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GM Probe: David Kass Comments on Declining Shares, Berkshire Stake

Mar 14, 2014
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Hot Topic Alert: March 14, 2014
Attention: Finance reporters and editors 

Kass

Responding to the reported  U.S. attorney's office criminal probe into General Motors’ timing and handling of an ignition switch recall, David Kass, Tyser Teaching Fellow in finance in the University of Maryland's Robert H. Smith School of Business says: 

"Shares of General Motors have declined approximately 10 percent from its March 7 closing price of $37.69 to $34.09 at the close on March 13.  This decline is primarily a result of GM’s announced recall of 1.6 million vehicles with possible faulty ignition switches which have led to numerous accidents and 12 deaths over the past decade. 

"Several U.S. government investigations have been announced that may result in substantial financial penalties and require a large amount of time on the part of GM’s senior management.  This may have a significant negative financial impact on GM in the short run. 

"Berkshire Hathaway owned 40 million shares of GM as of Dec. 31, 2013.  At the March 13 closing price of $34.09, this investment is valued at $1.4 billion. Warren Buffett has stated that his portfolio managers (Todd Combs and/or Ted Weschler) purchased these shares. 

"Since Mr. Combs and Mr. Weschler generally invest for the long term, it is likely that Berkshire will maintain its position in GM as the company navigates its way through a very challenging problem." 

“Warren Buffett, on CNBC on March 14, said CEO Mary Barra has a ‘new chance’ because she just started in the post, but the company needs to tell the truth and act quickly to fix any problems.” 

Kass has held senior positions with the Federal Trade Commission, General Accounting Office, Department of Defense and the Bureau of Economic Analysis. His teaching includes advanced financial management and business finance, and he has launched a Smith School “Warren Buffett” blog. He has appeared on Bloomberg TV, CNBC, PBS Nightly Business Report and others. 

Contact him at 301-405-9683, dkass@rhsmith.umd.edu 
View his bio at www.rhsmith.umd.edu/directory/david-kass
Follow him on Twitter at  twitter.com/DrDavidKass

About the University of Maryland's Robert H. Smith School of Business 

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, MS in business, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.