Avoid This Auto Stock: It’s Dug Itself Yet Another Hole To Fall Into

Todays top stocks to buyJust when we thought that things were on the mend for one of Detroit’s Big 3, it now has another ugly PR crisis on its hands…

After years of less than stellar results in the NBA, the Los Angeles Clippers were thought to have a real shot at going deep into the playoffs this basketball season.

They sold out every regular season home game this year, and had formed a rock solid core of all-star caliber players, including Blake Griffin, Chris Paul, and new addition JJ Redick.

The team went on to win their Pacific Division, ranking 3rd overall in the Western Conference and look poised to make a deep run into the playoffs.

But alas, an ownership scandal and inconsistent play plagued the team.

They managed to squeak past the Warriors, but could not beat the Oklahoma City Thunder in the second round, losing game 7.

Some say had it not been for the off-court distractions, the Clippers would’ve had a really good chance of making it to the finals.

In a similar fashion, top car stock General Motors (NYSE:GM) had all the makings of a company ready to explode after hitting rock bottom a few years back.

Upon emerging from Chapter 11 in 2009 when it was bailed out by the US government, GM issued one of the most successful IPOs in history in 2010 and subsequently returned to profitability later that year.

Following a slump in its share price when it fell below $20 in July 2012, GM’s stock made a dramatic turnaround — more than doubling to $41.00 by the end of December 2013.

But just as investors were growing more optimistic of GM’s future, the manufacturer became embroiled in a deadly safety scandal.

GM was instructed to recall 2.6 million vehicles that were sold since the mid-2000s. It was confirmed that a known ignition defect was linked to at least 13 deaths across the country and in Canada.

What’s worse was that GM knew about it, and acknowledged that it had failed to notify the government of this deadly defect.

“Since at least November of 2009, GM has had information linking ignition switch problems with airbags failing to deploy. They had that information and they told no one,” says US Transportation Secretary Anthony Foxx.

As a result, GM’s been slapped with a maximum fine of $35 million.

While $35 million might feel like a slap on the wrist for this $53 billion company, the public relations fallout is only just beginning.

And that’s not all.

Just when GM thought that things couldn’t get any worse, they recently garnered the embarrassing distinction of being the worst automaker by US car industry suppliers.

In industry analyst Planning Perspectives Inc’s (PPI) annual automotive supplier Working Relations Index, GM was ranked last out of the six largest automakers.

PPI ranked them in the following:

  1.  Toyota
  2. Honda
  3. Nissan
  4. Ford
  5. Chrysler-Fiat
  6. GM

Suppliers gave GM low marks on all kinds of key measures, including its overall trustworthiness, its communication skills, and its protection of intellectual property.

The suppliers also said that GM was the automaker least likely to allow them to raise prices to recoup unexpected material cost increases.

Although such a survey doesn’t appear to be too impactful on the overall bottom line for the companies, PPI says supplier perceptions of auto makers are critical because they can determine which car makers see the suppliers’ newest technologies first, get their best pricing, and work with their best engineers.

Furthermore, PPI suggests that the US auto industry could be entering an era in supplier relations that doesn’t bode well for the U.S. Big 3.

A whopping 55% of the suppliers surveyed characterized their relations with the automaker as “poor to very poor,” up from 48% last year.

If word of mouth is supposedly the best form of marketing for any business… GM clearly isn’t doing itself any favors.

At the end of the day, the new GM is still very much the old GM.

Let the bleeding continue…

Yours in profits,
Todays top stocks to buy
John Holt
for Top Stock Millionaire
Follow me on Google+, Facebook, and Twitter

Similar Posts: