March 5, 2009

GM Gets ‘Going Concern’ Warning from Auditors: Evidence That Buyers Have Shunned the Bailed-Out

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 7:16 am

GMsilverLogo0309Some $13.4 billion or so taxpayer dollars later (NOT counting whatever has gone to GMAC), I get this CNN headline e-mail:

GM files annual report, says: “There is substantial doubt about our ability to continue as a going concern.”

From the initial AP story:

…. its auditors cited recurring losses from operations, stockholders’ deficit and an inability to generate enough cash to meet its obligations in raising substantial doubts about its ability to continue as a going concern.

Bailout approver Bush and bailout cheerleader Obama didn’t figure in the high probability, which the numbers show came to pass in both January and February, of refusal by enough potential customers to matter to buy from taxpayer bailed-out companies.

As I pointed out shortly after the original deal was done, not buying GM or Chrysler vehicles is “the only …. action the average person (opposed to bailouts) has available that is practical, and will be quickly understood by the powers that be.”

The bailout money thrown at GM and Chrysler has, as predicted, only made things worse. It must stop.


UPDATE, 10:30 a.m.: CNN’s related story says nothing about how GM’s falloff from the comparable year-ago period has steadily deteriorated since receiving its bailout money. Instead, it limply notes:

GM said Thursday auto sales, which have plunged more than 40% in recent months, must rebound by next year if it is to survive.

Readers can make the call about whether “more than 40% in recent months” fully accurately characterizes this (see graphic at this link — also at Update 4 below):

  • December 2008 (last [mostly] pre-bailout month) — down 31.2%
  • January 2009 (first full bailout month) — down 48.9%
  • February 2009 (second full bailout month — down 53.1%

If you went into your boss and told him that sales were down more than 40% in recent months, and the numbers were really as they are for GM in the past two months, there would be one word to describe your situation once the boss learned the real numbers: Fired.

UPDATE 2: Welcome Instapunditeers!

UPDATE 3: I’ve done a post at NewsBusters on how the press is totally ignoring GM’s post-bailout sales dive.

UPDATE 4: Okay, so there’s no lack of clarity, here are the results for Dec. 2008, Jan. 2009, and Feb. 2009 for the “Big Six”:




  1. Unfortunately Tom, just like with AIG, the vested interests of the controlling political party are more important than the financial wellbeing of the country. I understand that AIG manages much of Congress’s retirement plans (403b). It has never been that GM or AIG are too big to fail, it that Democrat leaders and major campaign contributors are more important than the rest of us. As long as Democrats have the power of the purse, they will bleed the country dry to save themselves. This is what all ruling elite groups do. The bail outs were a financial fraud perpetrated upon the taxpayer. Every group who received a bailout were major financial contributors to the Dem Party.

    Comment by dscott — March 5, 2009 @ 7:38 am

  2. Oops. They forgot one thing.. People are not buying GM’s junk. What the Dems should have done is buy cars instead of handing them cash.. A Chicken in every pot , an Escalade in every garage

    Comment by Mark — March 5, 2009 @ 7:46 am

  3. [...] As BizzyBlog points out: Bailout approver Bush and bailout cheerleader Obama didn’t figure in the high probability, which the numbers show came to pass in both January and February, of refusal by enough potential customers to matter to buy from taxpayer bailed-out companies. [...]

    Pingback by Seymour Nuts » No Kidding, Consumers not Buying from Bailedout Companies — March 5, 2009 @ 8:10 am

  4. One has to ask the question; “Why would anybody in their right mind pay twice for an automobile?” Once through the taxes collected to provide bailout money and once when buying a car from those who take bailout money.

    Comment by Dennis — March 5, 2009 @ 8:16 am

  5. May I ask if any institution that has been bailed out is NOT a Democrat contributor? I could not find one via Google so far.

    Comment by RelativelySaneMax — March 5, 2009 @ 8:19 am

  6. #5, only some of the banks, but they had a gun put to their heads.

    Comment by TBlumer — March 5, 2009 @ 8:28 am

  7. Thanks TB, I guess at gunpoint so would I….

    Comment by RelativelySaneMax — March 5, 2009 @ 8:29 am

  8. [...] supporting my own intact family (wife & two kids), and regularly go to church. That said, this blog posting and link to an AP article that GM’s auditors issued a warning that they may have trouble continuing as a going concern [...]

    Pingback by Citizen Paine Blog » Civil Disobedience, Conservative-Style — March 5, 2009 @ 8:45 am

  9. Once again, it was the Conservatives that were right and prescient.

    Comment by Joe C. — March 5, 2009 @ 8:48 am

  10. The best (and probably least likely) idea I heard for a Big Three bailout was to offer tax filers money, say $7k, for purchase of a new domestic automobile. The automakers would see increased sales volume, the state governments would receive sales tax revenue, those who participated would receive (subsidized) new cars, and those who didn’t would see lower prices on used and competing cars. It’s not a perfect scenario — no bailout/subsidy would appeal to laissez-faire adherents — but this plan would have entailed a broader scope of those benefitted.

    Instead we’ve tossed money directly at the domestic manufacturers, so they can continue to make products… at a time when people have significantly cut back on spending, and have little cash or inclination to buy those products in general (domestic or foreign).

    Comment by Steve — March 5, 2009 @ 9:04 am

  11. #10, your idea would have beaten the heck out of what “we” (without “our” approval, since Congress wouldn’t pass it) have done instead.

    But then, these nutbars in DC thought the bailout “loans” would be a way to force their environmentalist will on these companies in exchange for the money. That doesn’t work very well if the companies aren’t around.

    I don’t agree, if you’re implying it, that the tax credit should only have gone to Big 3 vehicles. The credit would have probably restored the domestic market to pre-POR Economy volumes, but I would have wanted the Big Three to fight for their market share, and not to have it in effect handed to them.

    BTW, the stimulus plan (American Recovery and Reinvestment Act) has a tiny, probably not very effective version of what you’d like: a deduction (not credit) for sales tax paid on new vehicles.

    Comment by TBlumer — March 5, 2009 @ 9:17 am

  12. [...] GM gets ‘going concern’ warning from auditors:    Another adverse impact of the stimulus plan:    [...]

    Pingback by Resume lightening up - Steve Cook on Disciplined Investing - InvestorsInsight Publishing — March 5, 2009 @ 9:34 am

  13. I doubt the loss in sales volume represents popular displeasure with the bailout as much as it does a fear of being stuck with a ‘new’ car with no parts or service availablity and no resale value.

    Which is not to say that the public doesn’t understand with precision who profits from the bailout, and why, and is not amused.

    Comment by PersonFromPorlock — March 5, 2009 @ 9:43 am

  14. It’s not a protest so much as no warranty on the new vehicle when they go bankrupt.

    Actually going bankrupt would remove that disadvantage; then new obligations would be good as long as they’re still around anyway.

    Comment by rhhardin — March 5, 2009 @ 9:49 am

  15. I disagree with Dennis “who would pay twice for a car.” I’ve been paying twice for my children’s education for years, once in the form of property taxes to schools that I wouldn’t dream of sending any child to, and once in the form of tuition to a private Catholic school. The Auto Industry is far behind the Education Industry in the taxpayer extortion racket.

    Comment by Different Steve — March 5, 2009 @ 9:51 am

  16. #13, and #14 —

    The warranty/parts issue is a very relevant factor, and part of the “shunning” implied in the title.

    You can be totally apolitical and rationally decide not to buy from GM or Chrysler in the current situation.

    Comment by TBlumer — March 5, 2009 @ 10:37 am

  17. I’m one of the “customers who ain’t.” I need to replace two cars due to normal age and normal wear, a pickup truck and a sports car. The outgoing vehicles are a Ford (Ranger) and a Chevy (Corvette). My initial plan, pre-bailout, was to replace each one with this year’s same make and model.

    GM is off my list because of the bailout. The way I see it, they and their union already held me up for plenty of money, and the politicians are not done shaking me down for GM’s benefit; I’ll see them in Hell before I give them a dime voluntarily.

    Comment by Kevin R.C. O'Brien — March 5, 2009 @ 11:01 am

  18. I’ve decided that any business that takes taxpayer dollars isn’t going to get my business. So, I decided, after 30 years as a Chevy man, to buy a Honday this time around.

    Message to GM: “I won’t buy your vehicles if you’re making them with m y tax dollars!”

    I’ve moved my bank account as well. I will not invest my savings in a bank that is paying me interest with my own tax dollars. Admittedly, since most banks have taken (or been forced to take) bailout funds, this has been more difficult, but I finally found a regional bank that only took the money under protest and intends to pay it back as soon as their regulator will allow them to.

    Message to Citicorp: “I want you to go out of business.”

    Message to Bank of America: “Eat sh*T and die you fkin thieves.”

    Any other company that intends to steal my tax dollars can also go fk themselves.

    Comment by striker — March 5, 2009 @ 11:35 am

  19. Ummm … aren’t car sales down by about this percentage for all manufacturers, including (even) Toyota and Honda? Just lookin’ for a little perspective.

    Comment by ricketts for thee — March 5, 2009 @ 11:37 am

  20. 20 pts. to “Different Steve” for that response. Been right there with ya, buddy.

    Comment by Rose — March 5, 2009 @ 11:40 am

  21. “People are not buying GM’s junk.”

    Another big lie. Well, actually two big lies. GM still is the market share leader in the United States and continues to sell more cars and trucks in North America than Toyota. As for “GM’s junk”, GM has better statistical quality than BMW and Mercedes-Benz. Drive a Chevy Malibu and then tell me that it’s “junk”.

    GM has, no doubt, consumer tested both a government bailout and a chapter 11 bankruptcy and my guess is that while getting money from the gov’t is creating a retail backlash, sales would be even worse if they filed Ch 11. As it is, the domestic automakers’ sales are down by about 10% more than Toyota and Honda (both down 35-40%), most likely due to concerns over the domestics’ viability. If all this talk about their risk of demise is hurting sales, imagine what an actual bankruptcy filing would do.

    I wonder how consistent folks are who say they won’t buy a GM or Chrysler product because that would be like paying for the product twice because the companies are already getting taxpayer dollars. Have any of these people moved their bank accounts and mortgages from large banks that have received TARP funds to credit unions or regional banks that are well managed and haven’t taken TARP funds? Do any of these people who won’t “pay for a car twice” consider that when they buy milk, cheese, eggs or just about any food, that they are paying farmers a second time?

    The money that GM & Chrysler have requested from the government is a fraction of the almost $200 billion taxpayers have given to farmers over the past decade.

    Of course, farmers, banks and automakers are pikers compared to government employees when it comes to suckling at the taxpayers’ teat. Companies all over the country are cutting back and laying off thousands of employees. How many government employees (with their guaranteed pensions and lavish benefits) have been laid off?

    Comment by Ronnie Schreiber — March 5, 2009 @ 11:40 am

  22. #19, um …. no. The graphic in the post I linked to provides the perspective. I just carried it into the post at Update 4.

    Comment by TBlumer — March 5, 2009 @ 11:57 am

  23. #21, A whole bunch of bad things doesn’t mean we do another. And by the time we’re thru, a non-bailed out GM and Chrysler might suck up $200 billion.

    You’ll note that I’m not ripping GM’s quality, which is probably fine at this point. But it’s too little, too late, IMO.

    Comment by TBlumer — March 5, 2009 @ 12:04 pm

  24. This is in response to comment #21.

    I have seen this argument many times before: We have done a lot of dumb things in the past so y’all can’t complain about doing even more dumb things now!


    Explain to me why I should have to pay for someone else’s mistakes? When can we stop paying for their mistakes? When is it enough?

    Again I say bollocks!

    You seem to not like how government employees appear immune to layoffs and have lavish benefits. I agree, but how can you defend GM’s suckling while complaining about someone else doing the same thing?

    Comment by PunditJoe — March 5, 2009 @ 1:00 pm

  25. Since unions helped elect Obama, why should anyone purchase products made by unions?

    Comment by PacRim Jim — March 5, 2009 @ 2:38 pm

  26. I suggest we all join in on the fun downtown Cincy @ the Tea Party event on March 15th…I’ll even bring “Green” Tea for the libs. >;o)

    Comment by Rose — March 5, 2009 @ 5:21 pm

  27. I can not wait until the Big Three are gone, and Europeans/Japanese/Korean working stiffs can be taxed to fund my whip.

    Comment by Paul — March 5, 2009 @ 7:12 pm

  28. [...] right, and center, are now lined up against the bailout.”  Others have taken to organizing a virtual boycott that may be working to crush comapnies who have taken taxpayer dollars.  Auto sales numbers [...]

    Pingback by » The next bubble will explode the loudest — March 9, 2009 @ 7:47 am

  29. You all are a bunch of winy closed minded people. Do you not see the thousands of people that will lose there jobs if the big 3 go under??? That would be great for our economy situation right now. If you would pull your head out of you a$$ and see that we are the people who voted these people in, so what they do with our money we already gave them permission by voting for them. Yeah, GM has made mistakes, but I am willing to bet not one person here can say they never made a mistake and asked for help to fix it. If we just woke up, and let it go, you would see that a faster fix to this is to actually buy an American made car instead of one of these Jap POS’s. That is our money going out of the country stupid. We should not allow any foreign cars in the country for 10 years and we would be done with the recession faster. I do not work for GM, never have, and even had a great job running a Biodiesel Refinery, but not anymore. The plant went under and so are many more and I have no job. Also, look into where all the big 3′s money went. Trying to meet all these ever increasing government safety and emission standards. If we were to slow down how fast we were changing emission laws, and give them a little relief, cars would be cheaper and sell more. Impose emission standards on imports and them just improve on there tech. We cannot afford this right now so let them pay. I am sorry, but you guys are idiots to think not spending money on American cars is going to help this economy, you must all have jobs.

    Comment by All American Man — March 14, 2009 @ 12:04 am

  30. #29, sorry about your job.

    We can do without the name-calling in the future.

    We should not allow any foreign cars in the country for 10 years and we would be done with the recession faster.

    Are you also going to take the foreign content out of domestic cars? Good luck with that. Those “Jap” companies (there are many who consider “Jap” a racial epithet, by the way) and their suppliers employ hundreds of thousands in the US. And Detroit’s quality would never have improved without the competition.

    I disagree with draconian emissions standards too, but they apply to all companies, so you can hardly use then as a reason why GM and Chrysler are going broke.

    Comment by TBlumer — March 14, 2009 @ 6:52 am

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