Strike Two for the Big Three

So, Detroit is back with their hats in their hands begging for more money. This time they at least drove down instead of flying in their private jets. They brought a plan this time, but reading through them they are filled with more statistical propaganda and woe is me pleads and lack any real “plans”. GM lists the outcomes of liquidity and market share based on upside and downside targets, but where do they get these assumptions. They are based on no facts especially since they have been losing market share forever.

Also all of GM’s earning projections are estimated on a pro forma basis. The following is the definition of pro forma according to investopedia.com. Items sometimes excluded in pro-forma earnings figures include write-downs, goodwill amortization, depreciation, restructuring and merger costs, interest, taxes, stock based employee pay and other expenses. The company excludes these items with the intent to present its figures more clearly to investors. However, whether or not this is accomplished is debatable. This has spawned such nicknames for pro-forma earnings as EEBS (earnings excluding bad stuff). So again GM has come up with assumptions that have no factual basis and has to use a reporting system that does not include all of their actual costs.

Next, GM discusses that they want the total $15 billion distributed by March 2009. Understandably they need money and they need it now, but wait there’s more. GM discusses that they are in talks with their “labor partners” (IE. UAW) to be fully competitive with foreign manufacturers operating in the US by 2012. When do these labor talks have to be completed by you may ask? The answer is March 31, 2009 after GM has received all bailout distributions. By then GM and the UAW have already received their money so what consolations do you think they’ll really make.

Then, GM starts talking about the “sacrifices” their senior staff is willing to make in the form of salary and bonus reduction. Are you kidding me? How in the world can you have the arrogance to even suggest that you are “sacrificing” a bonus when you’ve been bleeding money for that past 4 years and are so badly off that you have to beg congress to stay afloat? They claim they have to do this to retain top staff to help them with the restructuring of the company. Why would you want to retain any of these clowns when their decisions have put the company in this predicament in the first place?

GM also discusses new hire employee pay and benefits and how they have been comparable to Toyota recently and will be completely competitive by 2012. At the same time though, they state that they will be reducing their workforce from 96,500 to 75,000 by 2012. If you know anything about employee contracts a familiar phrase is last one in, first one out. In other words, seniority rules and the newer cheaper hires will be out the door while the older workers that are still under the previous contracts will remain.

Lastly, GM discusses their commitment to creating more fuel efficient and alternative fuel vehicles. They are so committed that they plan on spending $2.9 billion from 2009-2012 on research developing these types of vehicles. There is only one catch though. Earlier this year congress gave the Big 3 $25 billion to do this. So where is the other roughly $5 billion that should be allotted for this type of research.