General Motors hits $40 and it is just begging me to short it

I cannot see any reason for this rise in GM.

GM has risen sharply and mowed down many a short for a while now (I think that lots of stocks have done that).

The truth is that the company isn't profitable and isn't likely to be profitable any time soon, regardless of whether they have offloaded their health care liability on the unions (for no small amount - $35 billion in cash, I believe).

Their products are terrible.  They can't make a car or a van or a truck or anything.

I want to short.  Would someone please give me the reasons why I shouldn't?

 

 

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to financial literacy and bank transparency. Since co-founding this website in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

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Comments

  • Steve

    October 12, 2007

    I have been an engineer for GM for 26 years, and never have I've seen the prospects so bright. Here are some of my reasons:
    1) New products launched, like the Monte Carlo and Cadilac CTS, Chevy Silverado. Have you driven one??
    2)The new TEMP employees we received the last(2)years in our manufacturing plants are motivated and hard working.
    3) Outside the U.S. our market share is growing. Europe just hit our best market share in the last 15 years.
    4) The weaker dollar will multiply the profits overseas.
    5) Our overseas market share will over take our U.S market share next year.
    6) Not to mention our legacy costs in both hourly and salary have been shed to competitive levels.

    I not going to say GM will have an easy ride, but its finally positioned itself to compete against the likes of Toyota and Honda.

    Good luck shorting .... I'll be working 24-7 to make the best product out there on the market.

  • Thomas Bivens

    October 12, 2007

    Steve,

    Thanks for this comment. Very enlightening. If all GM workers are like you then maybe there will be a turnaround.

    Tom

  • kurt

    October 12, 2007

    I have a friend who just started at GM last year - he has a PhD in engineering and he just quit. He said the environment is still too old-school with people who are not progressive enough to keep up with the changing times. Perhaps this is why the styling in Detroit cars lags the rest of the world. Michigan (and probably GM) has had a talent drain for many years now and I think the ramifications of that are long-term. Until the economy in the rest of the country tanks like Michigan people will keep leaving.

    The unions finally gave big concessions because they realized that they have handicapped the industry to the brink of bankruptcy, but make no mistake, they are not out of the picture. The worst is yet to come for GM.

  • Frank

    October 13, 2007

    I travel all over the world. World share market for Japanese cars and now Korean is increasing dramatically. China and India are also introducing new cars at incredibly low cost/price. I believe that in a very short term, all manufacturing for machinery will be moved to Asia.USA and Europe are very progressive country and can not support a mass production for an industry like automobile at a competitive cost with Asia. Example is the tragic end of the great automobile industry in England.

  • Art34

    October 13, 2007

    But what about Germany? They are able to stay competitive and manufacture in country.

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