Dear Mr. Berko:

I own 1,000 shares of General Motors, which I bought at $33 when it came public after emerging from bankruptcy. I bought the shares because a close friend of mine who has been with GM for 24 years and is an important executive told me the stock would run to a premium and, within nine months, pay a good dividend. I am still waiting for my dividend and would appreciate your thoughts on when the dividend will begin again. We depend on our dividend income from our investments to pay our bills. Please advise me on what you think we should do. 

L.S., Troy, Mich.

Dear L.S.: 

Too many Americans have terribly short memories. To bail out this Detroit automaker, Congress gave General Motors Co. (GM-$35.60) $49.5 billion of taxpayers’ money in 2009, and so far, only $32.5 billion has been recovered. GM still owes us $17 billion, and you and I are stuck with 189 million shares of GM stock at $35.60 a share as collateral. GM stock would have to trade at nearly $90 a share to return the remaining $17 billion we are owed. And a $90 share price is not likely to happen until the cows jump over the moon or cats learn to bark. So paying new GM shareholders a dividend before paying off the American taxpayer is likely to cause some very nasty resentment, as well as long-lasting negative publicity. I suspect that even GM’s new, happy-camper board members, who receive a minimum base pay of $225,000 plus perks and bennies, are mindful of this.

Meanwhile, I’m glad you have a profit in your 1,000 GM share purchase at the $33 initial public offering in November 2010. Now you have a $35,600 asset that doesn’t pay a dividend and has little chance for any meaningful appreciation, so I recommend you sell your shares. However, I must tell you that my opinion is not shared by 17 of the 20 analysts who follow the stock. They suggest a high target price of $56, and I hope they’re right. The remaining three analysts have a “hold” on GM. I’m disappointed that major mutual funds such as ING, John Hancock, MFS, Oppenheimer, Dodge & Cox, Prudential, AllianceBernstein, Wellington and Templeton do not feel strongly enough about GM to become shareholders. I suspect they have good reason not to own the stock.

I’m also very concerned about GM’s excessively generous, union-designed pension plan, which is currently underfunded by $27.5 billion. The United Auto Workers union wants GM to make this plan whole within the next five years and has been aggressive in lobbying Congress for taxpayer guarantees. This may become a terribly heavy monkey on GM’s back. UAW President Bob King wants this guarantee to take precedence over the repayment of the remaining $17 billion of bailout money still owed by GM to taxpayers. The UAW, like the airline unions, can be devastatingly strident, and a possible strike or even the threat of a strike could be hurtful to GM’s share price.

And finally, I’m not so sanguine about auto sales as are most observers. I think the long-anticipated acceleration in the U.S. economy is in the process of disappointing a lot of people. It appears that unexpectedly lower corporate earnings in the past month will continue for the remainder of the year. This will put the kibosh on the economic rebound that many figured would be strong enough to increase employment, increase wages and indemnify the U.S. from foreign competition. Meanwhile, consumers (think car buyers), whose spending and higher debt have nudged the economy forward, are now tightening their belts again. Retail sales grew at a paltry 0.35 percent, and restaurant sales (a key source of low-wage job growth) also tumbled last month. And gasoline prices exceeding $4 a gallon may also stall GM’s revenues and profits. GM is unveiling a new generation of gas-guzzling full-size pickup trucks (its most profitable vehicles) this year and next. Darn, one would think GM management might have more sense than that. So sell your GM.