General Motors announced disappointing earnings results today and issued a warning that first quarter results will underwhelm as well. The reasons behind the earnings' miss are surely going to be explained away by pundits and proponents of the company still known as Government Motors to many. Sorting through the smoke and mirrors can lead to some important and simple explanations as to what is going on at GM.
The internet was ablaze Tuesday evening with stories presenting a perceived positive move by General Motors' outgoing government-appointed management. All hail! "General Motors to pay first dividend since 2008," trumpeted the headlines. GM shares immediately spiked up in after-hours trading with shares rising about $1.60 or 4% on the news. Unfortunately for those duped by the proclamation, GM followed the story hours later with a profit warning. For the time being, the bad news outweighed the good with GM shares reversing course and ending the day Wednesday with a loss of over one and a half percent on a day that the market rallied.
I made these remarks today at the National Press Club in Washington, DC before the luncheon speech of outgoing General Motors CEO Dan Akerson:
President Obama justified the auto bailout by predicting it would make money for the taxpayer. With Treasury now selling its remaining shares, the direct loss is about $10 billion. So on its most fundamental level, the auto bailout is a failure.
But that $10 billion figure dramatically understates the true cost. There were separate multibillion dollar bailouts of Ally Financial, formerly know as GMAC, and Delphi and other suppliers. There was cash for clunkers, the government guarantee of warrantees, accelerated fleet purchases, etc., etc.
Submitted by NLPC Staff on Mon, 12/16/2013 - 11:30
Peter Flaherty, president of the National Legal and Policy Center (NLPC), today posed key questions to the General Motors leadership at a National Press Club press conference, including whether the company will repay to taxpayers the $10 billion direct cost of the GM bailout.
News that the U.S. Treasury Department has sold its remaining stake and that Mary Barra will take over as GM's new CEO have put the spotlight on the company and its future. GM executives have pointed to GM's $26.8 billion in cash as evidence of its improved financial position. Analysts have raised the possibility that the company will buy back shares or institute a dividend.
I will hold a press conference on Monday, December 16 at 11:00am to pose key questions to General Motors leadership, including whether and when the company will repay to taxpayers the $10 billion direct cost of the auto bailout.
News that the U.S. Treasury Department has sold its remaining financial stake and that Mary Barra will take over as GM's new CEO have put the spotlight on the company and its future. GM executives have pointed to the company's gigantic cash position as evidence of its improved finances. Analysts have raised the possibility that the company will buy back shares or institute a dividend.
The US Chamber of Commerce's "On the Road with Free Enterprise" tour has quietly entered its second month. The main story currently on the "Free Enterprise" website is a piece titled "First Ever Sushi Tech Combats Fish Fraud." The fact that General Motors is hypocritically co-sponsoring a free enterprise tour might bring to mind the words fishy and fraud as well.
"Beneath the deep purple cuts of healthy tuna and the smell of fresh wasabi, there lies a sushi underbelly in America that will make your stomach turn," reads the first line of the all-important "fish fraud" story. Likewise, GM's anti-free enterprise bailout process exhibited an underbelly of political cronyism that turned the stomach of those (like GM bondholders and Delphi non-union retirees) who saw there rights subordinated to the politically-favored UAW.
Great news for consumers who are considering buying General Motors' green wonder car, the Chevy Volt. I know how excited those environmentally conscientious Volt enthusiasts can get, but a little patience can pay off big time if potential buyers hold off for a year or so on their purchase. According to GM CEO Dan Akerson and following another dismal month of Volt sales (1,306 in April), the car that defies logic will soon be available for up to $10,000 less money. The good news extends to shareholders of GM as the next generation of the Volt will supposedly be profitable for the company. So, as we say prepare to say goodbye to the current generation of the obsolescent Volt, let's take a trip down memory lane to review how past promises for the car panned out.
General Motors moved quickly to complete its buyback of 200 million shares from the US Treasury Department before year end. It is a welcome sign that the Obama Administration is finally beginning to exit taxpayers' GM stake, a move that could have been made a year and a half ago when share price was closer to $30. While some felt it was never the place of Government to gamble taxpayer money on Wall Street by market timing the exit of Treasury's GM stake, others argued that taxpayers would be better served by waiting until GM share price rose to at least over the $33 IPO price of two years ago.
General Motors is criticizing Mitt Romney for running an ad that says GM cut 15,000 jobs under the Obama Administration. The Detroit Free Press reported that GM spokesman Greg Martin (speaking about the Romney ad) stated, "No amount of campaign politics at its cynical worst will diminish our record of creating jobs in the U.S. and repatriating profits back to this country."
Leaving aside for a moment the bigger issue of a taxpayer-supported entity improperly inserting itself in an election, lets examine the facts. A look at GM's annual SEC filings gives a clear picture of how many people were employed by the company both before and after the Obama Administration guided the company through a bankruptcy process.