GM: A look into the abyss

Today was a bad day at stock exchanges all around the world and it was potentially the worst day in stock market history for General Motors.

Already down about 80% from its trading range around USD 40 per share 12 months ago, the share price of the Detroit car maker today was shredded another 30% to around USD 4.7. The report from JD Powers published today that is expecting an “outright collapse” for the global auto industry in 2009 certainly did not help. And for that the writing was already on the wall when GM stopped production in some of its factories in Europe earlier this week (Today even BMW has announces a short production stop with one of his factories in the next weeks).

Let’s put these figures into perspective:

The last time GM was traded around USD 4.7 a share was in the 1950s when an average car sold for USD 3,000, houses went for about USD 16,000 and petrol cost 20 cents a gallon. GM’s market capitalization at the end of normal trading hours today was around USD 2.8 billion, about 15% of its annual revenues or about an estimated sales value of 2 months of its car production.

Let’s not forget we are talking about a global enterprise here with more than 260 thousand employees and more than 9 Million cars produced per year.

How crazy the stock market valuation of car makers around the world has become can be seen with the share prices of the German car maker VW on a steep rise during the last days. VW is now worth more than BMW, Daimler, Renault, Peugeot, Fiat, GM, Ford, Mitsubishi and Hyundai together. In other words VW today is worth almost 50 times what GM is traded for at the stock exchange.

So why is that all important to the average American?

Well, the economic impact of the U.S. car industry on the country’s economy is substantial and reaches across almost all states. U.S. based car makers spend more than USD 12 billion on research and development per year, provide healthcare benefits to 2 million Americans and pay the pension of almost 800,000 retirees and their spouses. GM alone directly employs more than 260 thousand people and another 5 million jobs within dealerships and suppliers are linked to it.

From the GM web site:
“…General Motors Corp. (NYSE: GM), the world’s largest automaker, has been the annual global industry sales leader for 77 years. Founded in 1908, GM today employs about 266,000 people around the world. With global headquarters in Detroit, GM manufactures its cars and trucks in 35 countries. In 2007, nearly 9.37 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM’s OnStar subsidiary is the industry leader in vehicle safety, security and information services…”

More information:
GM web site
Market data for GM at MarketWatch