Ford And General Motors Get Wish

After rubbing the genie bottle for weeks, the auto companies will likely get their wish finally granted to them. The market has opened higher after reports that the White House and congressional Democrats have finally reached an agreement in principle on a $15-billion bailout plan. Shares of Ford Motor (F, $3.35, up $0.12) and General Motors (GM, $4.90, up $0.20) are trading slightly higher on the news.

As a result, the Dow is up 75, at the 8,765. The S&P 500 is up 8 to 896 while the Nasdaq is higher by 3 ticks to 1,550.

There is still a chance the bailout doesn’t get approved and all it would take is one grumpy Republican to hold things up. Despite what appears to be a done deal, there is still plenty of skepticism among the ranks in both Congress and on Wall Street that we are just throwing money away.

Ford seems to be the safest but the real problems are that these companies have too many models, too many dealers, too many over-paid workers and a dying business model. As you know, I’ve been in the camp of not doing a bailout and believe it or not, Ford has gone on record as saying they don’t need to take the bailout. The company has said it can restructure with new product plans. So the you have it.

Ford and GM are not getting the pops one would expect but that may change once things are “official”. However, beware of the “buy the rumor, sell the news” setup.

Rick Rouse
Rick@OptionsMentoring.com

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