Filed under: Government/Legal, GM
Cheap shares lead GM to suspend employee stock purchases
You know what they say: "Buy low and sell high." General Motors stock closed at $9.45 on September 30, which is 78% below its 52-week high of $43.20. That little piece of news, coupled with GM's enormous financial losses and declining sales, makes stock in the 100-year-old company sound like a bad bet, but employees don't agree. The low price of GM shares has lead workers to snatch up all available employee purchasable stock, which is capped by volume in the company's two 401(k) programs. As a result, GM employees can no longer buy stock in the automaker through the company. Because of the share freeze, GM executives are also not allowed to buy, sell or trade any of the company's stock during this time due to the Sarbanes Oxley act. To obtain more employee purchasable shares for its 401(k) program, GM has to register more shares with the SEC, which is expected to happen on November 9.
[Source: Detroit Free Press, Photo by jzakariya | CC2.0]
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Reader Comments (Page 1 of 2)
Ayatollah Rodriguez 5:07PM (10/04/2008)
General Motors stock closed at $9.45 on September 30, which is 78% below its 52-week high of $43.20. -----------------------------Rick Wagoner for President.
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bob 5:08PM (10/04/2008)
hahah that's awesome. also, you want "has led workers" not "has lead workers".
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Josh 6:22PM (10/04/2008)
I smiled when you stated that the executives cannot buy or sell shares either. It makes me happy to learn that they are treated the same as any other employee at seemingly rare times
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tankd0g 6:32PM (10/04/2008)
Damn, there goes the dream of a couple hundred employees banding together and firing Lutz.
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Ayatollah Rodriguez 8:21PM (10/04/2008)
Lutz is a total and complete nutcase, but he has some value, look at some of his designs, Wagoner of the other hand is the worst executive in USA easily, plus he make 16+ Million a year and has been running this company with this record for YEARS.
Another 3-4 years of Wagoner and GM will not be here.
tankd0g 8:37PM (10/04/2008)
I'd wager that Lutz is probably the guy that walks the halls getting on everyone's nerves while Wagner rarely comes down from his ivory tower to bother with the peasants, but of course the entire top floor of the company needs to go.
Nightcrawler 8:21PM (10/04/2008)
I guess you could say the fact that the employees are optimistic enough about GM's future that they are buying all the company stock possible is a good sign. If the people on the inside are optimistic, there may be good reason for it.
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Ayatollah Rodriguez 8:24PM (10/04/2008)
Well first of all Rank and file are pretty clueless when it comes to the value of the company.
As far as executives, well they may but the stock worth 50K, but that gives them more votes to vote for their 250,000 salaries.
tankd0g 8:44PM (10/04/2008)
Unless of course they all just planed to sell it after the stock get's a temporary bump from the $25 bilion government handout.
G-Meister 4:29PM (10/05/2008)
Its a simple matter of self preservation. As an employee, you have two choices- leave or stick it out. Leaving is not a good option for most because there are not that many extra jobs here in MI right now. You could leave MI, but only if you can dump your house- may cannot. So the best option is to stick it out. By buying all the stock they can, they improve GM's ability to get credit and increase their own stakes in a recovery that GM HAS TO make.
Samurai Jack 8:57PM (10/04/2008)
I'm confused. Not surprising I suppose as I'm not at all a GM fan and don't follow them too closely. But many of the people slagging Wagoner are the same people who harp on how great GM's new products are. I've seen some of you say how wonderful the new Camaro is, how nice the Cruze, Malibu and Cobalt SS are, etc. Seems to me Wagoner must be doing something right.
So which is it? It seems to me you can't have it both ways.
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Brian 8:04AM (10/05/2008)
He is actually doing alot of things right. He expanded the buisness to china and has improved quality over all the new product. If he was doing that bad of a job he would the board of directers and the share holders would have fired him by now. They all have the power to do that. But here is my theory on GM doing bad and I think alot would agree with me. GMs market share is gone! They are only left with their die hard GM fans. In the 1980s GM made some serouisly bad decsions. The product line was terrible. Alot of customers decided from then on would buy IMPORT ONLY and they have. But here is their other problem. That very same generation has also teached their children to never buy an American car. Believe me on this. I see it and I know people like this. This next generation won't buy American because they have always been told not to.
Ayatollah Rodriguez 11:55AM (10/05/2008)
Brian, lets be honest here, nothing Wagoner does will ever make you question him. #1 First of all it was Smith who took GM to China. #2 China and Asia as a whole are tiny compared to North America for GM. #3 I love it how you COMPLETELY forgot to bring up the fact that GM is LOSING money in Asia. Also it does not matter as to the cause of GMs problems, all investors care about is stock price....which is down what 78%? If i failed at a fifth of the rate Wagoner failed at i would have been fired LONG ago. Here are a few facts for you, Wagoner was personally responsible for Aztek, LAMBDAs, G8, ASRA, AURA....all failures from financial stand point. It was Wagoner who said build bigger and bigger SUVs. I am sure you are OK with it because Toyota did the same thing, but as i said i read your comments before, if GM files for bankruptcy you will be here demanding a golden parachute for your boy.
BrianFL 12:50PM (10/05/2008)
@ata...
Lets say you fire Rick. Do you actually think a new CEO will turn the tables on all of GMs problems? Because it won't. GM will still have those past problems that Rick inherrited. I think one of problems you have with Rick is because he jumped on the SUV thing just like everyone else did. Because they sold and thats what the public wanted. The Lambas were in developement for 5 years before they came out. No other automakers saw the future being what we are in now. Oh and I do have a porblem with his salary and never promote a golden parachute for anyone.
Ayatollah Rodriguez 3:33PM (10/05/2008)
@ Brian
Well Brian LAMDAs went on sale in 2006, that means they went into development in 2001. Wagoner became CEO in 2000, please do remember that Wagoner was a CFO prior to becoming a CEO, that is arguably second most important position in the company, so his hand touched product that went on sale way before he even became a CEO.
Also Aztek went on sale in 2001, according to Autonews Wagoner personally pushed for the design of that car, he was the chief supporter of that car. When it went on sale and became a total bust Wagoner had to hire Lutz to completely take over the design side of GM.
Brian, yesterday i read newest issue of Car and Driver, they did reviews of SUVs, out of 6 SUVs, Traverse came in 5th place, a tad above Veracruz. They just hammered Traverse for being so obese and fat. The scariest part is that of all the SUVs on the list (Pilot, CX-9, Flex, Highlander, Veracruz, Traverse) Traverse is the newest one. This will not come as a shock to anyone, Pilot won, just read the review they gave to Traverse, they just bashed it for having elephant skin, cheapish leather, cheap plastic and obscene weight, almost 5000 LBs, compare that to 4401 Lb Highlander. The only positive thing that they said was the size of the SUV, you can put a lot of stuff in the back.
If you'll get your hands on that magazine read the review on Pontiac G6 GXP, see how they bash that little gift from Wagoner. By the way, while you at it read the review on Lexus LX570, it's like they are having a hard on on that SUV. To me anyone who can think clearly should look at Wagoners record (78% loss of stock, billions up on billions lost, market % way down) and conclude that he should have been fire long ago, and he does not deserve 16+ million dollars a year. To me this is not a debatable issue at all, no CEO in this country would survive this, not one. Yes he inherited a bad company, but his decisions are about to finish it completely, example G8, Astra, Sky/Solstice, LAMBDAS are already losers.
I know Wagoner has many supporters in here, but most simply refuse to look at his record.
P B 9:06PM (10/04/2008)
Actually, it's kind of refreshing to think that maybe some of the employees have some faith in GM.
...Or they just want a quick buck.
Either way, good for them!
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whofan 9:20PM (10/04/2008)
GM`s current mess was caused years ago before Wagoner got the top job. Sure there or other facters involved as those that are effecting the other companys. The over all slide GM is on started long ago I think Roger Smith was the most destructive to GM`s future.
Lutz is the best thing to happend to GM in a long time. He is a true car guy. The kind that can get past the bean counters for a better product. The worse thing that happened to Chrysler was loosing Lutz. We all saw what Bob Eaton done.
Lutz and Wagoner have a very big ship to turn around. A ship that been lead off course a long time ago. GM is only here today because of its enormous size and past wealth. If Ford or Chrysler had been run as bad as GM was in the past they would both be history by now.
I agree 100% with Samurai Jack!
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Brian 9:21PM (10/04/2008)
Simple explanation. When you have a 401k, you get matched by your company, and it's in stock. So let's say you had 5% of your salary matched in 401k. Well, your salary remains the same, but the stock price goes down, so more shares can be bought for the same dollar amount. A 4x drop in stock price equals a 4x increase in volume. This isn't employees rushing to buy stock, this is just the way the 401k is run.
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knifetramp 4:08PM (10/05/2008)
GM no longer pays 401K matching in GM common stock. That changed years ago. I think the crush of GM stock purchases are employees trying to load up.
DKB_SATX 10:36PM (10/04/2008)
It is generally not a good idea to buy any company stock for the voluntary part of your 401k, but many companies encourage it (anyone remember Enron?)
You can't do anything about the company match until you're fully vested in the company's contribution to your 401k, but you shouldn't invest ANY of your voluntary 401k in the company's stock... use the employee stock purchase plan (if it exists) and you can generally get a discount on the share price, then that stock is more liquid for you to sell if there's a good opportunity.
Putting your voluntary contribution in the 401k into company stock is putting too many of your eggs into one basket.
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