Wednesday, April 21, 2010
GM and the Bush/Obama "New" Economy
The headline reads... "GM Repays U.S. Government"
(*SIGH*)
Well... unfortunately the word "repaid" has a quite different meaning from what the average reader might assume from scanning the headline.
Perhaps the following sentence from the tenth paragraph of today's Financial Times' reporting will serve to introduce my point:
"The company [GM] lost $3.4 billion in the fourth quarter of 2009 and is due to release its first-quarter results in mid-May."
Backing up three paragraphs, here's another... er... clarification:
"The US government now has a 61% stake [in GM], while Canada owns 11%."
Folks... GM lost $3.4 billion in just the fourth quarter of 2009 - just that one quarter! Anyone wanna throw out at guess as to total GM losses for 2009? How'bout 2008...? 2007...?
Folks... GM is 72% government owned...!!! We the taxpayers - U.S. and Canadian taxpayers - have had our pockets picked by governments not to pay for government services, but to "invest" - "invest" in a company that has been hemorrhaging money... racking up multi-billion dollar losses!
And the way this is being portrayed in the media...??? Supposedly this is all wonderful - it's grand as grand can be!
Now I may not have a bachelor's degree in finance, let alone an MBA...
I'm neither a trained economist nor an attorney specializing in business law...
But, folks... it seems to me that GM is "repaying" it's loans via debt piled upon debt rather than via... er... profits based upon actual net productivity and return on investment.
Question: Have GM's pension obligations ceased to exist?
Question: What are GM's outstanding debts worldwide - in total?
Question: What are GM's "unfunded liabilities" pegged at over, say... oh... the next decade?
Remember a couple years back when we were all reading news stories along the lines of "GM Loses $2,000 Per Vehicle Produced and Sold?" When and how did that get turned around...???
When GM announces their first quarter (2010) results next month will they be announcing a profit? If so, will the profit be enough to make up for just their forth quarter 2009 losses alone? If not... say worst case scenario where rather than make even a tiny profit GM announces further losses... how does GM get the money to "repay" anything - let alone billions and billions in loans... let alone continuing pension obligations... let alone their newly announced "investments" in a Kansas City facility and a plant in Detroit being built at a cost of $257 million?
I mean... I understand the "short answer." My friend Carl and perhaps others of you would point to the money GM "makes" by selling shares of itself.
The problem is... if the "itself" which is GM is destined to be a company that over the long haul loses rather than makes profit via selling their products on a day in, day out, week by week, month by month, year by year basis at cumulative profits...
(*SCRATCHING MY HEAD*) (*SIGHING*)
Folks... is it just me or does this sound suspiciously like what happened with the mortgage meltdown? Homeowners "profited" by pulling paper equity out of their "investment" in their home. Problem was... in the end... when the "investment" turned out to be worth less than the original purchase price and debt - never mind all the refinancing "equity" pulled out which actually represented further debt above and beyond the original debt - lots and lots of folks were left with nothing in front of them but foreclosure.
Folks... the ultimate question... what makes anyone think that GM is a good "investment?"
If GM was such a good "investment" why would the government of the United States and their junior "partner" (co-conspirator?) the government of Canada have to "invest" our money on our behalf (and ultimately at our risk) rather than let us decide whether we wanted to personally invest in GM at our own behest via our own free will?
Finally... again addressing my friend Carl the undergrad finance major who later earned an MBA and then went on to law school and is now a business attorney at a mid-Manhattan law firm... as to the taxpayer's expected "capital gains" on the "investment," what happens if in five years, ten years, GM again is driven to the brink by a steady stream of "real" losses? Will taxpayers then "return" our past "profits" (and more?!) in the form of new bailouts - a new bailout of GM perhaps; a bailout of GM's future institutional investors perhaps?
I'm sorry. None of this "high finance" makes any sense to me. You know what they say... if it walks like a duck...
(*SIGH*)
This whole thing sounds like a giant scam to me.
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5 comments:
If you let something as big as GM fail and shut down its operations, what do you do with all of the workers at GM, its dealers and service garages, and its suppliers who would be put out of work simultaneously? What would you do about the small midwestern company towns in which most of the citizens work at "the plant?"
What would you do about the schools that now have no support because the tax base has evaporated? Where will these people pick up and move to, en masse, when their town has died? What about the folks who no longer can pay their mortgages and car payments? Or their doctor bills. Or their credit card minimums (since almost all of them carry credit debt.)
There's no California for the new Dust Bowl the collapse of the auto industry would create--California's taken. And it's broke, too, anyway.
If I stipulate that GM should have been allowed to fail, will you provide me with some answers about how you would deal with the aftermath?
GM should have gone into bankruptcy.
Period.
Bankruptcy and reorganization.
What would have emerged would have been a "new" GM - a stronger, healthier GM.
We discussed this at the time ad nauseum. No need to rehash as far as I'm concerned.
You simply don't understand bankruptcy, Rob. You didn't then, you don't now. Nor do you care to understand.
(*SHRUG*)
(Again... I write this not to insult you, but as a companion thought to my above noting of the fact that we've been over this ad nauseum.)
BILL
P.S. - Oh... and of course... allow me to note that even if one "gives you credit" for bringing up the same questions that have been asked and answered time and again (we beat this horse to death on Ragged Thots) there's still the little matter of you totally ignoring the thrust of the actual thread post.
(*SMILE*)
(*CHUCKLE*)
(*SHRUG*)
That's my Rob...
(*HUGE FRIGG'N GRIN*)
BILL
In other words, 1) you have no answers; and 2) you don't really give a shit (not your problem.)
It's all ad hominem with you, hoss. I make points and ask legitimate questions, and you respond by mocking me personally.
You've got no game.
Rob,
(*BORED YAWN*)
No "other words" are necessary.
You know I'm telling the truth.
(*SHRUG*)
As to others reading this... I'm confident that no one doubts me.
(Hell... any friends or cyber-acquaintances with whom I was in contact with back at the time the "to bailout or not to bailout" debate was going on no doubt recall my views then and would acknowledge my views haven't changed.)
Rob. Be annoying... that's fine.
(*WINK*)
Just don't be desperate; it comes off as pathetic.
As always... (*SIGH*)... just trying to impart wisdom to you in the hope that some will stick.
BILL
Read I what I wrote. I stipulated that you were right. And then I asked you to explain how you'd handle the inevitable consequences, and you declined to provide that explanation.
You don't have one. Case closed.
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