Louis Woodhill of Forbes.com:
President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.
Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion.
Right now, the government’s GM stock is worth about 39% less than it was on November 17, 2010, when the company went public at $33.00/share. However, during the intervening time, the Dow Jones Industrial Average has risen by almost 20%, so GM shares have lost 49% of their value relative to the Dow.
It’s doubtful that the Obama administration would attempt to sell off the government’s massive position in GM while the stock price is falling. It would be too embarrassing politically. Accordingly, if GM shares continue to decline, it is likely that Obama would ride the stock down to zero.
GM is unlikely to hit the wall before the election, but, given current trends, the company could easily do so again before the end of a second Obama term.
Woodhill uses the Chevrolet Malibu to show how bad things are for GM:
Because the D-Segment is the highest volume single vehicle class in the U.S., and the U.S. is GM’s home market, it is difficult to imagine how GM could survive long term unless it can profitably develop, manufacture, and market a vehicle that can hold its own in the D-Segment. This is true not only because of the revenue potential of the D-Segment, but also because of what an also-ran Malibu would say about GM’s ability to execute at this time in its history.
GM is in the process of introducing a totally redesigned 2013 Chevy Malibu. It will compete in the D-Segment with, among others, the following: the Ford Fusion (totally redesigned for 2013); the Honda Accord (totally redesigned for 2013); the Hyundai Sonata (totally redesigned for 2011); the Nissan Altima (totally redesigned for 2013); the Toyota Camry (refreshed for 2013); and the Volkswagen Passat (totally redesigned for 2012).
Uh-oh. At this point, it appears that the 2013 Malibu is not only inferior to the 2012 Volkswagen Passat, it’s not even as good as the car it replaces, the 2012 Chevy Malibu.
If you follow the automobile enthusiast press, you know that, under the leadership of then product czar Bob Lutz, GM went all out to develop a competitive D-Segment car for the 2008 model year. The result was the 2008 Chevy Malibu, which managed to get itself named by Car and Driver magazine as one of the “10 Best Cars” for 2008.
However, when tested head to head against six other D-Segment sedans in the March 2008 issue of Car and Driver, the 2008 Malibu came in third, behind the Honda Accord and the Nissan Altima. Adjusted to the points scale that Car and Driver uses today, the 2008 Malibu scored 187 points, 6% lower than the winning 2008 Honda Accord’s 198 points. …
In their March 2012 issue, Car and Driver published another D-Segment comparison test, pitting the 2013 Chevy Malibu Eco against five competing vehicles. This time, the Malibu came in dead last.
Not only was the 2013 Malibu (183 points) crushed by the winning 2012 Volkswagen Passat (211 points), it was soundly beaten by the 2012 Honda Accord (198 points), a 5-model-year-old design due for replacement this fall. Worst of all, the 2013 Malibu scored (and placed) lower than the 2008 Malibu would have in the same test.
Uh-oh.
Digging deeper, the picture just gets worse. Despite its mild hybrid powertrain, which is intended to provide superior fuel economy (at the cost of a higher purchase price and reduced trunk space), the 2013 Malibu Eco delivered the same 26 MPG in Car and Driver’s comparison test as the Passat, the Accord, and the Toyota Camry. …
Chevrolet is not a premium brand, like Mercedes or BMW. Since the 1920s, Chevy’s essential market positioning has been “more car for your money”. Unfortunately, the 2012 Volkswagen Passat is more car for the money than is the 2013 Malibu. There will not be anything that GM will be able to do about this for the next five years other than to reduce the price of the Malibu by offering “incentives”. This will eat into the company’s profitability, which is already weak. …
“The game isn’t over until it’s over”, but if President Obama wins reelection, he should probably start giving some serious thought to how he is going to justify bailing out GM, and its unionized UAW workforce, yet again. And, during the current campaign, Obama might want to be a little more modest about what he actually achieved by bailing out GM the first time.
Some comments on Woodhill’s piece believe his analysis is excessively pessimistic because, they claim, GM has $40 billion in cash on hand. If that’s the case, then GM should buy back the $10.1 billion in government stock and remove itself from the 2012 presidential campaign.
Another comment brings up another GM product Woodhill didn’t even mention:
Nissan and VW put their best engineers into working on their most popular cars. GM has every bit as good, if not better, engineers than do these companies. Unfortunately, they were put into developing the Volt. They did a very nice job, however this car should never have been built. They pushed the envelope with this car, however the technology to make a cost efficient electric car is still a good ways off. What they ended up with was a beautiful little car that gets great gas mileage, but is far too expensive, even with the subsidy, for value conscious driver’s looking for good gas mileage. It lacks the power performance oriented driver’s are looking for and it’s too small for families. There is no rational reason for anyone to buy it. Why would any company devote their best and brightest to develop a vehicle with no market? GM still makes great trucks – if they lose this, they’re screwed.
Having seen the Volt, I disagree with the commenter’s view of the car, but I suspect his view of the process is right on.
Others claim that GM’s future isn’t going to be based on one car, even though that car is in the highest-volume sales class on the U.S. They point to GM’s profitable pickups and SUVs. Those are vehicles that will be going away with the Obama-mandated 54.5-mpg standard. There is no pickup truck, full-size or smaller, that will ever get 54.5 mpg. And GM is incapable of selling enough small cars to offset trucks’ worse fuel economy.
Profit is the biggest issue not just for GM, but for all of the Big Three. Given the economy and the increasing costs of vehicles, plus the fact that vehicles last longer, GM, Ford and Chrysler need to be focused on selling cars profitably, not just making money through volume. GM has failed to sell small cars profitably for decades, and the Volt is a money-loser. If GM’s more profitable vehicles go away, guess what happens to GM.
Steve Prestegard.com: The Presteblog 
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