By on July 11, 2008

GM stock, $9/share.  Mastercard stock, $250/share.  Replacing GM in S&P 500 - priceless.The S&P 100 is the most widely watched index of large-cap US stocks. It's a bellwether for the U.S. economy, a vital component of the Index of Leading Indicators. Reuters reports that the index's managers have punted GM, replacing it with Mastercard. "S&P did not in a statement explain why it dropped GM from the S&P 100." The fact that the automaker's share price has recently slid to 50-year lows, and the international automaker's market cap has fallen from $56b in 2000 to around $5.6b (which means GM NA has a negative net worth), might have had something to do with it. Informed speculation about an impending GM bankruptcy certainly came into play. And now all the index funds that buy the basket of S&P 100 stocks will have to sell their GM and buy Mastercard– no matter what the current price. The news should drag GM's stock price even lower. It's only a matter of time– and not much of it– before the DJIA (Dow Jones Industrial Average) will have to take a hard look at GM's inclusion. If/when, GM gets kicked off that listing, raising money to feed the automaker's cash conflagration will get a lot harder. Leaving federal loan guarantees as GM's only recourse to stave-off Chapter 11. All this before July's sales number and GM's first quarter results. Dark days ahead. 

Get the latest TTAC e-Newsletter!

26 Comments on “S&P 100 Drops GM, Dow Jones Next?...”


  • avatar
    KatiePuckrik

    It just doesn’t get any better for GM. Maybe now they’re think that maybe they should have squirrelled some of those SUV profits away for days like these? Maybe GM management didn’t take basic economics at Harvard? Or at the very least read some of Aesop’s fables (i.e. the 2 ants, one saving for winter, the other messing around).

    Whoever “Red Ink” Rick’s successor is, is going to have an almighty job of:

    Instilling faith in GM as a company.
    Engineering new cars that people want.
    Securing new lines of credit and capital.
    Creating a new corporate culture at GM.
    Cull useless management.
    and
    Getting GM back on top.

    I have a funny feeling that not many people will apply for that job when Rick and Bob are sunning themselves in the Caribbean and thousands of rank and file workers are either:

    a: fuming at the failure of GM.
    or
    b: looking for a new job in a poor economic climate.

    Chapter 11 might as well be Chapter 7….

  • avatar
    raast

    Katie,

    That “Instilling faith in GM as a company”, that’s going to be the really tough one.

  • avatar
    Rday

    Events are finally catching up with GM. Walkonwater Wagoner’s exceptionally long string of Baloney is coming to an end. Wallstreet is waking up to the fact finally that GM is going nowhere but down. It is just incredible that he and his accomplices have taken such a great company down, while of course enriching themselves at every opportunity. I hope there eventually will be a ‘tribunal’ that will take back most of this ill begotten booty from these guys. Something surely needs to be done.

  • avatar
    Jordan Tenenbaum

    Sounds like GM needs FDR.

  • avatar
    GS650G

    The forward bilge pumps just failed, might be time to send a final SOS message and get the crew into their survivor gear.

    Hey Rick, help Maxi-Bob with his golden life vest.

  • avatar
    jaje

    Katie – IIRC it was the ant and the grasshopper fable.

    GM is no longer good for America in its present form no matter how much denial and how much its Glass House gang insulate themselves from reality. S&P finally dropped them for good reason as the are dying from within as GM cannot focus on anything and does very little very well. Its leaders are in denial and cover their ass mode so what is needed takes a back burner to saving face of its Executives.

  • avatar

    predicted this three years ago. fortunately, Return to Greatness would still get the job done.

    visit http://www.GeneralWatch.com and read how GM can be put back on it’s feet.

  • avatar
    adam0331

    I’m sure part of my 401k is/was invested in GM stock. Good riddance. Now here’s to hoping that my tax dollars don’t go towards propping up a failed company. Just like the airlines, the auto industry needs a chapter 7 filing or two. Chapter 11 will only prolong the inevitable. Like ripping off a band-aid, lets get it over with now and move on.

  • avatar
    taxman100

    Nice synopsis of how our economy is going – from one of generating wealth, to one of moneylenders who make money based upon the lack of self-discipline or moral character of your customers.

    Based upon the government bail-out of the financial services industry, we are not very good at that either.

    If this is not a telling indicator of where our country is heading, I don’t know what is.

  • avatar
    nudave

    As a taxpayer, I’d prefer contributing to the retraining of an ex-auto employee rather than pissing away money to keep a terminally ill company alive a few moments longer.

  • avatar
    Qwerty

    Nice synopsis of how our economy is going – from one of generating wealth, to one of moneylenders who make money based upon the lack of self-discipline or moral character of your customers.

    That is a nice take on the situation. I prefer to think of it as everyone plotting and scheming to make their money by screwing everyone else.

    When the bailout comes, a condition needs to be that half the management gets the boot. The culture of failure needs to change. Replacing the board, CEO, and a few executives won’t change a damn thing.

  • avatar
    netrun

    GM has done nothing but drive their business in the ground for the past 20-30 years. The fact that even now, as they are in their final death throes GM is denying reality – is absurd to the point of ridiculous.

    The louder the denial, the shriller the cry of victory, the closer they are to the end. By the sounds of it, they may not make the ides of March 2009. At least that way they won’t have to go through the embarrassment of debuting the Vega .. er, Volt.

  • avatar
    eh_political

    GM needs to file sooner rather than later. If it is looking for any kind of bailout, it is now competing with Fannie Mae and Freddie Mac. New York Times estimates that a bailout of those two institutions, or an absolute guarantee of the loans they provide would double the US debt.

  • avatar
    Bunter1

    Meanwhile the Board of Bystanders cranks up Tammy W. on their I-Pods and belts out another chorus of (what else) “Stand By Your Man”.

    Bunter

  • avatar
    menno

    From http://www.freebuck.com

    Thought my fellow best & brightest might be interested.

    “Private sector policy of insolvency: look no further than GM (General motors) for years now they have made cars and LOST an average of 2000 dollars upon them, and actually they only made money on the financing of them. They maintain jobs banks where employees are given FULL pay to stay home and not work. GM in one form or another has 390 BILLION dollars of bonds outstanding. THEY ARE TECHNICALLY INSOLVENT.”

  • avatar
    netrun

    @ menno

    GM has been insolvent for a long, long time, technical or no. But because they are a cash generating machine like all automakers, everyone who looked at them figured they could build their way out of the hole.

    Too bad that GM had every opportunity to do that and threw it away like everything else.

    “GM never misses an opportunity to miss an opportunity.”

  • avatar
    50merc

    Buickman, I followed the link and read a bunch of the articles on generalwatch.com. All twenty steps of “the plan” seem very deserving of consideration at least. Apparently GM honchos don’t agree, and of course we all know their own strategy is working so brilliantly it just needs a little more time.

    The piece “Buick Blues” is great, and “As Share Goes Bye” is simply inspired.

  • avatar
    50merc

    Some of the comments in the article have to do with the S&P 500, in which GM remains. The S&P 100 is a subset of the 500, and includes companies with exchange-traded options. My guess is that GM got dropped from the 100 because it is a troubled company with an uncertain future.

    Dropping GM from the Dow 30 Industrials (not all of which are “industrial”) would be noteworthy–it’s been included since 1925–but not historically unique. GE is the only company in the Dow 30 that was in it at the beginning.

    I doubt being dropped from the S&P 100, or from the Dow 30, would make it harder for GM to get funds. GM is in no position to sell new stock or bonds to the public. (Can you imagine what sort of risk disclosures would be required for the prospectus? More horrifying than anything Poe imagined.) But there would be a psychological impact on employees, creditors and customers that GM can ill afford. I’d call it another nail in the coffin except it’s distressing to speak of this fabled and giant century-old American enterprise coming to an end.

  • avatar
    ZoomZoom

    Well, this is no surprise. Being dropped from the major stock indexes is just a normal part of dying for a corporation.

    Okay, this is a minor nit, but I differ with the statement that the S&P 100 is the “most watched” index. Anytime I hear reports on television or radio, they always mention the Dow 30 and maybe the Nasdaq 100 or the Nasdaq Composite (edit: or the S&P 500). Never the S&P 100.

    Even so, it’s telling. I mean…Mastercard? Why not Mattel? Now THAT would be funny…yes…in a sad-clown sort of way…

  • avatar
    blowfish

    it is now competing with Fannie Mae and Freddie Mac. New York Times estimates that a bailout of those two institutions, or an absolute guarantee of the loans they provide would double the US debt.

    Fannie Mae, Freddie Mac & GM made Bush’s Bermuda triangle, and Iraq is hs Naam.

    Iraq no phobia is starting to have the signs & symptoms consistent with Bush’s Pyrrhic Victory.

  • avatar
    blowfish

    The folks at Mastercard are all enjoying “the feelng must be priceless” as they had won the also ran award to unseat GM on S & P.
    Everything else can be put on Mastercard.

  • avatar
    folkdancer

    Thank you buickman. Had a great time reading your web site.

  • avatar

    glad you liked it, wish GM execs would see the light.

  • avatar
    dealmaker

    menno Says:
    July 11th, 2008 at 12:32 pm

    “They maintain jobs banks where employees are given FULL pay to stay home and not work.”

    =============================================

    I’ve read this and seen this several times before. My question is ..How many? How many employees are or were in the jobs bank and how long were they there? How much of this companies losses can be attributed to the Jobs bank program?

    I’m not advocating this but just curious what the actual costs are. It’s easy to point to one area and make scapegoats out of it but if the reality is it’s a small link to a large chain then it should be put into proper perspective.

  • avatar
    dealmaker

    Buickman Says:
    July 11th, 2008 at 10:42 pm

    Buickman, Thanks for the link to your site and thanks for the insightful thoughts. Good luck to you in your quest to change GM. In light of what’s happening to that company it’s obvious they need to make top level changes.

  • avatar

    I don’t blame the workers at all. They know enough to ask for some of the $$ that GM is offering every time their contract comes up. It’s the same as yelling at my dog for being smart enough to sit near my daughter’s chair at meal time. The dog, and the workers, know where the best morsels are.

    Nope, I blame the management. Too big a company, too many fiefdoms, too many actuarial cooks spoiling a broth that was rancid in the late 80’s.

    I do actually hope they emerge. I look forward to owning a Cadillac some day, when I take up golf and finally buy a car with an automatic transmission.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • sgeffe: Especially the one where the poor father-to-be injures himself “south of the border” while attempting the...
  • Art Vandelay: Pile of S H I T
  • eng_alvarado90: I stand corrected on that one.
  • Lou_BC: I wanted a smaller truck so I can go more places in the backcountry. In town I get around just fine in my 20...
  • Dave M.: Congrats on the ‘vert, Mikey. Once the sun goes down here in TX a convertible is hella fun.

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Jo Borras
  • Mark Baruth
  • Ronnie Schreiber