Did CEO Mary Barra's testimony before Congress expose a deeply flawed GM? Photo credit: General Motors Co.

Shareholders of General Motors (NYSE:GM) have been watching the news around the company's recall scandal with some trepidation. 

On the one hand, the stock has been holding up fairly well, with most big investors taking the view that the events would pass in time without doing too much harm to GM's long-term prospects. Toyota's (NYSE:TM) experience provides good reason to take that view. 

On the other hand, those of us who have spent many years watching General Motors have been wondering if there's another shoe waiting to drop.

That shoe might have dropped on Wednesday.

A leading GM bull changes his mind
Morgan Stanley auto analyst Adam Jonas is widely perceived as one of the sharper observers of the global auto business. His has been one of the stronger voices making the case for GM as an investment. But that abruptly changed on Wednesday, when Morgan Stanley downgraded GM"s stock to underweight and lowered its price target for GM shares from $49 to $33.

The Detroit News quoted Jonas as saying, "We think the market's got it right on GM valuation and no longer see significant risk-adjusted upside."


That's a sharp change of course for Jonas, who -- like many of his peers -- was quite bullish on GM's prospects as recently as January. 

So, what has changed?

I think that's the problem is that it's starting to look like not enough has changed.

Meet the new GM... a lot like the old GM?
It's no secret that GM was a very broken company before its 2009 bankruptcy. Too much bureaucracy, hilariously inadequate financial controls, broken product-development processes, too-high fixed costs... the list of problems was a very long one.

GM did have some things going for it, even then: Its factories and production processes were modern and well-run, it had a surprising amount of first-rate talent within its engineering ranks, and it had -- somehow -- a steady, if slowly dwindling, group of loyal customers.

The bankruptcy fixed some of that in one fell swoop. Freed of a slew of underutilized factories and heavy debts, GM's cost base was suddenly far more competitive. 

But plenty of problems remained, starting with the still-broken GM bureaucratic culture and its long-misplaced priorities that threatened to sabotage any revival. 

That culture, more than anything else, is what former CEO Dan Akerson set out to fix when he took charge in the fall of 2010. Akerson didn't know the car business when he took over -- but he knew business, and he could see a lot of what GM needed. 

And he had a very good model just a few miles away: Ford's (NYSE:F) old problems weren't exactly the same as those that GM was facing, but the Blue Oval's thoroughly convincing turnaround provided a rough road map for addressing GM's lingering issues.

Akerson did a lot of good work. Some things really have changed. GM already has much better internal reporting and financial controls, and it's implementing thoroughly up-to-date systems to improve them still further.  GM's product-development process has been completely overhauled and the results are far better cars and trucks -- and lower costs. 

Strong new GM products like the excellent Chevy Impala sedan have helped convince investors that GM's turnaround is for real. Photo credit: General Motors Co.

But when CEO Mary Barra went before Congress making promises of transparency -- but couldn't answer a lot of questions about the circumstances around the recall -- it gave the impression that GM still has too many layers of dysfunctional bureaucracy. That GM management still doesn't know what's going on in the far-flung reaches of the company. 

That led a lot of people, including your humble Fool, to wonder if GM had really come as far as we'd thought

The case for owning GM stock boils down to the belief that GM is finally getting its act together, that it really is following the path blazed by Ford. There have been a lot of reasons to believe that that's true, that a genuine transformation is well under way. If so, it's easy to argue that GM stock remains a good buy, recall woes notwithstanding. 

But what if GM really hasn't changed all that much?

Apparently, Jonas and his team at Morgan Stanley have been asking themselves the same questions.

It's not too late for Barra to change this, but it's getting late
Barra has spent a lot of time in the last few weeks telling us -- GM customers, Congress, the media, the American public -- how much GM has changed.

Barra has been employed by GM since 1980. I have no doubt she feels GM has changed tremendously over the last few years and that her statements are sincere and heartfelt.

The problem is, she hasn't yet been able to show us that GM has changed and we have decades' worth of reasons to be skeptical. 

We need actions, not words, and we need to see them soon. Without the actions, the words don't mean much. 

It's not too late. Some strong moves from Barra could still change minds.

But when you've got even top-drawer Wall Street analysts hinting that it's the Same Old GM after all, it's getting very late.