From The NY Times of 1 Feb 2006:
Quote:
Ford and Chrysler Sales Break Losing Streak
General Motors Corp.(GM.N), on the other hand, was expected to post a sales decline of as much as 10 percent later on Wednesday. The world's largest automaker last week reported a net loss of $4.8 billion, its fifth straight quarterly loss.
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GM wants to sell off a profitable division. Problem is that this division is the only profitable operation in GM - GMAC. But GM has conditions. GM reserves the right to buy back that division once GM becomes profitable. To potential buyers such as Citigroup and KKR, this is a problem. For if GM does not solve their problems, then GMAC has little value. But if GM does turn around, then the GMAC investment that has value must be surrendered.
GM is expected to drop $billions of underfunded pension funds on the American taxpayer as United Airlines, Delphi, and so many other companies have done previously. The game was simple. GM grossly underfunded those pension funds. Then when the stock market boomed in mid-1990s, GM claimed no more pension funding was necessary. When the stock market dropped back, then GM pensions fund were short $billions more. Then GM blames their losses on myths such as too many retirees. Had GM funded pension as they were suppose to when those employees were working, then GM would have no pension fund problem to blame. GM hopes you never learn these little details so that GM can blame unfair market problems and other diversions.
Why do market analysts let this continue without comment? No different than when Donald Trump was bankrupt. One analyst (Marvin Roffman by his employer Janney Montgomery Scott) had enough balls to accurately report that fact and was fired for honesty (as was demonstrated in the following courtroom battle). Even little Donald Trump has that much clot over honest assetments. Market analysts would never report, for example, that GM was only hours away from insolvency in 1990. Market analysts are unlikely today to declare how insolvent GM is for same reasons.
Pension Benefit Guarantee Corporation (PBGC) is but one way that GM will dump debts on American taxpayers when they are ready. It's called corporate welfare. It will continue as long as so many Americans buy their products rather than do what we did to save both Chrysler and Ford in 1979 and 1981. We stopped buying inferior products and therefore remove their only problems - Ford and Chrysler top management. GM will not recover as long as Rick Wagoner and his staff are protected by those who 'Buy American' and therefore cause more downsizing of GM's assets - their employees.