Let the Market be the judge and grade GM’s latest Actions

GM announced it would cut 30,000 jobs. The Market is the best judge to determine if GM’s the latest measures will save them from bankruptcy. The market gave GM a low grade (a warning that they may flunk out). Although its stock traded higher in the beginning of the day, it closed 2% down from the pre-job-cut announcement level. Also the credit derivative market, the cost of buying protection against GM’s default ended with little change. (GM would have hoped that it would have gone down) Most importantly, the cost of buying protection against default by General Motors Acceptance Corp, their profitable financing unit, rose yesterday. You can deduce what this implies.

GM needs to make better and more attractive cars which is the underlying issue of why their market share in the US (let’s not say the world) has gone down from 43% to 26% since 1982. You make better cars by using the more efficient methods of assembly and letting trained executives run the company, not unions. You make more attractive cars by embracing innovation and creativity. If that is too hard, then just hire German engineers or the folks at Apple.