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November 6, 2008
Dump General Motors From the Dow
By Elizabeth MacDonald
Fox Business - EMac's Stock Watch


Acting as an anvil on the neck of the Dow Jones Industrial Average is General Motors ($5.03, -0.53, -9.53%), one of 30 corporate leaders thought to represent the U.S. economy.

But as GM is under fire for mismanaging its business, for not switching gears fast enough as gas prices rose to sell what car buyers wanted, fuel-efficient cars, as GM dithered dumping its unjustifiable gas hogs such as the Hummer brand, the stock has plunged to levels around the price of a gallon of gasoline or a gallon of milk, levels not seen since the ‘50s.

GM’s rapidly shriveling market capitalization at $3.2 bn is the tiniest in the Dow, with next in line Alcoa (AA: 10.95, -0.85, -7.20%). The aluminum manufacturer is valued at nearly three times as much, $9.4 bn.

Ford has a bigger market value than GM, at $4.7 bn, but is not a Dow component. GM’s status as a once iconic American brand is eroding as fast as that of Whirlpool, Eastman Kodak, Corning, and Sears.

The stock market doesn’t need a gauge of the auto industry, as it’s not a news flash that car makers are getting a $25 bn loan from US taxpayers to retool their plants to make more fuel-efficient cars, a move they should have made decades ago.

The Dow is a price-weighted average of 30 blue-chip stocks that are supposed to represent the largest and most widely held public companies in the country. The index of 30 has been the bellwether stock market index to watch since Oct. 1, 1928.

It’s been a long time since the Dow has been thought to be singularly “industrial,” a quaint anachronism as many of the Dow’s 30 components have little to do with manufacturing or heavy industry. The editors at the Wall Street Journal get to decide which stocks make up the Dow.

It is time to dump GM from the Dow.

SOURCE: http://emac.blogs.foxbusiness.com/2008/11/06/dump-general-motors-from-the-dow/
 

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How are they supposed to rise and meet the demands on high fuel when it's back down to $2.00 again? It's not like they can just turn things on and off. I will admit the did miss the boat by not offering better and more options, but if they diverted everything towards low-profit high mpg cars, what would happen now when gas is back down and people would stop buying them?

This is assuming the economy slumpage wasn't as bad, which no one predicted.
 

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Discussion Starter · #7 · (Edited)
it’s not a news flash that car makers are getting a $25 bn loan from US taxpayers to retool their plants to make more fuel-efficient cars, a move they should have made decades ago.
That's a bit of a falsehood to say the least.

I've owned cars made by GM in the 1980's and early 1990's that were the product of such retooling. GM had them in all brands, even Buick and lest we forget the Cimmaron, Cadillac.

They included FWD 4-cylinder powered coupes, hatches, sedans and station wagons.

I'm still a fan of those often ridiculed vehicles, because they showed GM remaking itself and trying to beat the Japanese at their own game -- even if the effort fell short at the time. I'm still impressed with the cavernous cargo space my old Pontiac 6000 Wagon had.

To pretend that the 80's never happened to GM is ignorant.

If you want to blame GM, blame them for helping pump up the SUV and glorified Farm Truck craze with endless marketing and advertisements, and then claiming that they were mere passive victims of Americans' tastes.

Blame GM for dumping 4-cyl. FWD hatches and wagons as alternatives to gas-sucking trucks and SUVs. Blame them for abandoning those cars and avoiding marketing them like the plague.

But don't say GM never retooled its plants. They did. They just did another 180 in the late 90's in the hunt for short term fat SUV/Truck profits and the almighty Quarterly Earnings.

And they told us "Americans don't want" vehicles that they spent nary a dime on advertising (Malibu MAXX), more than willing to let those vehicle types lag in sales because they didn't make enough profit.

Now the Toyota-engineered Vibe is a source of pride for monthly sales results, check out GM's last Press Release for October sales. The same sort of hatchback pseudo-wagon 4-cylinder type of vehicle that "no American wants" is up by close to the percentage that the rest of GM sales are down.

Wouldn't it be nice if the Vibe was instead a GM-engineered, current generation version of my old Pontiac 6000 wagon?
 

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Wow! GM stock is tanking today - at near noon it has lost 88 cents to $4.68!

GM is a basket case - what is a shame is that the bravado of the Yutz and the Hair Piece masked how truly bad the company was - though I was able to wade through the screed and have pointed it out regularly! I've been vindicated - the truth hurts and GM can't get enough pain pills....
 

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Isn't the point of DJIA to represent the American economy? It seems to me GM represents it quite well, in good times and bad.
No... it's to represent the 30 largest and most prominent companies in the US. GM does not qualify anymore.
 

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That's a bit of a falsehood to say the least.

I've owned cars made by GM in the 1980's and early 1990's that were the product of such retooling. GM had them in all brands, even Buick and lest we forget the Cimmaron, Cadillac.

They included FWD 4-cylinder powered coupes, hatches, sedans and station wagons.

I'm still a fan of those often ridiculed vehicles, because they showed GM remaking itself and trying to beat the Japanese at their own game -- even if the effort fell short at the time. I'm still impressed with the cavernous cargo space my old Pontiac 6000 Wagon had.

To pretend that the 80's never happened to GM is ignorant.

If you want to blame GM, blame them for helping pump up the SUV and glorified Farm Truck craze with endless marketing and advertisements, and then claiming that they were mere passive victims of Americans' tastes.

Blame GM for dumping 4-cyl. FWD hatches and wagons as alternatives to gas-sucking trucks and SUVs. Blame them for abandoning those cars and avoiding marketing them like the plague.

But don't say GM never retooled its plants. They did. They just did another 180 in the late 90's in the hunt for short term fat SUV/Truck profits and the almighty Quarterly Earnings.

And they told us "Americans don't want" vehicles that they spent nary a dime on advertising (Malibu MAXX), more than willing to let those vehicle types lag in sales because they didn't make enough profit.

Now the Toyota-engineered Vibe is a source of pride for monthly sales results, check out GM's last Press Release for October sales. The same sort of hatchback pseudo-wagon 4-cylinder type of vehicle that "no American wants" is up by close to the percentage that the rest of GM sales are down.

Wouldn't it be nice if the Vibe was instead a GM-engineered, current generation version of my old Pontiac 6000 wagon?
Amen!
 

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Isn't the point of DJIA to represent the American economy? It seems to me GM represents it quite well, in good times and bad.
http://www.djindexes.com/mdsidx/index.cfm?event=showAvgOverview&averageSelection=I

The 30 stocks now in the Dow Jones Industrial Average are all major factors in their industries, and their stocks are widely held by individuals and institutional investors. The DJIA accounts for approximately 23.8% of the total U.S. market, as measured by the Dow Jones Wilshire 5000 Index, as of December 13,2005.

Using such large, frequently traded stocks provides an important feature of the Industrial Average: timeliness. At any moment during the trading day, the Dow Jones Industrial Average is based on very recent transactions. This isn't always true with indexes that contain less-frequently traded stocks.

The Dow Jones Industrial Average is the most-quoted market indicator in newspapers, on TV and on the Internet. Because of its longevity, it became the first to be quoted by other publications. This practice became habit when Wall Street earned at least a mention in the general news each day, and habit became tradition when the post-World War II bull market galvanized the nation's attention. The Industrial Average became the indicator to cite if you were citing only one. Besides longevity, two other factors play a role in its widespread popularity: It is understandable to most people, and it reliably indicates the market's basic trend.
 

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Whats the point of DJIA if they are going to remove any company not doing good lately?
There is a difference between "not doing good" and the catastrophic systemic failure inside GM. Right now, Microsoft "isn't doing good", yet we haven't seen the 90% drop in stock price, have we?
 

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Seems to me GM is still large and one of the largest employers in the U.S.

Just because they are in dire straights right now doesn't mean they should be dropped.

Every company has ups and downs.
 

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How are they supposed to rise and meet the demands on high fuel when it's back down to $2.00 again? It's not like they can just turn things on and off. I will admit the did miss the boat by not offering better and more options, but if they diverted everything towards low-profit high mpg cars, what would happen now when gas is back down and people would stop buying them?

This is assuming the economy slumpage wasn't as bad, which no one predicted.
It's simple: you maintain a well-diversified product line. Just like you invest in a well-balanced retirement portfolio, thereby affording you to catch upswings in sectors and mitigate downturns in other sectors, GM's product line would have great cars, trucks, minivans, luxury cars... Detroit seems to have a schizophrenic approach to marketing that has it mostly chasing trends. Again, I'd like to see them have a strong line-up of cars and trucks, day in and day out, just like their profitable counterparts around the world.
 

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If they drop GM they might as well change the name of the DJIA since it will have little to do with industrials.
Dropping them would accurately reflect America's attitude toward manufacturing, though...
 

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Probably irrelevent, slightly less bad headlines for GM.
 

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Here's a better idea. Dump the entire DJIA.

It's a useless measurement using only 30 companies. Use the S&P500 or the entire market as a better measurement. The DJIA was limited to 30 companies because it was made BEFORE computers and adding up the numbers for a large collection of companies took a long time.

The DJIA is a useless relic (like fractional stock prices were just a few years ago) that Wall Street can't get rid of for some silly reason.

It's time to dump or at a minimum ignore ignore the DJIA.

mark
 

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Blowhard...here lets see if we can make a bad situation even worse!
Dumbass.
I agree. It is amazing to me to see how many people on this board seem to be hoping GM will fail. I, like many thousands of others, want GM to survive and prosper again and I believe it will. GM isn't looking for a "bailout" or government giveaways.....all they are asking for is loan guarantees so they can get financing, at reasonable rates, to get thru this difficult time in our economy.
 

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Here's a better idea. Dump the entire DJIA.

It's a useless measurement using only 30 companies. Use the S&P500 or the entire market as a better measurement. The DJIA was limited to 30 companies because it was made BEFORE computers and adding up the numbers for a large collection of companies took a long time.

The DJIA is a useless relic (like fractional stock prices were just a few years ago) that Wall Street can't get rid of for some silly reason.

It's time to dump or at a minimum ignore ignore the DJIA.

mark
For most valuation teams, the SP500 is used as the "market rate", so the DJIA is ignored by those who actually matter.
 
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