Connect the Dots: Oil Price Soars, GM Stock Plummets

Robert Farago
by Robert Farago
connect the dots oil price soars gm stock plummets

What is it with Friday? Every time I think I've crossed the finish line, the bad news arrives like an uninvited guest. Of course, it's not all about me. It's about an entire industry facing cataclysmic change. Bloomberg reports: "Oil rose $11.33 to an all-time high $139.12 a barrel during trading. Crude oil surged more than $10 a barrel to a record as the dollar weakened after the U.S. unemployment rate grew the most in two decades and Morgan Stanley said prices may reach $150 within a month." As far as GM's concerned, causation don't 't make no never mind. The bottom line: the automaker's stock price ended the day at $16.22, a 33-year low. Automotive News [sub] attempts to put a brave face on it, spinning the loss as part of the larger stock market drop. No matter how you parse it, GM's still a high-cost, cash-burning, truck-heavy manufacturer leaking red ink from every pore of its North American ops, with no escape plan (although its CEO and top brass are well-protected). As this blog from the Wall Street Journal indicates, the Street is waking up to GM's death spiral, and it ain't that pretty at all. "By contrast, GM — which seemed to have covered itself well by selling assets before the buyout markets skidded to a halt last year — could end up with less than $1 billion by 2010, thanks to a combination of cash-draining losses and debt repayments, according to Lehman Brothers Holdings. Even if it tapped bank credit lines, it would by then have less on hand than the $10 billion or so analysts reckon it needs to support its everyday business."

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  • Geotpf Geotpf on Jun 07, 2008

    What impending Yaris five door? You want a Yaris five door, you buy a Scion xD. (The five door exists in Canada because Scion doesn't.)

  • Rudiger Rudiger on Jun 07, 2008
    Geotpf: "You want a Yaris five door, you buy a Scion xD. (The five door exists in Canada because Scion doesn’t.)"Seems like I read somewhere that the 5-door Vitz was coming to the US soon. Even if it's not, considering the current market due to skyrocketing fuel prices, a 5-door Yaris and Scion xD could both exist in the same market and sell quite well.

  • Blowfish Blowfish on Jun 08, 2008

    Good news for the General, the Indians are circling the Humvee this time. But what price are they offering to the General? U think they can buld them in India and sell to US market again? With record oil price how else to sell them here. A fnd's fnd said that they bought Oil future back in last November. It went from $1,00 to $6.00 now. Had the General bought some oil contract at least the landng will be much softer.

  • 97escort 97escort on Jun 08, 2008

    Glad to see RF and I are now on the same page. It is Peak Oil that will finish off GM not bad management. Rick can always come up with some spin to keep the game going a little longer, but Peak Oil is out of his control. It is happening and Rick can not spin it to drag out the clock. North American customers are finally waking up to Peak Oil and the even more devastating Export Land Model and dumping gas guzzling pickups and SUVs. As pointed out in the above posts, GM NA has nothing but mediocre product except for the Toyota-Vibe to sell in the small car segment. The cash flow implications are devastating.