Buy High; Sell Low

GM's rules for corporate success. Bloomberg (10.05.05):

"General Motors Corp., hobbled by three straight quarters of losses, agreed to sell its stake in the Japanese maker of Subaru cars and trucks for about half the amount it paid five years ago." GM Sells Stake in Fuji Heavy to Toyota and Investors

And guess who's buying it? "Toyota Motor Corp., GM's biggest competitor, will buy 8.7 percent of Fuji Heavy Industries Ltd. for about $315 million cash." "GM will sell the remainder of its 20 percent stake in Fuji Heavy, worth about $422 million at today's closing share price, back to Fuji or on the stock market. GM's Fuji holding had been valued at $1.5 billion." Oh and guess what? "A stake in Fuji Heavy will give Toyota access to Fuji's technology for batteries that can be used in hybrid gasoline- electric cars. Toyota aims to boost production of hybrids to 1 million by the early part of next decade. It sold 134,700 hybrid vehicles last year." Making Toyota even more competitive in the hybrid market. Those damned unions. Guess they sure fooled GM by accepting that health care package GM offered them. Those crafty socialist bastards. The Economist (in an article which doesn't evince much pro-union bias, believe it or not) (10.20.05):

"GM has been negotiating with its main union for some time to bring down the costs of health-care provision to blue-collar workers. Delphi's fate may have prompted the unions to agree the deal. GM says that $1,500 of the price of every new vehicle it sells goes towards health care for past and present employees. The firm’s commitments are shockingly vast. It pays the health insurance of some 1m retirees and their dependants as well as its current 200,000 American workers and their families." GM and Ford in need of a big overhaul

And before we look at another example of how astute the GM's executive strategic decision-making has been, let's take a little stroll down memory lane! The Age (Melbourne) (03.14.00):

"General Motors Corporation and Fiat SpA have formed a strategic industrial alliance which creates a partnership of leaders in the world's largest automotive markets of Europe and the US." GM, Fiat join forces

Fast forward five years. Washington Post (02.13.05):

"General Motors Corp. agreed Sunday to pay Fiat SpA $2 billion to resolve a contract dispute, allowing the U.S. carmaker to divest its stake in Fiat's troubled auto unit and revise the companies' business relationship. The dispute centered on an option included in the 2000 agreement, which gave Fiat the right to demand GM buy the rest of the car unit." GM, Fiat Agree to End Partnership

"In a conference call Sunday, GM's chairman and chief executive, Rick Wagoner, called the deal 'a fair and equitable agreement' that 'gives each of us more freedom to act in today's competitive environment.'" "He also said the deal lets GM 'avoid a likely protracted and acrimonious legal solution to the case.'" Too bad. We like it when lawyers make money. Such a beautiful sound! Sounds like GM got itself into a bit of a pickle. Reuters (02.12.05):

"General Motors Corp. has been trying to slam the brakes on a deal that could see Fiat SpA's money-losing car arm Fiat Auto, rammed down its throat. GM set the deal in motion itself, however. And analysts say it raises questions not only about a troubled industrial alliance, but about decision-making and strategy at the world's largest automaker." GM's Fiat deal comes back to haunt it

"In March 2000, when GM bought 20 percent of Italy's Fiat Auto in exchange for 6 percent of GM's shares, it did something different than in other tie-ups, however. It also agreed to a 'put option' under which Fiat could eventually sell its stake in Fiat Auto to GM." "'That's just dumb, and that's the best word you can use for it,' Gerry Meyers, a University of Michigan business professor, told Reuters." "'GM is over a barrel. It was a bad decision and all they can do is pay their way out of it,' said Graeme Maxton of Autopolis, an auto industry consultant in Britain." Yeah and if it hadn't been for the damned union and their damned health care.