Open Thread: Taxpayers Still Stand to Lose a Bundle on GM Stock
Despite the media hype, American taxpayers still stand to lose a bundle from the government takeover of General Motors, thanks in large measure to the lack of credibility the company’s Obama-mandated obsession with the unpopular Chevrolet Volt: GM announced earnings this morning and the numbers appeared to be good on the surface. Media friends of GM trumpeted the good news but the celebration did not last long. The festive mood was replaced with GM apologists trying to explain the negative share price reaction.The obvious overhang of UAW obligations seemed to be ignored, as did the lack of management credibility. One TV commentator known for his defense of GM attributed the sell-off to “bankruptcy fatigue”, claiming that investors are still punishing GM for its trip through bankruptcy. Nonsense. The people who control the big money on Wall Street are not concerned with the past actions of a corporation as much as they are with actions that give an indicator of what the future holds. The problem with GM is not that it suffers from “bankruptcy fatigue”, but rather “credibility fatigue.” Current management has claimed that future growth would be driven by China and the Chevy Volt. China is a small portion of GM’s profitability and the Volt loses money for GM. Recent statements out of GM that dismal sales of the Volt were due to the fact that dealerships had “virtually” no inventory have been exposed as dishonest. Another comment by CEO, Dan Akerson, about cash on the balance sheet of 35 to 40 billion dollars is also inaccurate. Cash and cash equivalents are about 20 billion dollars. Of course GM might claim that it all depends upon your definition of “cash.”
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Open Thread: Taxpayers Still Stand to Lose a Bundle on GM Stock
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on August 5, 2011. Filed under