Dear Mr. Berko:

Right at the top of the market in early 2000, I bought 100 shares of General Motors at $92. Today it’s $42.65. What’s wrong with the company? Do you think it will ever return to my purchase price or even $65 or $75 or $80 per share? Would you recommend that I buy another 100 shares at this much lower price?

The annual reports are very positive, and so are the quarterly reports I get. GM’s cars are good-looking and ride well. Sales are very good and GM will make $7.50 a share this year and the stock trades at a very low six times earnings. The current $2 dividend yields 4.7 percent and sales incentives are really bringing in new-car sales.

G.S., Syracuse, N.Y.

Dear G.S.:

I strongly doubt that General Motors Corp. (GM-$42.65) stock will get sufficient speed or momentum to return to your $92 purchase price in this decade. I think you and thousands of others who bought GM between January and June of 2000, when the price ran up to $95, bought shares in an overpriced, exceedingly mature, arthritic, cyclical, debt-heavy Rust Belt company that hasn’t raised its dividend in seven years and whose net profit margins and return on shareholders’ equity continue to fall.

Certainly, with rising interest rates and a consumer who is over his collarbone in debt and very nearly tapped out, it’s unlikely that 2005 new-car sales will approximate those of 2004 and 2003. Yes, I know that GM (which is also Saab, Isuzu, Opel, Vuxhall, diesel locomotives, trucks of all kinds, defense stuff, auto and truck financing, consumer mortgages, electronics, new parts, auto and life insurance, residential mortgages, auto service contracts, ad nauseam) does this stuff all over the free world. Perhaps that’s one of GM’s big problems.

Enormous fixed costs, impossibly aggressive unions, plus federal and state regulations that would warm a bureaucrat’s heart and unpredictable product demand are just a few of the mind-numbing problems that plague General Motors in every one of the 20-plus countries where it does business. GM’s domestic cost structure (which is better than Chrysler and Ford) trails those of Honda, Toyota and other foreign competitors. And there’s nothing on the horizon that leads one to believe it will improve.

Though GM’s incentive-driven promotions have increased current demand, they also put a brake on revenue growth for 2005 and 2006. High-volume sales (Ford’s and Chrysler’s too) have lowered used-car prices and tanked new-car values.

Finally, the company’s daunting obligations to its retirees scare the bejabbers out of smart investors. There’s serious talk that GM might not be able to honor its commitment to those union workers who believed they were blessed with a sacrosanct, sweetheart retirement package.

I like GM’s cars (I even own one) but I’d ask to be committed if I were ever crazy enough to buy the stock. This company is so huge that it is unwieldy, impossibly cumbersome, terribly bureaucratic, clumsy and clunky in its execution, unresponsive to consumer demand and almost impervious to change and improvement. The company has so many disparate parts, all moving in different directions, that cogent, concise, clear and effective management is almost impossible. General Motors is a veritable Tower of Babel.

Frankly, I think investors would be better off if GM were to pull an American Telephone & Telegraph and divide itself into six or seven different companies, each with its own product, executive suite, board of directors and listings on the New York Stock Exchange. Perhaps GM could have a Chevrolet division, a Pontiac/Buick/Saturn division, a truck division, a finance division, a Cadillac division and an industrial equipment division. Each division should be autonomous, independently competitive and responsible for its own future. This might be the only way to maximize shareholders’ value and possibly the only way you will ever see your purchase price again. Without a divestiture of this nature, General Motors is just a bungling, bumbling, awkward giant of a company that will continue to lumber along, taking the path of least resistance.

Because I believe that you will never get your money, I suggest you sell the stock and place the proceeds in greener pastures.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.