The Associated Press gives evidence today to how desperate General Motors is to give the appearance that the company is firing on all cylinders. GM pulled out all the stops to ensure that June sales would not disappoint when sales were slowing as a result of the company's loss of credibility during its seemingly never-ending recall saga.
At mid-June, sales for the month at GM were lagging the previous year's. The political minds at GM could not have this, and according to the piece:
The burden carried by the holders of stock in mortgage giants Fannie Mae and Freddie Mac, each operating for nearly six years under federal conservatorship, just got lighter. On July 16, U.S. Court of Federal Claims Judge Margaret Sweeney, in a procedural ruling, held that shareholder-plaintiffs in Fairholme Funds Inc. et al. v. United States are entitled to know material facts that the government wants to keep secret. The shareholders are seeking compensation for foregone income resulting from the Treasury Department's "sweep" rule of August 2012, which forced the companies to forward all dividends to the department in perpetuity. Government lawyers had filed a motion for a protective order on May 30 to inhibit discovery. The outcome of this case will have major implications for the future of property rights in this country.
General Motors reported earnings today for the 2nd quarter of 2014. The early prognosis is not good with share price falling after the report. While it is difficult for the Mom and Pop investor to sort through GM's myriad of charges, special items and various smoke and mirrors, there are some key take-aways that give a glimpse of GM's financial health. Primarily, debt continues to grow at the company, now exceeding $40 billion while earnings are propped up by special items.
On Thursday, July 17, General Motors CEO Mary Barra will be back as a witness on Capitol Hill, this time before the Senate Subcommittee on Consumer Protection, Product Safety and Insurance.
Senator Claire McCaskill (D-MO), who has been an outspoken critic of GM's response to the deadly ignition switch defect, chairs the Subcommittee. Indeed, the hearing is titled, "Examining Accountability and Corporate Culture in Wake of the GM Recalls." Another subcommittee member, Senator Richard Blumenthal (D-CT), has been even more outspoken. Both deserve credit for seeking to make GM accountable, especially since some members on both House and Senate committees have pulled their punches on Barra and GM.
Is General Motors trying to make lemonade out of lemons? In the case of the company's recent string of lemon recalls, there seems to be a strategy to increase showroom traffic by issuing recalls for only those vehicles which do not require high costs to repair. GM CEO, Mary Barra, gave a hint at this strategy during last quarter's earnings conference call.
On May 13, we asked GM to recall Chevy Silverados and other pickups and SUVs with a brake line corrosion problem. GM responded by claiming that it was a "maintenance issue" and therefore not a reason to order a recall.
General Motors continues to deny that there is a problem with rusting brake lines on its vehicles, as noted here yesterday. GM's new Vice President of Global Safety, Jeffrey Boyer, claims that brake line rust "is a maintenance issue that affects the entire automotive industry." However, a search of the National Highway Traffic Safety Administration's (NHTSA) website shows that GM vehicles have about ten times the complaints for brake lines than Ford, Toyota and Honda combined!