GM's one very small & very expensive step toward economic recovery

June 1, 2009 GM filed for chapter 11 bankruptcy. 6 months ago, GM's former CEO Rick Wagoner said bankruptcy was unthinkable. He said American car buyers would not purchase cars from a carmaker in bankruptcy for fear of loss of warranty support. For the latest on this and other interesting tidbits of info on this monumental bankruptcy, go to GM's official bankruptcy website, www.gmreinvention.com. There you will find reassurances that current GM customers have nothing to worry about, GM asked the bankruptcy court to require continued honoring of all warranties, parts needs and promotions. Even customers of dealers that will not have their contracts renewed have nothing to worry about. Other GM dealers will gladly step up to the plate and fulfill any customer needs. I hope none of the unrenewed dealers were the only GM dealer within a 25-50 mile radius of their city/town. That would create a major inconvenience for existing customers and a discouragement for future prospective customers.

GM also plans to trim its dealerships down to 3600 by the end of 2010. From its 5969 dealers in 2008, this is a 40% reduction. At the end of 2008 GM had 20% share of the USA auto sales. Toyota had 19% share with 1500 dealers in the USA. Either GM is going to increase their market share or further reduce the number of dealers. Only time (36 to 60 months) will tell.

Now, for the really bad news. What can the owners of GM stock expect now. Go to gmreinvention.com and click on investors. This is how GM will respond to investors that try to file a claim with the bankruptcy court:

Why can't stockholders file claims with the court?
The Bankruptcy Code is clear that stock is an "interest" and not a "claim." Stockholders will be
instructed as to how they can establish their proof of interest. If a stockholder does file a "proof
of claim," the company will object to that claim on the basis that the stockholder does not have a
valid claim according to the rules of the Bankruptcy Code.

In 25 words or less, current GM shareholders are toasted road kill. Now we know why diversification of your investments is so important. If any of the GM shareholders are highly dependent on their GM share dividends in their retirement, they are in a world of pain. I hope most shareholders saw the writing on the wall before the US government did and bailed out. Ultimately, the bankruptcy court will decide if the shareholders will get any compensation. Let's face facts, folks. If the GM shares were worth anything, GM would not be in chapter 11. The share price reflects the market's and investors' valuation of the company as a profitable ongoing concern. The only good news for shareholders is if they also have a GM credit card, they will keep the bonus points and use them to purchase their next GM vehicle, if they feel so inclined and can still afford one. The stock of one of the (formerly) largest corporations in the world gets trashed but credit card points remain intact??!! With priorities like these, I no longer wonder how we got into this recession.

This posting is dedicated to all the men and women serving America abroad. Army, Air Force, Coast Guard, Marines, Navy, State Dept. and anyone else out there who is working to protect our freedom and interests. Thank You Very Very Much!!!


The week before Christmas 2008
(for Detroit and D. C.)

T'was the week before Christmas and all through the plants,
not a creature was stirring, not even the ants.
The assembly lines were shut down with great care
In hopes that Uncle Sam would soon bring repair.

From politicos in D. C. there rose such a chatter,
"We cannot allow Detroit's factories to be battered!!!"
The Motor City Magi hopped in their private jets
and flew to D. C. to beg for as much money as they could get.

They went to Congress with visions of C-notes in their heads
but were admonished "you should have driven instead!!!"
Back to the Motor City the Magi's chariot's did fly,
all so heartbroken they could have cried.

"Who are these wise-arses to treat us in this manner?
Fannie and Freddie prove us managers much better.
If we could only get back our campaign contributions
that would give us true problem resolution!"

The magi gave a collective shrug and dejectedly sighed
"It's back to D. C. we all must fly.. make that drive!!!"
They ordered their lackeys to acquire them good wheels.

"Get a Ford!! Get a Chevy!!!
Get a Chrysler! Get a Buick!!
No Navigators! no Suburbans!
No Vipers! No Vettes!!!
especially no Camry or Civic!"

The Magi dashed landward to the East this time
Hoping their gestures would work just fine.
Democrats vowed taxpayers they would protect
and still save the industry from its own neglect.

Republicans responded with "wait just a minute,
we can't protect taxpayers without taxation limits!!
We're not Santa Claus, nor the Easter Bunny
The taxpayers just don't have that much money!!"

This put the hot potato in the President's lap
He told the magi" this is the time to act.
I will authorize $14 billion to you.
In return this is what you need to do."

"By march 31 2009 you will have a plan in place
to reverse 30 years losses in the market share race
You must get all your stakeholders to work together
to make your companies a whole lot better."

The magi did thank him for the multitude of bucks
"It's nothing" he said "as Pres I'm just a lame duck.
This time next month you'll deal with a new president
who wants to spread the wealth to all US residents."

This thought made Mr. Bush look forward to Texas
and getting away from the city of taxes.
He was overcome by a flood of so much good cheer
He proclaimed "Merry Christmas and a happy new year!!"

The End (finally)

Why a car czar creeps me out.

During the oil embargo of the early 1970s, President Nixon appointed James Love as Energy Czar to head the newly formed Federal Energy Administration. Now we are stuck with a cabinet level agency, the Department of Energy in its place. Did we really need another bureaucracy in the first place? I don't think so.

My concern is a Car Czar will transform itself into another large bureaucracy. Thank goodness President Bush did not appoint a Czar for 31 days, he just left the responsibility with Treasury Secretary Henry Paulson. The Treasury Dept. is funding the auto bailout so they should oversee the use of the funds.

My advice for President Elect Obama is this. Make a list of all the government agencies that GM Ford and Chrysler have to deal with now. I'll get you started with the obvious, departments of Labor, Commerce, Transportation, EPA. These are just a few cabinet level federal agencies. Don't forget the various and sundry state and municipal governmental entities they deal with. Is another large bureaucracy going to make the Big 3 manufacturers into instant turnarounds? No, it will only strain their ability to turn a profit, the basic ingredient of a viable recovery.