Posted on 11/23/2010 8:01:00 AM PST by SeekAndFind
Last week, GM sold stock in a public offering. At the same time, President Obama announced that the tough decisions made during his administration were beginning to pay off. He also indicated that the "American taxpayers are now positioned to recover more than my administration invested in GM, and that's a good thing."
I do not know where to be amazed or appalled.
First, contrary to popular administration folklore, GM did not survive bankruptcy. The name did, but that is all that happened. A new company acquired the name and assets of GM and is now the company being called GM. I wonder if the GM commercials tracing its history back to the older GM without a disclaimer is being honest with those of us who own it -- the American taxpayers.
Additionally, GM's profit of $2 billion in this most recent quarter is a little puzzling. The difficulties involving the financials for a large company are well-known, but the disclosure statement by the company about its internal controls concerns me. I am more puzzled about the $2 billion in profit in light of the following disclosure (Page 166) from the GM 3rd-quarter 2010 SEC filing:
We have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan.
If control deficiencies were not enough, I am troubled as well by the presence of some items on the GM Balance Sheet, the valuation of which is subject to significant interpretation. Specifically, the company lists over $30 billion of goodwill. Goodwill? Really? I am certain that someone can justify this number, but then again, someone justified the bailout to begin with.
GM's profit and alleged success serve as a horrible payback to the holders of over $100 billion in debt forgiven and shareholder value lost over the recent decade. Proclaiming a success from such a travesty is difficult to understand.
Bankruptcy is intended to serve as a fresh start. It is intended to help people and organizations begin again and restore themselves to profitability or financial health. To boast of your success after so many millions have been hurt is devastating.
The real success story in my mind is Ford Motor Company and the United Auto Workers at Ford, who worked feverishly with one another to restore profitability in a very difficult economy.
Ford earned approximately $1.7 billion on much lower sales than GM's. Ford's shareholders and employees also benefited. The U. S. Treasury benefited in that a tax provision of almost $200 million was recorded in the quarter. Paying taxes versus receiving bailouts is such a patriotic thing to do, according to Vice President Biden. Thank you to the Ford team.
As a result of the Ford team's efforts and its factions' cooperation with one another, new Ford is the old Ford. Ford's commercials will not need to be disclaimed. Does that mean that Ford did everything right? Absolutely not, but it does mean that management, employees, the unions, dealers, suppliers, local government, and lenders worked together to resolve an incredibly difficult problem, and they did so successfully.
I realize that this is not much consolation to Ford or its team, but since the president has decided to laud the activities of those who took the easy way out, let me be one of the first to laud you and your entire team for a job well done! That is the true recession success story. Let's celebrate that.
-- Frank Ryan, CPA specializes in corporate restructuring and lectures on ethics for the state CPA societies. He is a retired colonel in the Marine Corps Reserve and served in Iraq and briefly in Afghanistan.
Let’s see...
Take over the auto industry and wipe out stockholder’s equity, bail them out for billionss of dollars, then sell the stock at half what it cost you...
That’s a great deal!
But the americal people “are on track to” make a profit... somewhere... all they have to do is sell the remaining stock at 4 times the price!
If a plethora of Hollywood Idiots buy 'GREEN' Chevrolet Volts at 40,000.00 per, it still won't happen!!!
REAL Americans are NOT buying from Obama Motors...they’ve switched to Ford or Foreign, but will not stoop to the level of buying the Union-bailout-Obama Motors’ products.
One question that kept coming back to me is, who underwrote the GM IPO, and on what did they base their initial price per share? I’m no finance guru, but isn’t that how an IPO works?
And as of today, those lucky people who bought GM have lost a Dollar per share. What a deal!
National Survey of 1,000 Adults
Conducted November 18-19, 2010
By Rasmussen Reports
1* How likely is it that all the taxpayer money invested in General Motors and Chrysler will be repaid?
2* Suppose GM remains in business but the taxpayer bailout is never fully repaid, is that good for the economy or bad for the economy?
3* Suppose GM remains in business and fully repays the taxpayer bailout, would you look more favorably on future bailouts or less favorably? Or would your view of bailouts be about the same?
NOTE: Margin of Sampling Error, +/- 3 percentage points with a 95% level of confidence
We lost a large part of our retirement savings in the GM stock wipe out.It was a double hit..we lost our money and then bailed them out at the same time..
My question is how did they get an IPO with problematic Internal Controls. Auditors usually issue a "Going Concern" qualification if the Internal Controls are dicey in which case the IPO wouldn't be bought by the public. I hope these new investors in "GM" know what the're doing.
as bad to me is that they underrpriced the IPO last I saw by way too much and allowed the underwriters a windfall
all the outcome of our tax dollars
Stockholders lose equity all the time, thats the risk you take when you buy a stock. The real crime was the raping of the bond holders. Thanks to the Obama admins actions I will never invest in US corporate bonds. Too risky, I’ll buy bonds somewhere where they respect the rule of law....
I certainly wouldn’t invest in GM now, because I don’t see the turnaround they’re claiming. My fear as an investor would be that the IPO, and all it’s current pro forma results have been politicized. One bad quarter (assuming everything will be accurately reported under GAAP), and the stock will be dumped like last week’s trash.
How much of that IPO was purchased by the USA Treasury?
If ANY was purchases—that is like paying off your Visa with your Master Card.
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