GM announcement today starts its death march The GM stock jumped up 9% today on the announcement to buy back shares and pump up the dividend.
To analysts, the GM announcement says "we are going to turtle and milk our customers as hard as we can for as long as we can" .
After the initial euphoria, I expect the street will put GM on ingore as the company marches towards extinction
Some fund managers will participate in GM for the outsized cash flow the shares will produce. Liquidity is really important to funds to cover day to day operations, cover their management fees, and to fund redemptions. GM will be sticking around for awhile as they will be selling ICE vehicles in the US for 5-10 more years and then have ten more years to milk customers for parts and service.
I expect that most fund managers will ignore GM and move on to more attractive investments as part of a "total return" philosophy. Fund managers look to the future and the news for GM is going to get worse and worse as the rate of transition to EV escalates.
Why are things going to get worse for GM?
The message that I gof from the GM announcement is that they are going to maximize returns for as long as they can. That is good news for the short term but will come at a huge cost in the future. The best way to maximize returns is to slash CAPEX to the bone. The problem with slashing CAPEX is that growth stops. I suspect GM has seen the writing on the wall and Mary Barra is happy to milk the company for another decade at $28 million per year.
I believe the GM announcement today says the company is giving up. VW made the same announcement last week. Both companie have put their investment chips into partnering with Chinese EV companies for the Chinese market. Both companies have kissed Europe and North America goodbye.
I hope Shawn Fain enjoys his 15 minutes of fame for the union deal with the Big 3 because in a few years I expect he will be blamed for destroying the UAW.