Detroit Free Press —
General Motors Corp. has more convincing to do.
A day after its stock price shot up more than 10 percent following the release of quarterly earnings that exceeded estimates, the shares retreated nearly 4 percent.
Friday’s drop simply could have been a matter of investors taking profit on GM’s stock after Thursday’s sharp increase, but it is clear not everyone is certain GM has turned the corner.
At a speech in Washington on Friday morning, Kathleen Ligocki, the chief executive of automotive-parts supplier Tower Automotive Inc., asked a crowd of bankruptcy attorneys and other legal professionals if GM “will be saved by a hail Mary pass.”
None in the crowd of a few hundred people raised a hand.
“How many think GM is beyond prayers already?” she asked the meeting of the American Bankruptcy Institute.
About 30 people raised their hands.
Ligocki, whose own Novi, MI-based company is in bankruptcy protection, said that both GM and Ford Motor Co. will need to shrink to survive.
On the other hand, some Wall Street analysts, who issue buy or sell recommendations on companies’ shares, raised their earnings estimates for GM. GM posted a $323-million loss for the first quarter Thursday, but that was far better than financial analysts had expected, and better than the $1.25 million lost in the first quarter last year. Some analysts now predict that the automaker will make a profit this year.
So some are getting the message GM is trying to deliver.
Beginning at 7:30 a.m. Thursday, GM spun into action to convince skeptical investors and the media that it was on its way to a turnaround.
GM just posted its sixth consecutive quarter of losses, but the automaker had moved ahead the earnings release time by half an hour to tout the signs of strength behind the weak numbers.
Within minutes, GM Chief Executive Rick Wagoner was live on CNBC, departing from his usual practice of letting his chief financial officer handle the media duties for earnings. “I think by any measure — whether it’s cash flow, whether it’s operations in the auto business around the world, revenue is an all-time record — a lot of things to be positive about,” he said in the CNBC interview.
In the previous months, Wagoner had been continually under attack for the poor performance at GM.
A Fortune magazine cover story in February, written by Carol Loomis, concluded that bankruptcy is a near certainty.
Other publications said that the GM board of directors would soon put Wagoner out of a job.
But there Wagoner was on television Thursday, making sure the GM story was told from his perspective.
“We were more aggressive in going to the broadcast side to try to get the message out,” Mike Meyerand, director of broadcast media with GM.
Wagoner considered it another good day in winning over skeptics, said Steve Harris, GM vice president of global communications.
Harris, who came out of semi-retirement on Feb. 1 to lead GM’s public relations team for a second time, said more work has to be done.
As part of a grassroots effort to get its story out, the automaker has asked some influential leaders like former U.S. Labor Secretary Robert Reich, local car dealers and others to give their thoughts about GM and its turnaround effort, Harris said.
“There’s a lot of difficult work ahead, and it will be with us for some time,” Harris said.
Copyright 2006 Detroit Free Press. All Rights Reserved.
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