GM Seeks $16.6 Billion More in U.S. Aid
GM said it might need as much as $100 billion in financing from the government if it were to go through the traditional bankruptcy process. Rick Wagoner, GM’s chairman and chief executive, said the bankruptcy scenarios are “risky” and “costly,” and would only be pursued as a last resort.
—WSJ February 18, 2009
The most irresponsible thing you’ll read this weekend is—well, you’ve already read it, we think.
That would be General Motor’s Chairman and CEO, Rick Wagoner’s threat that a GM bankruptcy would be “risky” and “costly.”
Why irresponsible? Well, think about those words for a minute.
Think about the fact that GM stock was above $60 a share when Wagoner was made CEO in June of 2000—last trade $1.95.
Think about the fact that GM has reported losses of close to $70 billion in the last three-and-three quarters years under Mr. Wagoner’s leadership.
Think about the fact that GM is a 101 year-old company which under Mr. Wagoner has accumulated negative retained earnings of $60 billion-and-climbing—meaning that in more than 100 years of operation, the company has not managed to keep a dime’s worth of retained earnings for its shareholders.
And ask yourself if letting GM continue as it is could be any riskier, and any more costly, than it’s been as a public company under Mr. Wagoner.
Now, we have no doubt the political money-launderers in Washington—of both parties—will agree with Mr. Wagoner, and will continue to fund GM in what essentially amounts to nothing more complicated than a continued effort to secure Michigan Electoral College votes for each party’s future Presidential bids.
But that wouldn’t make the statement that a bankrupt GM would somehow be riskier, and more costly, than GM as an independent public company has been, any less irresponsible.
Jeff Matthews
I Am Not Making This Up
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9 replies on “The Most Irresponsible Thing You’ll Read This Weekend”
Mostly I agree with you. I don’t know the deets re: GM enough to speak directly to it, but I do know that often leaders inherit large ships heading in a bad direction, and large ships can take years to turn around. I’m always reluctant to hold the current leader accountable for a mess.
It often takes at least a year to truly grasp the mess, then another year to start to devise turnaround strategies, then implement them, then finally after a few years start to see the positive results.
Also, large companies are going to be talking in the billions in either direction. IE., “billions” to us seems completely overwhelming and can evoke a strong emotional response. Billions to corps of that size are more like “thousands” to average joes like you and I.
I’m not here to defend GM at all, but not completely convinced the current leader should be vilified, either (except for that jet-flying incident)
These people really are set on ending Western Civilisation, aren’t they?
Nancy – according to the infallible Wikipedia, Rick Wagoner joined GM after competing an MBA at Harvard in 1977, and became treasurer of their Brazilian operations in 1981. From there,
In 1992, he was named GM’s chief financial officer, in 1994 he became executive vice president and/or president of North American Operations, and in 1998 he was named president and chief operating officer. He became president and chief executive officer in June 2000 and was elected chairman on May 1, 2003.
People who are interested in the product, like writers at car magazines, have observed, literally for years, that Rick Wagoner does not seem to give a rat’s ass about the products the corporation makes and sells, which might explain the garbage GM has made over the past decade and a half – or the tin-eared ruination of -say- SAAB. Whatever Wagoner’s failings, an unfamiliarity with the company, the corporate culture, or the business model were unlikely to be among them.
“Honda replaces chief executive amid slowdown”
Honda has been eating GM’s lunch for years and they’re even turning over their executives. GM needs to get a clue.
Jeff, this response is not meant to detract from your overall message. However, I want to take issue with the retained earnings point.
While GM may have little to no retained earnings at this point (I know their balance sheet shows an accumulated deficit as of 9/30/08), that is partially due to the dividends that they paid to shareholders. In 2007 they paid $1.00 per share and the same in 2006, with only $0.50 being paid in 2008 (Q1 and Q2 at $0.25 per). This amounted to $283 million in dividends in 2008, $567 in 2007 and $563 in 2006.
I understand the argument that will inevitably be made that this doesn’t equal the $61 billion accumulated deficit, but the shareholders have gotten some benefits along the way (and they were paying dividends out since before I was born).
The hard part will be for all of the US auto majors to figure how to deal with a 35% reduction in unit sales when they were already hurting at 16 million units per year.
I would have expected that after nine years on the job, the CEO should have a handle on where the supertanker’s steering wheel in and how to turn it.
Please put this company and the current employees out of the misery of the delusion that some magic wand will make it all right again.
If it is killed now, there could be a chance that those plants could be retooled for something the US/North America could really use: wind turbines? bridge/highway/other infrastucture retooling?
GM’s debt will haunt taxpayers in North America for a generation already ($4B pension shortfall??)
While this is no defense of GM, this was hardly the most irresponsible thing I read this weekend. I think AIG coming back for another round of Treasury money, and Citi’s upmpteenth plan to stay solvent suing taxpayer money easily trump the relative pocket change GM is asking for here.
The best commentary I have heard on the current crisis was made in this decades old interview of Milton Friedman, in which he states much more eloquently than I ever could why the GM bailout, and much of the government intervention, is such a disaster. Enjoy.
http://www.youtube.com/watch?v=JfdRpyfEmBE