Skip to comments.Akerson Admits GM Bankruptcy Not Well Thought Out
Posted on 06/12/2012 10:00:31 AM PDT by jazusamo
General Motors CEO, Dan Akerson, discussed some of the issues plaguing GM's share price in today's Wall Street Journal. Akerson laments a bloated bureaucracy at Government Motors that has not greatly improved since the company's 2009 bankruptcy process. Despite admitting that the bankruptcy was rushed through without proper planning, the Obama-appointed Akerson did not mention the continued UAW overhangs at the company.
Regarding an inherited bloated management structure at GM and the inefficiencies that went along with it, Akerson stated, "The good thing about our bankruptcy is that it took only 39 days. The bad news is that bankruptcy took only 39 days. If we had been there longer, people would have asked these questions and looked at these things."
As a result of the Obama Administration being able to protect UAW interests in a rushed-through bankruptcy process, many of the underlying problems at GM were not addressed. Akerson points to European problems and bloated management, but journalists neglect to question him on the $25 billion under-funded pension obligations along with an even more neglected additional $6.8 billion in other post-retirement liabilities. The idea that GM is so financially sound that they could buy back government's 32% taxpayer-funded stake in GM has been touted by multiple media sources. The balance sheet, and now the seeming words of caution from Akerson, belies the claims of "fortress-like" financial strength at the company.
I have stated in the past that the Obama Auto Task Force which orchestrated the GM bankruptcy process relied on bankruptcy experts instead of auto industry experts when they restructured GM. Labor costs and pension liabilities were overlooked as the politically powerful UAW had its interests protected. The belief that an influx of $50 billion of taxpayer money and the removal of $28 billion of bondholder debt could permanently fix GM's problems was a major miscalculation. The simplistic view that closing dealerships would greatly lower GM operating costs was also not accurate. Those realities are now coming to light as GM has about the lowest profit margins in the industry, despite all of the taxpayer help.
The Obama Administration did have an opportunity to slow down and think things out during the 363 bankruptcy process. When my group that represented individual GM bondholders requested that the process be slowed down, the Task Force threatened to pull out and allow a total liquidation of GM. GM now has to live with the government's decision to ignore operational weaknesses at the company while striving to ensure that the UAW was not adversely affected.
It appears that Akerson's comments and actions continue to be largely politically-driven. He praises the Obama Administration for not participating in board meetings, but neglects the fact that many of the board members are Obama appointees. The denial that pension obligations and labor costs put GM at a competitive disadvantage is also cause for GM shareholders to be concerned. An illogical and costly focus on the Chevy Volt, which loses money for shareholders but supports Obama green initiatives, increases the likelihood that Akerson is motivated by politics rather than profits.
The cautious words of Akerson give more evidence that GM remains a speculative and dangerous investment choice for retail investors , as well as for the American taxpayers who are forced to stay invested by the Obama Administration as the President campaigns on the "success" of GM. And if the economy declines in the future, GM may have a second opportunity to get the bankruptcy process right.
Mark Modica is an NLPC Associate Fellow.
“Not Well Thought Out” my ass.
It was and remains, nothing less than government enabled financial crime on a vast scale, that should have shaken the integrity of our financial markets to their very foundation.
It will be a long long time before I consider buying another GM vehicle.
Thought out well enough for me to decide that I’ll never ever consider purchasing a GM product again.
Coupled with my unending effort to socially stigmatize anyone who actually is stupid enough to purchase said vehicles.
Amen to you all.
This was a well-engineered (and possibly illegal) transfer of wealth from bond holders to the Unions. It was also a way to put many family-owned dealerships out of business and set up White Crib cronies with dealerships. GM is a shadow of its former self, and would have been better off going through traditional (and legal) bankruptcy. It would have recovered faster, been more streamlined, and more profitable.
You got it. It was very well thought out to protect unions and screw bondholders, who should have been secured creditors with a priority of payment. And of course a bloated bureaucracy remains. Government Motors has turned into Amtrak. A full employment program for Dem supporters. I will never buy a car from them.
Its the fault of We the People it has taken him THREE freakin’ years to figure THAT out. We the People had an obligation to one another and the USA to make that evident right at the git go ...or within about 2 weeks
I bought my first Japanese car in 1972 and have owned nothing since, (ok,one German vehicle) a total of about 15 vehicles. In all that time not including service which consisted only of oil changes (I never return to the dealer unless it a warranty item) I have spent a total of about $500 on repair in some 40 years. I do not include wear and tear items such as brake pads, tires, windshield wipers, etc.
I always sell my own cars and because I care for them and keep them looking showroom new I get absolute top dollar.
I bought an Acura the last time I purchased a car. 92,000 miles later I’ve changed the tires, oil, and a battery.
Still on the original brakes but my mechanic says they are good for another 20k miles. Probably need the brake fluid change before then though.
I successfully talked my wife out of buying a Buick Verano for a US built 2012 Honda Accord!!!
We did not buy Government Motors SH!T.
Japanese cars have come a long way since they were introduced in America. Back then it was a common to here dealership employees say when things were slow they could sit around and watch the cars on the lot rust.