General Motors Corporation (NYSE: GM) reported a $38.7 billion net loss for 2007, a company record. Though the shockingly large figure is an accounting reality more than a business one – GM used $39 billion of tax credits in the third quarter of the year that would have otherwise expired.
 
Despite tax management being the bulk of the loss, GM had combined losses of $1.7 billion in North American markets compared to a more modest profit of $437 from Latin America and Asia. The U.S. auto market has seen weaker sales in general recently due to a slow economy, but U.S. automakers Ford Motor Company (NYSE: F) and GM are particularly vulnerable because of their reliance on expensive pickup trucks and SUVs that use more fuel and require more financing. This combination generally makes them more difficult to sell in weak economies or during periods of higher fuel costs, both of which the U.S. is now experiencing.
 
Acknowledging the reality that U.S. sales may continue to be problematic, GM Chief Financial Officer Fritz Henderson said in the wake of today’s announcement “We are talking about global automotive operations -- that is where we see an improvement.”
 
GM is also seeking to minimize its largest cost, labor. It announced, in an unprecedented move, that it is offering voluntary buyouts to all of its U.S. union workers, totalling about 74,000 employees.
 
Depending on the employee, the offer includes up to a $62,500 payout in the form of a lumpsum of cash, retirement benefits or an annuity. The buyout is designed to drastically reduce the number of UAW represented employees and replace them with lower-wage workers in an attempt to compete globally. Even so, most analysts doubt GM will be able to make a profit in 2008.
 
Though GM faces severe challenges, the company still has more than $27 billion in cash and remains the world’s largest automaker. Whether or not it can maintain either of these positions may largely rest on the success of its worker buyout program.
 
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Gaiam, Inc. (NDAQ: GAIA) announced the spin off of its Real Goods Solar (NDAQ: RSOL) unit last week in a move that could substantially boost shareholder value. Real Goods Solar installs residential solar energy systems in California and claims roughly 2/3 of the residential solar market. A market that values solar will surely find value in this pure play that promises to net a substantial amount of cash for Gaiam and its shareholders. So, should you look at buying into this hot new issue?

Initial public offerings in hot sectors like this generally spike early in their trading, which can make it difficult for investors to obtain a good price. Luckily, this particular spin off scenario gives investors the ability to obtain shares in the spin off company by purchasing shares in the parent before the separation. Essentially, shareholders are given the ability to get on the ground floor of one of the largest pure-play players in one of the fastest growing industries in the market.

Gaiam itself is also a strong, diversified company focusing on “green” products. Real Goods Solar will take over the company’s solar operations while the retail division will continue to focus on selling products like yoga supplies, exercise equipment, eco friendly home supplies and much more. Combined, the units are quickly growing with earnings rising more than 40% last year and a projected 50% in 2008. Currently, Gaiam commands a steep 75x multiple, but strong growth may justify that with a PEG ratio that is within the norm.

In the end, Gaiam is a great company and this spin off should only unlock additional value for shareholders. This is one of the few opportunities to get on the ground floor of the solar boom, but investors should carefully watch the terms of the spin off in case pricing goes beyond a tax free distribution. Combined, these factors make GAIA a stock that is definitely worth watching over the next few months!

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Point Blank Solutions, Inc. (OTC:PBSO) may be a small company with a market cap of just $188 million but some investors see big value in the body armor maker. Warren Lichtenstein’s Steel Partners is one such investor who offered to acquire the company for no less than $5.50 per share in cash. Unfortunately, the company rejected the offer last year and the activist hedge fund is now nominating its own slate of directors to take over the board and presumably force a sale. So, is this a stock worth buying at these depressed levels?

Point Blank shares plummeted after former chief executive David Brooks was charged last October with securities fraud, insider trading, tax evasion, and other offenses. Prosecutors alleged that he improperly inflated corporate profits and made the company pay for personal expenses including a face-lift for his wife. The news infuriated shareholders as the stock sank from around $6.20 per share to around $2.70 per share earlier this year. Shareholders are now ready for a change as shares continue to fall as investors are losing hope.

Steel Partners then announced this week that it would be taking matters into its own hands by nominating five of its own directors to the company’s board. The activist hedge fund has extensive experience working with and maximizing the value of other public companies in the defense industry, including United Industrial Corporation, Aydin Corp., ECC International corp. and Tech-Sym Corp. Additionally, the proposed directors have extensive experience in the defense industry and could provide valuable insight for the company to turn itself around after the disaster last October.

Very little has changed materially since the $5.50+ offer from Steel Partners, so it should be interesting to see whether the offer is still on the table. If so, that would mean a 37.5%+ premium to the current market price of $3.97. Otherwise, if the firm simply works to turn around the company it could lead to even higher share prices if successful. Combined, these factors make PBSO a stock that is definitely worth watching over the next few months!

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