Sunday Funnies: Feds could buy GM & Ford
In a high stakes game of chicken this past week, the Senate GOP and UAW leadership could not agree on setting a date certain for cutting members wages and the hard-line senators would not accept anything less. (See Auto 'support fund': Senate & UAW clash.)
One of the ironies of the proposed, and not passed, Federal bailout, or support fund, as I have begun to call it, depending on your point of view, is that the proposed $14 billion is more than the value Wall Street currently places on the two companies.
General Motors (NYSE: GM) closed Friday at $3.94, down $0.18 or 4.37%, with a capitalization of $2.4 billion. Ford (NYSE: F) closed at $3.04, up $0.14 or4.83%, with a capitalization of $7.04 billion. The combined value therefore is $9.44 billion; yes folks, another Washington bargain!
While world markets sank on the news of the failed talks, U.S. investors yawned and were unimpressed with activity in foreign markets -- all three of the major indices ended up for the day. Perhaps that's because temporarily propping up the two companies by spending more than they're worth made no sense to anyone outside Washington D.C. or Detroit.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares of GM or Ford.
