No doubt about it; this has been a tremendous week for General Motors. Everybody is going crazy over the Chevy Volt, the sort-of-electric car that has already won top honors as the car of the year from Motor Trend and Automobile Magazines.
It’s won those awards, I should add, even though it isn’t in the showrooms yet. General Motors is also making money again -- two billion in the third quarter, four billion dollars so far for the year.
And tomorrow, in the greatest anticipated sale since the Oklahoma land rush of 1889, the once-bankrupt General is expected to take in billions when it once again offers stock to the general public. That will be good for all of us.
The more stock General Motors sells, the more it will be able to repay the U.S. Treasury, which invested almost fifty billion to save General Motors when it was on the point of death less than two years ago. Beyond doubt, one question has been answered: The auto bailout worked, and was worth it.
Now, the public response to what Wall Street calls an IPO, or initial public offering of GM stock has been so strong and so positive that the expected price keeps going up and up.
Demand seems so strong that General Motors has decided to offer even more shares to the public when trading opens tomorrow. If things go as well as expected, the taxpayers could be twelve billion richer by the end of the day, and “Government Motors” will no longer exist. At least, Washington’s share of GM will have fallen from more than sixty percent of the company to only about a third.
But there’s a ghost whispering in my ear, the ghost of Jerry Flint, the dean of auto writers, who died in August. “The worst thing that could happen to GM after this mess is some big early success,“ he told me a couple years ago.
He feared that could revive GM’s old unjustified arrogance. I was reminded of that today when I read that Cadillac is thinking about introducing a subcompact car tentatively called the ULC -- for Urban Luxury Compact. There is a picture of the prototype in today’s papers; it looks, if you know your entomology, like a stink bug. This may just be the stupidest idea in modern automotive history.
Cadillac buyers want a look that says size and elegance. They do not think less is more and they do not vote for the Green Party.
GM should know better. Cadillac tried this before in the early ‘80s with a compact Caddy called the Cimarron. It flopped, big time.
All this should remind us that the reborn General Motors is still very much a work in progress. It’s management is new and largely untested. The company has shed a lot of debt, thanks to the bankruptcy process, but still has underfunded pension obligations. The Volt is still really an unknown quantity.
That’s not to say that you shouldn’t buy stock in the new GM. Just remember, people lost their life’s savings last year because they held on to stock in the old GM. Wall Street is, after all, just like any other street. You need to look both ways, and be careful.