan Mulally, fixed a broken 100-year-old company. Now Mulally is taking the final step in superior management, grooming the Ford management team of the future.

The Chrysler story is also impressive, although it hasn't quite captured our imaginations like Ford. In 2009, the U.S. government basically gave up on Chrysler, which was widely believed to have finished out the last of its nine lives. The thought was that if only the company could be propped up with a government bailout for a few years, avoiding a shutdown in the midst of the worst recession in 60 years, that would represent success.

In the desperate search for a buyer, no American stepped forward. So Fiat's Sergio Marchionne saved Chrysler.

Unfortunately, the GM story got tied up with our caustic political environment. No doubt a comment about "government motors" will at some point be added at the end of this story, part of a new age of journalism in which we measure success by the numbers of hits and comments.

That particular comment will gloss over Obama's success in saving GM. The federal government provided debtor-in-possession financing when no one else would step up. The United Auto Workers were incentivized to take the health care obligations off the company's hands, meaning GM could finally abandon an untenable position as a health insurance company that also made pickup trucks and occasionally cars. Uniquely in this bankruptcy, workers came ahead of bond speculators.

As for GM today, not only are its shares up but also publicity-averse CEO Dan Akerson is taking a more public role. In a recent interview with The Detroit News, Akerson commented on the removal of the executive showers from the 39th floor of GM's headquarters. "I came to work, not to shower," he said. Give Americans credit: We understand symbolism. In this case, we see Akerson working hard to change a hidebound company.

Questions will always surround GM. It is so easy to compare its performance with Ford's. In May, GM sales rose just 3%, while Ford's rose 14% and industry sales rose 8%. GM said reduced fleet sales account for the gap. For the full year, U.S. light-vehicle sales are up 7.3% and GM sales are up 8.3%. But Chrysler is up 9% and Ford is up 13%.

A big problem for GM sales is the 2013 Malibu, the company's entry in the biggest sector of mid-sized cars. Malibu sales are down 18% this year to about half of the total for the Toyota (TM) Camry and two-thirds of the total for the Ford Fusion. At least GM moved quickly to fix the problem -- not what the old GM would have done. The new 2014 Malibu is already on the way.

Among the bright spots at GM, Cadillac has somehow become the most improved major brand. In China, where it is the biggest automaker, GM reported that May sales rose 9% to set a record for the month. Also, the 2014 Silverado will soon come to market, at exactly the moment when pickup truck sales are booming due to the housing and energy booms.

That's because sometimes, once you get the first pieces of the puzzle right, the others start to fall into place.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs