Browse > Home / Stock Comments / GM And F: I Agree With Cramer On This

GM And F: I Agree With Cramer On This

June 30, 2008 8:18 PM

Without having a very strong understanding of balance sheets and cash flows, I would not touch either GM or F regardless of how cheap they become UNLESS it is a trade. I warned long ago on GM when i said “someone wake me when GM hits $10″.

The problem is oil, debt, and product mix. GM and F may sell small cars, but can they sell them at a profit. The vast majority of the profits, especially with F, came from SUV’s and trucks. I do not believe either can survive if the market stays where it is or the current management stays in place.

Let’s look at how “asleep at the wheel” they are. The short term answer to mileage and gas prices was OBVIOUSLY hybrid vehicles. Toyota leads the way and introduces a broad line. What does GM and F do? They emphazise “flex fuel” vehicles. Here is a newsflash: Corn ethanol is the single dumbest idea in the last 20 years, possibly longer. I have mentioned this many times before. It has an energy coefficient of 1.1 while sugar cane ethanol is 1.3. It makes zero sense on any level.

Point being, if GM and F cannot meet cash flow going forward, do not get lured in by the dividend. I believe they will both have to eliminate it, which begs the question why they haven’t done so already?? If they cannot get to positive cash flow, they both may have to file for bankruptcy at some point. I am not saying that will happen, but it would not surprise me, in the least.

Written by Tom@StockBlade.com · Filed Under Stock Comments 

Comments

Got something to say?