General Motors has just issued its first public income statement since emerging from the ashes of bankruptcy four months ago. The results for the "New GM"? Well, mixed -- see details below:
- GM Co. reported a stomach-wrenching third-quarter earnings loss of $1.15 billion. Yet -- it also saw its first monthly sales gain since January 2008. Yet -- the bulk of that gain was due to outside forces rather than internal strength; such as: government-backed warranties of GM vehicles and the "cash for clunkers" rebates. Yet -- GM Co. says it's ready to start paying back its $6.7 billion loan from the U.S. government six years ahead of schedule. Yet -- the money to pay that loan back is NOT coming from company profits, but rather the $16 billion it received from Uncle Sam as get-out-of-bankruptcy startup cash.
All of which is to say, "Old GM" -- the former icon of American manufacturing -- Is No More. In the words of a November 16 New York Times: General Motors Corp., once a beacon of economic growth, is now a "carcass" waiting to decompose. Once a Big-Thirty (Dow)-leader, the 100-year old-conglomerate is now listed on the OTC Bulletin Board, its share price 99% below its 2000 peak. With a new name, a new CEO, and a new work ethic, "New" GM still has a long way to go before reclaiming such glory.
Which brings us to the next point: Was GM Corp.'s fate foreseeable?
According to the mainstream experts, the answer is a resounding NO! As late as November 2008, a GM Corp. spokesperson released this statement to the public:
"Bankruptcy is not an option that GM is considering. It would not benefit our customers, our dealers, or our employees." (Reuters)
Five months later, when the carmaker did in fact announce its plans to file for Chapter 11, one popular news source expressed total disbelief and wrote:
"Seriously, who ever expected to see the day when General Motors -- General Motors! -- would totter on the verge of bankruptcy? Now that's a shock of near-existential proportion." (CNET news)
We respectfully disagree.
Fact is -- Elliott Wave International’s (EWI) team of expert analysts foresaw the reversal in General Motors’ fate long before the wheels of misfortune began to turn. Here, the following archive of EWI’s analysis steps in:
· July 2004 Elliott Wave Financial Forecast: "A breakdown of car companies bottom lines makes the depth of the economy's dependence on the now-stumbling financial sector glaringly apparent. In 2003, GM got 87.5% of its profits from GMAC [its debt financing arm] NOT Car sales…As the credit bubble deflates, financial stocks will mimic the performance of technology stocks from the mania's 2000 peak."
· March 2005 Elliott Wave Financial Forecast: "The lowering of prices by up to $2000 on some of GM's most popular SUV's in the middle of a model year is considered 'highly unusual.' It is still the early stage of a trend that will surely lead to the failure of at least one of the two remaining US car companies."
AND: Since peaking in April 2000 at 94.63, GM’s stock has been “making a series of lower lows and lower highs, the very definition of a downtrend.”
· April 2005 Elliott Wave Financial Forecast: “GM remains a tremendously important financial player in the U.S. and global debt markets. After General Electric, GM is the biggest issuer of corporate debt, with $136 Billion outstanding. It is also a bellwether debtor in the Lehman Credit Index, the benchmark corporate bond index used by many fund managers. As one manager notes: A GM downgrade to junk status would be 'horrific' because most institutions are not allowed to hold junk bonds and would be forced to sell. Lehman will change the way it calculates its benchmark index in an effort to forestall a potential market-decimating event... and to stave off a market shattering event. It will not succeed."
Later that month, GM bonds were downgraded to junk.
In the end, our analysts make a powerful distinction: It's the difference between watching the major, history-moving events unfold through a "rear-view mirror," and thus, becoming historians -- VERSUS --
Seeing those events unfold through the "windshield," and so, becoming forecasters.