GM Offers Buyouts to All UAW Members
How can you lose more money than you have and not go bankrupt? I don't have time for a big post now because I've got work to do. As I write this, (after the announcement of the loss) Yahoo quotes GM stock at $27.20 per share. According to the Detroit Free Press, my main source for this post, the loss in the 4th quarter of 2007 amounts to $68.45 per share. Despite this, GM's stock so far is only down $.27 per share.
Why is that? According to the Free Press, "excluding special items", GM's net loss was only $22 million -- that's statistical break even for GM. Here's what Freep said about the $38 Billion figure:
Despite the historic decline, the loss is almost entirely attributable to a non-cash special accounting charge of $38.3 billion that GM announced in the third quarter.
The charge relates to the valuation allowance against deferred tax assets.
If tax accounting can make a $39 billion difference, it's probably more of an indictment of our tax system than it is of General Motors.
The other big news is that Chevrolet intends to offer buyouts and early retirement to all its UAW members. It has sweetened offers already on the table. Finally GM has gotten smart and offered an annual payment option. (In the last round, workers got killed on taxes by taking the lump sum. Others blew the money all at once or had the money attached by creditors.)
On the product side of things, there's no question that General Motors has been going in the right direction. Overall car sales increased 3% last year, and 60% of sales were outside North America. The Cadillac CTS is a critical and market hit. The Chevrolet Malibu is a hit with the critics. It would probably be a hit with buyers if they could find one. (I visited a Chevy dealer last week, and I passed a row of about 15 beautiful new Corvettes to look at the one Malibu on the lot. That car was already sold.) Chevrolet's flex platform looks well placed to deliver competitive vehicles that are gas/electric hybrids, plug-in electric and fuel-cell powered.
The bottom line is that you can look at this as the glass 1/4 full or 3/4 empty, your choice, but actually, that's really no change to the way things were before, so its no surprise. As press coverage continues regarding General Motors' financial condition, don't look so much at the income statement, look at the balance sheet. The balance sheet should give you a better idea of whether GM will have what it takes to ride out the rough patch and push through until the next generation of vehicles.
BY THE WAY The Blogger spell checker hasn't been working as of late. If I mispell, misspell, whatever, any words, I'm sory.
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