General Motors' stock hit an all-time low today of $31 and change. That's right, "all-time." Today's GM is a new company that did not exist two years ago. In an effort to shed liabilities and force sacrifices from creditors while protecting the UAW, GM emerged from bankruptcy as a totally new company. The media inaccurately reported that GM had its best earnings since 1999, but it has not given a clear picture of the situation at GM. Biased media coverage is a story in itself, but let's look at why GM has not done as well as the pundits predicted, and why it is likely to continue to struggle.
General Motors has been very benevolent since receiving $50 billion of taxpayer funds less than two years ago. GM, the GM Foundation and Chevrolet are donating more than $10 million towards the building of a Martin Luther King, Jr. monument in Washington, DC. Following is a list of just some of GM and GM Foundation recent giveaways.
$40 million for "clean energy projects."
$4.5 million for college scholarship programs to benefit students; criteria list includes being female, being a minority or being a military member.
$27.1 million to United Way for restructuring of Detroit schools.
The New York Timesreports that the auto industry "overhaul" (AKA General Motors' bankruptcy) is about to "pay off handsomely" for UAW workers at GM. GM, along with Ford, is expected to announce profit-sharing checks for hourly workers this month. UAW president, Bob King, states that workers expect to get a piece of GM's profits.
In the coming weeks we are sure to hear a lot of hype over the upcoming General Motors IPO. As we approach the November elections, it is a certainty that the Obama administration will tout the government intervention and nationalization of a major US industrial corporation as a huge success. Claims have already been made that the American economy and millions of jobs have been saved by bailing out GM. There are many people, including the Mom and Pop investors that financed GM through their bond purchases, who see a less savory side to the bankruptcy process and view it as a model of corruption and cronyism.