The news of the bankruptcy of Chrysler or the financial difficulties of GM (NYSE: GM) or Ford (NYSE: F) never came to me as a surprise in any shape or form. Companies in the conventional automotive industry or even worse in the airlines industry have failed to show a consistent pattern of profitability over long periods of time.
So let’s take a look at General Motor’s most recent publicly available annual financial statements, it is astonishing to notice that the last time their balance sheet was carrying a positive number in the retained earnings section was back in 2006, fame thing for Ford. At the end of 2008, the accumulated deficit had reached 70 billion dollars... and 16 billion for Ford. That’s steep value destruction!
Ford seems to be in a better condition than its competitors, but looking at the respective market share of each of those companies; but it is pretty obvious that GM (NYSE: GM) and Ford (NYSE: F) are in a much better shape than the third counterpart of Detroit’s Big Three. Considering those facts, value investors must have fled Chrysler a long time ago. I know for sure I wouldn’t have invested in those companies, no matter the buzz in the financial community.
Full disclosure: the author has no position in GM, F or Chrysler