GM Needs to Do This Now to Avoid Bankruptcy

NEW YORK (TheStreet) -- After a relatively quiet period for several weeks, General Motors (GM) has once again rattled investors with more bad news. Let's highlight what's been going on and what we've covered here at TheStreet:

May 15: GM recalls 2.7 million vehicles and takes a $200 million charge. Year-to-date recalls total 11.1 million vehicles. We said, Seriously General Motors -- These Recalls Are a Disgrace

May 16: GM receives the maximum fine from the Department of Transportation for its handling over the ignition switch recall. Fine totals $35 million. 

May 20: GM recalls 2.4 million vehicles and takes an additional $200 million charge. Year-to-date recalls total 13.6 million vehicles. We said, Latest Recalls add to GM's Woes.

May 21: GM recalls an additional 218,000 vehicles.

Oy vey. 

From the beginning, I have been saying it looks like GM's stock is headed toward the $30 to $32 range. It closed as low as $31.93, before rebounding back to around $35. After settling down for a few weeks, the stock has started to crack and looks as if it could be headed lower once again. On Thursday morning, it was trading at $33.61, up 15 cents.

Year-to-date charges have eclipsed $2.4 billion and we're not even halfway through 2014 yet. The company's reputation is taking a beating in the investing community, and the more I talk to everyday people, the more I realize that so is the automaker's public perception.

Although sales have yet to feel the pinch -- April sales rose 6.9%, it may be only a matter of time before U.S. consumers collectively shake their heads in disappointment and open their wallets to Ford (F), Chrysler, Toyota Motors (TM) and others. 

Why shouldn't they? 

After it filed for bankruptcy in 2009, the automaker's image has remained fragile in the eye of the U.S. consumer. It was dubbed "Government Motors" after receiving a roughly $50 billion bailout from the U.S. government. 

CEO Mary Barra needs to make a stand. She needs to tell the public why they should still be walking into a dealer with a Chevrolet, Cadillac, Buick or GMC logo on the building. 

Every newspaper, Internet headline and news station is pointing out the company's blunders each day in the form of additional recalls and fines over its handling of the fatal ignition-switch problem. 

What if General Motors came out with a full 60-second television ad, with solely Barra on TV. Forget all of the Our trucks can do this and these cars get this many miles per gallon. 

Because that's not what's swaying U.S. consumers when this type of news hits. Ford's trucks do the same thing, and its cars get the same miles per gallon, arguably speaking. 

Instead, put Barra on TV, and have her apologize to customers about all of the issues GM is having. It's not her fault -- she walked into the situation in January -- but that doesn't mean consumers will give the company a pass. 

She needs to apologize on behalf of her company and explain why General Motors is still a brand to be bought and trusted, and detail why the recalls are good for the company long term. Highlight the fact that contrary to current belief, GM does care about safety and that's why there have been so many recalls. 

Once customers leave, they're hard to get back. And that's the last thing GM needs. It can't afford to lose sales. An apology ad is cheaper than lost customers. 

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This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

At the time of publication, Kenwell had a long position in Ford. 

-- Written by Bret Kenwell in Petoskey, Mich.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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