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.
Much of the good news is behind GM
Investment banks with a vested interest in seeing GM succeed have already initiated coverage with buy ratings and rosy projections. When GM shares started to trade below the IPO price of $33, underwriters … Read More ➡
Earlier today I accused Interior Secretary Ken Salazar of a “cynical” approach to issuing deepwater drilling permits for the Gulf of Mexico. I did not realize how right I was. According to Kristen Hays of Reuters:
BP Plc, whose Macondo well blowout in the Gulf of Mexico caused the worst offshore oil spill in U.S. history last year, co-owns the well that was granted the first deepwater drilling permit since the disaster.
BP is Noble Energy Inc’s partner in the well, holding a 46.5 percent interest, BP said.
Noble operates the Santiago well that received a permit from U.S. regulators on Monday to resume drilling in the Mississippi Canyon area of the Gulf, about 70 miles (110 km) south of the Louisiana coast.
I pointed out that the moratorium was a policy response by officials like Salazar who were hostile to deepwater drilling even before the BP disaster. His department’s … Read More ➡
The media may want to take a break from its rooting for General Motors, not to mention its hype surrounding the Chevy Volt. USA Today recently summarized Consumer Reports’ ranking of automakers based on performance and reliability. Of the 13 automakers receiving report cards, GM and Chrysler received the worst rankings.
The number one performer according to CR was Honda, followed by Subaru. Strong reliability contributed to the high overall scores. GM was number 12 on the list with only Chrysler receiving a lower score. It should not come as a surprise that the bottom two performers were the automakers that ended up bankrupt and receiving taxpayer funded bailouts.
Almost two years after the bailouts, it appears there are still underlying areas of concern regarding quality and new product launch. It seems the fact that the Obama Administration chose to be advised by bankruptcy experts and Wall Street fat cats … Read More ➡
Under extremely unusual circumstances, the Federal Communications Commission (FCC) recently granted a company called LightSquared the right to use wireless spectrum to build out a national 4G wireless network. LightSquared will get the spectrum for a song, while its competitors have to spend billions.
Although the technical implications of the FCC action are complicated, how it came about is not. LightSquared is owned by the Harbinger Capital hedge fund, headed by billionaire investor Phil Falcone, in photo. Falcone visited the White House and made large donations to the Democratic Senatorial Campaign Committee.
When established regulations and procedures are circumvented for political reasons, the result is often unintended consequences. When the Obama FCC appointees did the favor for Falcone, they probably had no idea that they might be creating severe technical problems for other users of wireless spectrum.
Now the Global Positioning System (GPS) industry is up in arms. According to … Read More ➡
General Motors reported less than stellar fourth quarter earnings last week, and announced that bonuses paid to its UAW workers will average $4,300. The earnings report disappointed Wall Street as GM shares fell about 4% on the news.
Some media sources attributed the drop in GM’s share price to rising oil prices. Considering that oil prices went down on the day that GM shares fell, this explanation does not hold water. Rather, there are some specific issues relating to the earnings announcement that are causing concern on Wall Street.
Specific items of concern on GM’s fourth quarter earnings breakdown include declining market share in China. Year over year GM market share for China fell from 13.2% to 11.4%. Anyone who has been listening to the hype revolving around GM’s strength in China might be surprised by these numbers. GM CEO, Dan Akerson, has touted China as a bright spot that … Read More ➡
On Thursday, Fred Bartlit, Chief Counsel of the BP Oil Spill Commission, issued a report in which he put blame squarely on BP for the disaster, including a failure to adequately supervise its Halliburton and Transocean subcontractors.
The seven-member Commission, appointed by President Obama before the well had even been capped, issued its “final” report on January 11. Although it cited many of the same BP-specific problems detailed by Bartlit, it implicated the entire oil and gas exploration and production industry, and called for “systemic reforms.”
The Commission’s membership included prominent environmentalists who opposed offshore drilling even before the Deepwater Horizon disaster, such as Frances G. Beinecke, the president of the Natural Resources Defense Council. By blaming the entire industry, it reinforced flawed policy responses, like the Gulf-wide moratorium on drilling.
As Co-Chair William K. Reilly claimed:
Our investigation shows that a series of specific and preventable human and engineering
… Read More ➡
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.
- $1 million to Haiti earthquake relief.
- $70,000 to the United Negro College Fund
- $2 million to Detroit for community recreation centers near Chevy Volt manufacturing plant.
- $41,000 to groups associated with lawmakers with a $36,000 majority going to the Congressional Black Caucus Foundation.
The GM Foundation is legally separate from the company, but is fully … Read More ➡
Progress Energy CEO Bill Johnson, whose company will (pending approval) be swallowed by larger electric utility Duke Energy, has been making the media rounds. He has discussed the planned merger, which he says is necessary because of looming capital projects that will be needed to meet electricity demand, but he also warned regulators in Washington of the dangers posed by the heightened government regulatory environment:
“Call this regulatory picture what you will – “a train wreck” … “a tsunami” … or an overdue change that’s ultimately do-able,” Johnson said. “It’s not hard to imagine the customer pushback that will occur because of the resulting increase in the price of electricity. This pushback will come from industrial customers struggling to be competitive, and from residential customers and small businesses struggling to make ends meet. As indicated, I’m especially sensitive to the households of modest means, where energy represents a disproportionately large
… Read More ➡
General Motors will pay its factory workers bonuses of $4,000 each. AP reports that more than $189 million will be paid to UAW workers in addition to salaried workers (management and engineers) bonuses of up to 50% of pay. It is interesting to read the decidedly negative view of GM’s actions in comments that are submitted by readers at the end of the AP article. It remains a “tale of two cities”, however, when it comes to media coverage (particularly from television journalists) with many commentators refusing to acknowledge the public outrage as GM spends millions of dollars on bonuses while taxpayers and GM bondholders continue to have their rights subordinated to the politically powerful UAW.
During auto bailout congressional hearings, many representatives expressed indignation when then General Motors’ CEO, Rick Wagoner, spent thousands of dollars to fly on a private jet to the meetings. Where are these congressmen now … Read More ➡
One year after federal prosecutors opened a criminal investigation into Toyota’s unintended acceleration safety issues, a ten month investigation came to the conclusion that there were no electronic flaws that led to accidents involving Toyota vehicles. The causes were attributed to driver error and sticky accelerator pedals and floor mats. These were the exact causes that Toyota pointed to when congressional leaders decided to attack the automaker at a time when General Motors was struggling to regain sales after exiting its bankruptcy.
The SEC subpoenaed documents from Toyota back in February of 2010 when the criminal investigation began. Members of Congress piled on to the assault with Rep. Henry Waxman (D-California) sending a letter to Toyota and the Department of Transportation that stated, “First, the documents appear to show that Toyota consistently dismissed the possibility that electronic failures could be responsible for incidents of sudden unintended acceleration. Second, the one … Read More ➡