Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
A blue chip turns a penny stock - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jun 1, 2009

    A blue chip turns a penny stock

    "What's good for GM is good for America," said Charlie Wilson, the former Chairman of the US auto major General Motors (GM), once among the largest employers in the world and now battling for survival. From becoming the first American corporation to pay taxes of over US$ 1 bn 53 years back, to filing for bankruptcy today, GM has indeed covered a rugged path to self created doom.

    Whether what Wilson said was exactly what he meant or not, it certainly stood for the way most GM top executives have been thinking for the past five decades. During this period, the world's greatest automobile company has frittered away its reputation and market share with an unending string of flawed management decisions and arrogance towards customers and the government that would be hard to make up.

    And to compound the problem, the company invested too often foolishly as well as agreed to outrageous labour agreements and compensation packages for top executives.
    Source: Yahoo Finance
    Given these misadventures, its product superiority disappeared steadily over the years, and so began its decline that continues still today. The company's market cap, which at its peak in 2000 was nearly US$ 50 bn, now stands at less than US$ 500 m!

    How it is possible that such an industrial giant could not find a competent management team in 50 years and turn things around is a question that will continue to worry management gurus and strategic thinkers for years to come.

    And if what was good for GM was also good for America, the question that might legitimately be raised is that if bankruptcy is the cure for GM, would bankruptcy also be in order for the US. Remember, like GM, even the US has seen declining manufacturing supremacy over the past many decades, and whacky splurging by governments and consumers. Borrowing to invest may still make sense, but borrowing to consume is what the Americans have been used to for so many years now. Isn't that the fast track to doom...bankruptcy in the case of GM and possibly for America as well?

    Well, whatever may happen after the company files for bankruptcy today, we hope that the end of an old GM lays the ground for the birth of a new one, for anything else would lead to a cascading impact on the US economy given that the mass layoffs at GM will considerably add to the unemployment burden that the country is already facing.

    As for the bankruptcy's impact on India, there are though some reasons to cheer. As reported in The Economic Times, GM India's officials believe that the company's global restructuring could throw up substantial opportunities for Indian component companies shopping for cheap overseas assets. Furthermore, there are hopes that the company will now get a 'good' management at helm that will lead to better times for the employees and customers in the future. We also hope so!



    Equitymaster requests your view! Post a comment on "A blue chip turns a penny stock". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)