Eight: GM and Merrill Lynch

This morning a ML analyst changed his recommendation on GM from "neutral" to "buy." In my experience with ML, I interpret this as a "strong sell." Simply put, since the days of the Henry Blodgett/Internet insanity, ML has demonstrated time and again a perfect sense of timing for recognizing when a trend is finished. But enough of ML's history. Let's look at GM's numbers.

GM's most recently reported operating margin is less than one percent. Most industry observers agree that most GM brands need major product over-hauling in the areas of aesthetics, performance, and quality (yes, GM has made great strides in quality, but still lags far behind the Asians). How in the world is GM ever going to fund those activities with no gross margin? Add to this the fact that the GM selling prices are too high (which simply allows the Asians to match the GM selling prices, and with their more efficient manufacturing and higher quality, make a tidy profit), and you have continued, inexorable downward pressure on market share, which further erodes margins, and so on...

So I ask you, Mr. Merrill Lynch analyst (probably some MBA type whose has never been inside of a factory of any sort), why is GM a stock a good investment?