Yet another not so great week for Government Motors (GM).
A pseudo-private company of which We the People still possess 33% – residual ownership that dates back to the combined December 2008/May 2009 $49.9 billion bailout.
At first glance, you would think this was a good week for GM – and that is certainly how they are spinning it.
DETROIT – General Motors Company (NYSE: GM) today announced first quarter net income…of $3.2 billion….
“We are on plan,” said Dan Akerson, chairman and CEO. “GM has delivered five consecutive profitable quarters, thanks to strong customer demand for our new fuel-efficient vehicles and a competitive cost structure that allows us to leverage our strong brands around the world and focus on driving profitable automotive growth.”
President Obama’s 2012 re-up team dove right in.
Jeremy Bird, national field director for Obama for America — the president’s reelection campaign — sent an email titled “Saving the American auto industry.”
“…General Motors (is) reporting that they are healthy and growing: On Monday, …GM shared…strong figures in its earnings report….”
And (of course) the broad media consensus was to back this sunny presentation.
But what of the Dan Akerson-described “strong customer demand for our new fuel-efficient vehicles and…competitive cost structure?”
As we have frequently discussed, the electric-hybrid Chevrolet Volt’s sticker price makes Government Motors no money at all. It costs $41,000 to make – and sells for $41,000.
A main reason for the “strong customer demand” – of which there really isn’t any, as barely 1,000 Volts sold in this vaunted first quarter – is the $7,500 in GM per-car-kickbacks.
Which means that GM is in fact losing that $7,500 on each unit sold. Which means We the People are losing that $7,500 on each unit sold.
That’s a heck of a “competitive cost structure.”
As for the Volt’s “fuel-efficient” status? It gets – at most – 40 miles on the electric engine before it requires an up to 8-hour charge. Not anyone’s reasonable definition of efficient.
Another “fuel-efficient” – i.e. small – vehicle GM sells is the Chevy Cruze. And there are Cruze problems galore (again, perhaps it’s in part the spelling).
First, 2,100 Cruzes were recalled when steering wheels started spontaneously falling off.
But that was just the tip of the Titanic.
Government Motors is now forced to recall ALL 154,112 2011 Cruzes – for multiple problems. There was, again, the steering. And an automatic transmission with a phantom Park – it looks like it’s out of gear, but (surprise!) it’s not.
Not a very “fuel-efficient vehicle” if you can’t disengage the transmission.
But the recalls don’t end anywhere near there.
GM is also recalling 8,723 2011 vans – two different models, the Chevrolet Express and the GMC Savana – for potential brake leaks.
But wait – there’s more.
There are the 6,303 2011 trucks being called back – two different models, the Chevrolet Colorado and the GMC Canyon – that are suspected of having a windshield wiper nut that wasn’t tightened enough.
(The mental image of wiper arms flying off, up and over windshields….)
Government Motors trucks, vans and “fuel-efficient vehicles” – all being recalled. That’s pretty much every vehicle shape GM has.
They are nothing if not thorough.
It’s only the first week of May, and Government Motors has already this year recalled just under 170,000 vehicles.
That’s not quite the successful first quarter GM, President Obama and large swaths of the media are celebrating.
Especially when one digs into those first quarter numbers.
(A)lmost half of the ($3.2B) profit came from $1.5 billion in one-time gains that included the sale of stakes in former GM subsidiaries Delphi and Ally Financial.
In other words, it was the strip mine sell-off of assets that boosted GM’s first quarter numbers by nearly half the total – gains that of course cannot ever again be replicated.
And there were the aforementioned car purchase kickbacks. Which means GM vehicle sales that did occur were often not so much earned as bought.
And as we’ve seen with GM in China, when the kickbacks stop, so too do the sales.
Not so much the Akerson-described “strong customer demand for our new fuel-efficient vehicles and…competitive cost structure.”
And even with all of this artificial inflation – both of the first quarter numbers and the hype – GM’s stock price closed on Thursday down 3.1% – at $32.02. BELOW the November 2010 post-bankruptcy, pre-first quarter 2011 Initial Public Offering (IPO) price of $33.00.
Again, for We the People to just break even on our ownership share – never mind the profit President Obama has promised we would be making – GM stock must rise to $53 per share.
And even after this fake first quarter, it remains nearly 40% below our even money point.
If only we could recall the initial $50 billion bailout – and never have given rise to Government Motors.
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