“Hourly workers will receive close to $7,000 each in bonuses, despite the fact that GM missed earnings estimates.”
Can you imaging what they’ll get if/when GM ever again makes a profit? Shazzam! I’m in the wrong line of work.
IF the auto bailout had worked (??? because they were short on cash at the time??? I still don't get the reason for auto bailout, but that's beside the point), GM turned their business around and become a viable company, then they don't need to pull this stunt.
But we all know that's not the case. This 'mysterious earnings report' showed that GM will continue to need 'future bailout(s)'. Just like Obama's Coninuous Loop of Stimulus money to 'jump start our economy'.
The best description of that is "the patient is dying from multiple organ failures, and the doctor keeps pumping in viagra".
Give credit where credit is due.
So Romney was right? GM should of done a traditional BK?
Not all that mysterious... On the Goodwill writeoff GAAP requires you to value the acquisitions you make periodically and if the present value of the future cash flows is less than what you paid for the business then you write down the asset to the fair value. Used to you would amortize goodwill over a period of time (typically 15-30 years). That method changed a few years back to the current one. the event is non-cash and has no impact on real earnings. For example my company wrote off about a billion in goodwill in 2009 and it had no impact on us at all. We excluded it from our non-GAAP earnings as well. It’s an accounting exercise.
The release of the valuation allowance is more complicated. Here’s the description from Wikinvest:
“A valuation allowance is a balance sheet line item that offsets all or a portion of the value of a company’s deferred tax assets because the company doesn’t expect it will be able to realize this value.
Sometimes, a company expects it will not be able to realize the benefits of its deferred tax assets. For example, If a company loses $10 million, it would record a deferred tax asset representing the decrease in taxes on its next $10 million in earnings. However, if the company doesn’t expect profits for the next several years, and doesn’t expect to earn $10 million in the seven-year time horizon before these deferred tax assets expire, it can’t record them at full value - because the company won’t be able to take advantage of this tax benefit.
If a company expects there is more than 50% chance it will not be able to realize some of its deferred tax assets (because its future income won’t be large enough to take full advantage of these tax breaks), it must report a valuation allowance to account for this.”
GM doesn’t deserve a dime until all former holders of GM bonds are repaid.
GM uses non-GAAP
I’m still waiting for the explaination of how he can legally take my GM bond and virtually give it to the UAW.
It’s too bad GM is still making mostly crap since Cadillac is finally producing a fairly decent competitor with its ATS.