CNN Money: "Time to Kick GM Out of the Dow"
CNN Money's editor at large, Paul LaMonica, thinks GM should be kicked out of the Dow Jones Industrial Average. He argues that GM's poor performance, their plans to ditch HUMMER and the current 0% financing offer are all indicators that GM is in trouble. (If I were a cynic, I'd ask where he was when GM dumped Oldsmobile and had their "anyone with a pulse" financing deals.) What does LaMonica suggest to replace GM in the Dow? It "can still have an automotive component… GM is continuing to lose share to Japanese rivals Toyota (TM) and Honda (HMC). While the editors at the [Wall Street] Journal have maintained that the DJIA is only for American companies, I think that's a view whose time has passed." He concludes GM's just one of several companies "that are just not as relevant as they used to be, such as Sears, Eastman Kodak and U.S. Steel… GM's time has come." Ok — enough is enough. What took you (and everyone else) so long to figure this out?
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The Dow Jones Industrial Average is most certainly not restricted to "industrial" companies anymore -- just ask Disney, Verizon, Micrsoft, Bank of America, JPMorgan Chase, Citigroup, Home Depot, Wal Mart, etc. However, stocks are not removed from indexes merely because their prices tank or because their prospects are dim. For good or for ill (namely, ill) GM squarely belongs in the DJIA for now. You can't wish away a company that makes $180 billion revenue just because the stock sucks. GM is an American company with more sales than all but maybe 4 or 5 corporations in the United States and it has 6 to 7 TIMES the revenues of a couple Dow components. It's ludicrous to try to ignore that. And no, you cannot put a foreign company in the Dow Jones index -- the whole POINT of the index is to represent the stock performance of leading U.S. companies. I'll look at the Nikkei if I want to see how Japanese companies are doing.
I second MattVA and others. GM is a great barometer of what ails a big fraction of the US and Canadian Manufacturing industry, and it should be part of the equation. When the bell finally tolls, and the books are written, it will be i suspect a bit like Gibbons Decline and Fall of the Roman Empire. Greed, Union waste, Short term thinking, etc. it is wall streets fault too. The emphasis on short term profits, completely ignores the long term - like lets prepare for a high priced fuel future. lets think it all through, etc. No The execs, the union, the Wall street research, everything in this country was and is completely at odds with long term planning. The Russians at least had a 5 year plan. Does GM and the UAW /CAW as a team have one? not likely. Its just common sense what Toyota etc have done. Our problem is that common sense was distorted by all sorts a wierd (by normal standards) rules. The USA is not going to be what it was. After the war, everybody elses manufacturing was destroyed, and bad habits like this could foment. Now its the other way around, our core livelihood is being destroyed. and we are the architect of it. When UAW/CAW members go to walmart to buy all those foreign made products, they are part of the problem too.
Animals, governments, empires, and corporations are born, live for awhile, and then die. If the Dow didn't remove dying businesses would it's average eventually register 0? Actually the U.S. is doing quite well business wise according to "The Post American World" by Zakaria, we just have to learn to share the world with others.
Goldman Sachs has been accused of many things, but being stupid is not one of them. GS is thought to be the smartest money on Wall Street.