Jim Cramer Sells GM Stock, Thinks Automaker Should Consider Merger With … – TheStreet.com
DETROIT (TheStreet) — Jim Cramer, co-founder of TheStreet.com and host of CNBC’s Mad Money, sold the General Motors (GM – Get Report) shares held by his Action Alerts Plus portfolio because “they’ve fallen out of favor” and because the automaker’s CEO won’t discuss a merger with Fiat Chrysler Automobiles (FCAU) .
Cramer, whom I interviewed Saturday on my radio show — In the Driver’s Seat (Sirius/XM, Insight 121) — said that GM Chief Executive Mary Barra “has been dealt low cards” due to the market and economic meltdown in China, where GM sells a lot of automobiles.
While GM benefits from “good margins” in the U.S., its vehicle business in Brazil, the rest of South America and in Europe haven’t generated sustainable profits. A week ago, Barra told the show’s listeners that she remained optimistic about China, despite a steep downturn in the country’s stock market and an economic slowdown that has depressed vehicle sales.
As for Cramer, he said he admires the management prowess of Sergio Marchionne, Fiat Chrysler’s chief executive. He argues that GM made a mistake by spurning recent overtures by Fiat to talk about a merger.
“The man’s a visionary,” Cramer said. “If you could get (GM) together with Marchionne that would be terrific, a lot of shareholders would like it. I know Mary (Barra) doesn’t want it. She was dismissive of Marchionne. That’s just arrogance, I don’t have room for in my portfolio for that.”
The GM chief executive might have at least opened the door, he added. “You have to be open-minded. The reason is simple, your stock is awful,” referring to GM shares. “If you work at Netflix you can be close-minded, if you work at Amazon you can be close-minded,” given the high share prices of those stocks.
On Sunday, Reuters reported from Monza, Italy that Marchionne rated a strategic tie-up with GM “a high priority” and that such an arrangement would be the best option for its automotive rival.
I asked Cramer who he thinks would become chief executive of the enterprise if GM and FCA eventually combine forces. “I think (Marchionne) would declare victory,” he said. “He’s sensational. He’d say I’ve created tremendous value for the shareholder and move on.”
Near-term, Cramer says car sales in China are likely to be weak.
“The (Communist) party, which is all consuming, doesn’t want to see people do things to excess,” he said. “The stock market will go down another 30% easily. The stock market and the economy are bad; and right now it’s a really bad place to sell cars.”
On the subject of Tesla (TSLA – Get Report) , Cramer said, “I can get my head around the valuation analysis” of the maker of battery-powered cars. With a capitalization of $31.4 billion, the automaker hasn’t made a profit and sells a only a relatively small number of high-priced vehicles to wealthy customers.
“The stock market is made of companies that are based on financial fundamentals and others that are based on hope and optimism,” he said. Tesla, whose cars have been rated highly by reviewers, has a cult-like following, many of whom buy shares after they buy the cars or see them on the road.
“When I test drove the car, I loved it,” he said. “The head of Audi’s business in North America said he would get into the (battery-powered car) business when he can get them to the masses,” not just the wealthy.
Cramer’s ride? A 2006 Lexus ES: “When I was a hedge-fund manager I had a BMW 750L with a cooler in the back.”