Detroit blues: GM execs dump stock, Ford's stock issue unloved

All news seems to be bad news for the American car industry. Ford (F) announces a new stock issue, and the market drops. General Motors (GM) executives dump their GM stocks, the market drops. Perhaps they would all do better to take a staycation.

Imagine you're a key exec of a venerable international corporation desperately trying to convince the government, press and public that you can weather the perfect economic storm with the help of government dough. What, then, do you expect the world to think when you unceremoniously dump all of your stock in the corporation? Ask General Motors, after it was revealed that six top executives divested themselves of their GM shares in the past few days.

Since these sales yielded very little at current market prices, I would have thought that GM's CIO, the North America President, the European ops head, recently deposed Vice Chairman Bob Lutz and others might have held onto their shares as an expression of confidence, or, failing that, contrition. The news that they dumped their shares has sent the pathetic stock down over 20 percent to $1.14, about the price of a pack of gum.

Of course, this is a fortune compared to the two cents per share the company estimates its stock will be worth if it issues shares to satisfy its creditors. In bankruptcy, the stocks will be worth less than the price of equally-sized squares of Charmin. At least those of you who insisted on paper stock certificates can burn them for heat.

Ford announced yesterday that it intends to issue 300 million shares of common stock to fatten its war chest and fund union health care obligations. It is obviously hoping to find a receptive marketplace in light of its better-than-expected first quarter earnings report and the calamities befalling its Detroit competitors.

At first blush, however, the market has expressed concern about the approximately 13 percent dilution of share value. The stock is down almost 14 percent in early trading. The drop in price may also show that the market has fully digested last week's news of Ford's plans to retask some U.S. operations to produce more fuel-efficient and electric vehicles.

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