Is Ford’s Earnings Miss a Harbinger of a GM Disappointment?

car plunge graphicFord stock is taking a hit today after reporting earnings that missed analysts’ estimates. European losses accounted for much of the earnings disappointment. General Motors is also known to have major issues with its European brand, Opel. GM recently assigned Alix Partners to oversee their European unit’s “turnaround” plan. Alix Partners is a bankruptcy consulting firm that was hired by GM prior to their own bankruptcy filing. This is just one of many risk factors that have been glossed over by media coverage.

Early reports question why the expectations for Ford were set so high. Anyone who has followed the media coverage for the domestic automakers recognizes that the news that has been reported of late has had a very rosy slant. It is not hard to discern why analysts have been overly bullish of late on the auto sector. Biased analysts who work for General Motors’ IPO underwriters have … Read More ➡ “Is Ford’s Earnings Miss a Harbinger of a GM Disappointment?”

Will SEC’s ‘Say on Pay’ Rule Do Any Good?

golden parachuteAs someone who has sponsored “Say on Pay” shareholder proposals with companies like Boeing and Procter & Gamble, I wonder whether SEC-mandated votes on executive compensation will do any good. In fact, I worry that it may lead to a false sense of shareholder empowerment.

Yesterday, the Securities and Exchange Commission voted 3-2 to adopt a rule requiring public companies to hold an advisory vote on executive pay at least once every three years.

At Boeing in 2008, our “Say on Pay” proposal got 38% of the vote, an extremely strong vote for a proposal opposed by the company’s management.  It had little impact. Management paid no attention to us and Boeing CEO James McNerney continues to be overpaid, even as the company experiences setback after setback.

Public companies should be controlled by shareholders, and their representatives, the board of directors. Unfortunately, corporate boards today are characterized by cronyism and … Read More ➡ “Will SEC’s ‘Say on Pay’ Rule Do Any Good?”

GM’s ‘Looming Train Wreck’

GM logoUpbeat reports of GM’s “progress” have prompted politicians to pronounce the auto bailout a “success” and rocket the share price to 37. But do these reports reflect reality? The unrelated declines of both the American automotive and daily newspaper businesses have resulted in even less reporting on a beat that was thinly covered to begin with.

Right now, news about GM is what GM says it is. Business editors have little choice but to recycle GM press releases. They do not have the troops to do actual reporting. Even in the heat of the IPO coverage, GM’s financial data was uncritically repeated, never mind that the company could not even attest to its own financials.

Now comes Peter De Lorenzo, an automotive journalist who actually knows what he is talking about. These days he practices his craft on the website. De Lorenzo is not buying the GM hype. In … Read More ➡ “GM’s ‘Looming Train Wreck’”

Will GM’s Politicized Bankruptcy Become a Model for States?

man in barrelThe New York Times reported last week that policy makers are working behind the scenes on ways to allow states to declare bankruptcy. States are currently banned from seeking protection in federal bankruptcy court.

One has to wonder if General Motors’ bankruptcy outcome will embolden lawmakers to pursue a similar course for states that are overburdened with pension obligations and municipal bond debt. In the case of the GM outcome, union pension obligations were given precedence over creditor claims. The precedents set by the Obama Administration’s manipulation of GM’s bankruptcy will continue to have far-reaching, negative implications.

During the General Motors’ bankruptcy process, the politically favored UAW benefited at the expense of GM bondholders. Regarding the possibility that this precedent can be repeated in a state bankruptcy, a Wall Street Journal opinion piece warns that “It’s more likely that a state like California would pursue bankruptcy if powerful unions and … Read More ➡ “Will GM’s Politicized Bankruptcy Become a Model for States?”

Schwarzman Gets Billions; Taxpayers Get Bankruptcy

Schwarzman photoStephen Schwarzman is Chairman, CEO and Co-Founder of the Blackstone Group private equity firm. He is reportedly worth $8 billion. According to the Blackstone website, 36% of the money it manages is in public pensions, the largest single source.

On Wednesday, the Blackstone Group put out this statement:

Blackstone’s view on public employee pensions is clear and unambiguous: We believe a pension is a promise. Working men and women should not have to worry about their retirement security after years of service to their communities. We oppose scapegoating public employees by blaming them for the structural budget deficits that cities and states face. We at Blackstone are committed to helping public employees retire with confidence in the strength and reliability of their pensions.

What about people who pay taxes but who don’t work for the government? Aren’t they “working men and women,” too? And speaking of working people, … Read More ➡ “Schwarzman Gets Billions; Taxpayers Get Bankruptcy”

Is Weak GM Model Lineup Behind Daewoo Name Change?

Akerson photoGeneral Motors has announced that its Daewoo Group unit will now sell all of it vehicles under the Chevrolet name. The Korean Daewoo operation has suffered from falling sales and a reputation for shoddily built cars. So what is GM’s answer to these challenges? Change the name!

The name change game has been played before when GMAC became Ally Financial. More recently, GM introduced the “all new” Chevy Sonic, which is an updated Aveo. This smoke and mirrors marketing philosophy will only take GM so far before the public asks, “Is this all GM has got?”

The Chevy brand has had less success than General Motors’ Buick, Cadillac and GMAC brands. While Chevy sales were up 16% last year, a closer examination of the numbers unveils some less rosy indicators. It is essential to analyze the quality of the sales growth at Chevy when considering the state of GM, since … Read More ➡ “Is Weak GM Model Lineup Behind Daewoo Name Change?”

UAW Makes Out (Again) on GM Bankruptcy

autoworkerThe New York Times reports 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.

There was a time when publicly traded companies were expected to deliver profits to shareholders in the form of dividends or increased share price. This model seems to have been subordinated at General Motors where the desires of politically favored union members seem to take precedence over other stakeholders. In a particularly egregious example of the wealth redistribution scheme at GM, Old GM bondholders have yet to receive their equity distribution as laid out in the  bankruptcy proceeding. It is likely that additional stock offerings will dilute the bondholders’ share while their equity is held … Read More ➡ “UAW Makes Out (Again) on GM Bankruptcy”

CNBC: Flaherty Says Reduce Corporate Income Tax

Would a cut in the corporate tax rates really help create jobs? I debate this question today with David Callahan of Demos. CNBC hosts are Tyler Mathison, Sue Herera and Michelle Caruso-Cabrera. Here’s a transcript:

Michelle Caruso-Cabrera: Two Congressional committees will tax up tax reform this term. President Obama is trying to mend fences with Wall Street and the business community including the Chamber of Commerce’s Chairman, Tom Donohue – today clamoring for lower tax rates on corporations. Would a cut in the corporate tax rate really help to create jobs? David Callahan is a Senior Fellow at Demos and author of Fortunes of Change, the Rise of the Liberal Rich and the Remaking of America and Peter Flaherty is President of the National Legal and Policy Center. Gentlemen, good to see you. David, let me start with you. Would lowering corporate taxes help to create jobs in America?… Read More ➡ “CNBC: Flaherty Says Reduce Corporate Income Tax”

GM Confirms UAW Benefits Payment Will Dilute Shareholders

UAW/GM logosThe positive news on GM has been so rampant that many risks factors to share price have been overlooked. It is tough to get unbiased opinions since most analysts work for the GM underwriters and TV networks receive millions of dollars from GM ad revenue. While GM has much good news to discuss, the very obvious risk factor of share dilution to benefit the UAW has not been mentioned.

Here are the facts regarding GM’s plans for diluting shares in order to make a $2 billion contribution to the UAW benefits fund in GM Investor Relations’ own words:

The $2 billion in GM stock will be newly issued shares. They would be dilutive to the existing shares.  We currently expect to complete the contribution to the pension plans in the near-term. The stock contribution is contingent on Department of Labor approval. The number of shares contributed will be determined based

Read More ➡ “GM Confirms UAW Benefits Payment Will Dilute Shareholders”

Daley is Poor Choice for White House Chief of Staff

William Daley photoIt looks like the “Chicago Way” will continue with William Daley taking the White House Chief of Staff position formerly held by Rahm Emanuel. Daley is a particularly poor choice because he represents the nexus of big government, big business and the left-wing activist groups they enable and bankroll.

Daley is not a “centrist,” nor is he “pro business,” except when he is getting a piece of the action. Daley has carried the title of “Midwest Chairman” of JPMorgan Chase but he is not a banker or a businessman. He is a broker of influence. That is why JPMorgan Chase hired him in the first place.

It would be tempting to say that this appointment underscores how close Obama is to bailed-out Wall Street, but I believe the reality is far worse. Daley straddles the worlds of corporate boards and bare-knuckle Chicago politics. From his new position, he will no … Read More ➡ “Daley is Poor Choice for White House Chief of Staff”