May 2, 2010

NYT Writer on GM ‘Repayment’: Company Is Guilty of ‘Employing Spin and Selective Disclosure’

GovernmentMotors0609Well, it’s not the same as saying “the company lied through its teeth and the government let them,” but it’s as close to that as you’ll probably ever see in an establishment media outlet like the New York Times.

In a column that apparently appeared on the web on Friday while appearing Sunday’s print edition, Gretchen Morgenson, assistant business and financial editor at the Times, ripped into Government/General Motors, GM Chairman Ed Whitacre, and Treasury Secretary Tim Geithner, while uncharacteristically throwing thanks to a Republican Senator for calling the company out.

The flim-flam has to be pretty bad in a Democratic administration for someone at the Times to even notice it, let alone criticize it. But Whitacre’s whoppers were apparently too much for Morgenson to ignore:

… it’s becoming apparent that those seeking the whole truth are still outnumbered by those aiming to obscure it. This is the case not only on Wall Street but also in Washington.

… Truth seekers the nation over, therefore, are indebted to Senator Charles E. Grassley, Republican of Iowa, who in recent days uncovered what he called a government-enabled “TARP money shuffle.” It relates to General Motors, which on April 21 paid the balance of its $6.7 billion loan under the Troubled Asset Relief Program.

G.M. trumpeted its escape from the program as evidence that it had turned the corner in its operations. “G.M. is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse,” boasted Edward E. Whitacre Jr., its chief executive.

G.M. also crowed about its loan repayment in a national television ad and the United States Treasury also marked the moment with a press release: “We are encouraged that G.M. has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability,” said Timothy F. Geithner, the Treasury secretary.

… Mr. Grassley heard back from the Treasury last Tuesday. Herbert M. Allison Jr., assistant secretary for financial stability, confirmed that the money G.M. used to repay its bailout loan had come from a taxpayer-financed escrow account held for the automaker at the Treasury.

Emphasizing that the cash in the account was “the property of G.M.,” Mr. Allison said that the department had approved the company’s use of the money to retire the original debt because it was “consistent with Treasury’s goal of recovering funds for the taxpayer and exiting TARP investments as soon as practicable.”

… employing spin and selective disclosure is no way to raise taxpayers’ trust in our nation’s leadership.

“Strangely” (not really), Treasury’s Mr. Allison didn’t emphasize something I noted in a Friday Pajamas Media column that also went up at BizzyBlog today when looking at the company’s financial statements:

… the funds for GM’s loan “repayment” did not come from cash generated by operations. In fact, the company’s latest available financial information indicates that from September 30 (Page 2 at link) to December 31 (Page 123 at link) it burned through $2.4 billion in cash and equivalents, while its working capital (current assets minus current liabilities) fell by $2.75 billion.

The noted cash bleed only covers about three of the nine months since GM emerged from bankruptcy, but there’s no reason to believe that the company generated billions in cash from operations either before or after the fourth calendar quarter of 2009. It seems likely that its cash bleed has been more than what is currently visible.

It’s really worse than that, because whatever GM is earning in interest on its initially overstuffed-on-purpose cash accounts really isn’t coming from operations either. The December 31, 2009 financial statements (page 122) have an amount called “Interest income and other non-operating income, net” amounting to $440 million.

Morgenson’s write-up is mostly well done, she still went soft in a couple of cases, most notably with Ron Bloom, who defiantly stuck with the lie that she let slide by:

Ron Bloom, senior adviser to Mr. Geithner, bristled at Mr. Grassley’s criticism. “The Treasury Department has tried to be as straight as humanly possible,” he said in an interview. “We have never not been clear about exactly what we paid, exactly the terms of the investment. I’m finding it hard to find anyone obfuscating about this.”

Hey Ron, there’s an easy way to remedy that. Get up and look in a mirror.

Cross-posted at NewsBusters.org.

Robocalls Begin … (Questions for Kevin)

Filed under: Scams,Taxes & Government — Tom @ 3:03 pm

… Robo-Ken Blackwell just asked me to vote for Dave Yost — “paid for by the Ohio Republican Party.”

There were concerns that the organization I refer to as OPRINO (the Ohio Republican Party In Name Only) might drop over $1 million to stop Seth Morgan and Sandy O’Brien and buck up their favored State Central Committee candidates. Based on the blizzard of mailings and now the robocalls, that could be an underestimate.

As to Yost and Husted, the outsized and unprecedented support they are receiving from ORPINO leads to the question of whether the party is expecting anything from them.

Sorry to have to ask these questions, Kevin Dewine, but I am far from alone, and you and your apparatchiks have brought it on yourselves:

  • Do you anticipate that Dave Yost would an independent auditor — or do you expect/demand a beholden bean counter?
  • Who would John Husted be serving as Secretary of State — the people of Ohio, or big-money ORPINO contributors and their favored candidates?

I Guess This Is What Happens When You Stop Worrying About Getting Re-elected …

Filed under: Taxes & Government — Tom @ 1:37 pm

… You stop worrying about whether the truth will hurt.

New York Governor David Paterson, who is indeed not running for reelection, broke what had up to that point seemed to be a building wall of silence about the nature of the act involved in the New York City car bomb scare (HT Ed Driscoll):

Authorities on Sunday are continuing to investigate a failed car bombing at New York City’s Times Square on Saturday evening. Governor Paterson called it an ‘act of terrorism.’

The incident started at 6.34 p.m. EDT on Saturday when a t-shirt vendor alerted a mounted police officer to a suspicious dark green Nissan Pathfinder that had been parked at 45th Street near Broadway with its lights flashing. The officer noticed smoke coming from objects in the backseat of the car and smelled gunpowder. He then called in additional resources, including the fire department.

8-1/2 Painful Minutes from 2007: ‘Husted Announces $100 million in college scholarships’

Filed under: Business Moves,Economy,Education,Taxes & Government — Tom @ 10:55 am

Sometimes I don’t understand why something shows up in a Google Alert.

Given that the following video is from three years ago (March 24, 2007), that’s especially mysterious.

But I’m glad it did, because if you can stand to watch it, what follows reveals the utter incoherence, go-along-get-along nature, and spend-happiness of Jon Husted, Bill Harris, and by inference ORPINO (the Ohio Republican Party In Name Only), all in one clueless package.

It’s difficult to figure out where to start with these guys, so let’s roll the tape:

Remember, this was three years ago … and the results are … where?

Meanwhile, Husted’s defenders and his party-driven apparatus are desperately trying to smear his Secretary of State race opponent’s competence and temperament. ORPINO is also trying to do the same to Seth Morgan. I suggest you guys pay attention to what they say about people who live in glass houses.

Jon Husted, for so many reasons, does not deserve a promotion.

I’ll hopefully have a chance to get into this more this evening.

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QUICK UPDATE: One hears Mr. Harris brag about fuel cells. Here’s a related PR release from a year ago

Ohio Third Frontier has invested over $80 million in fuel cells through a variety of different programs, which has resulted in the creation or retention of 430 jobs with an average salary of $68,431. Overall, the Ohio Third Frontier has created, capitalized or attracted more than 600 companies, has created nearly 55,000 direct and indirect jobs and helped create $6.6 billion in economic impact in Ohio, a 9:1 return on investment.

Points relating to the bolded items:

  • $80 mil for 430 jobs is $186,000 per job.
  • This claim only works if you believe that 8,527 direct jobs magically create 46,473 more indirect jobs. C’mon. This is the same type of math abuse promoted by the Obama administration to claim mega-gazillion “created and saved” jobs in the bogus stimulus plan — and it’s only theoretically “valid” when unemployment is 7.5% or lower. In Ohio, it’s really 11.5%. This “created and saved” nonsense seems to have become so embarrassing that even Team Obama has been recently ramping back the hype.

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UPDATE, 10:45 p.m. — Husted starts off by telling his audience (college trustees) that Republicans want to outspend Ted Strickland in support of higher education (a 10% increase in state aid to higher ed in the second year, which of course gets a round of applause). This is at a time — early in the Strickland administration — when storm clouds were already brewing over the economically lagging Buckeye State, and he was okay with throwing money around like candy. Husted almost seems to believe that the General Assembly can create $100 million out of thin air for the STEMM (Science, Technology, Engineering, Math, and Medical) scholarships he describes. No Jon, the money comes from already overburdened taxpayers.

Without solving the fundamental problems of the state, which are taxes that are too high, a regulatory regime that is too burdensome, and an attitude that the state can pick winners and losers better than the marketplace, the millions of dollars being dedicated to “STEMM” have basically educated kids who simply say “thanks for the memories” and go elsewhere to get the higher-paying jobs Husted and later Harris describe.

Harris thinks that companies will move to Ohio because of the educated collegians who graduate from its schools. Not if they don’t stay here, guys … and they’re not staying here. Kids aren’t going to hang around waiting for companies to come here; when they graduate the favorable business climate has to be there already. You have to fix the business climate.

The fact that one has to explain this to alleged Republicans shows how utterly out of touch ORPINO and its favored politicians are.

Contrasts in Carland

ToyotaFordYesGMchryslerNo1109Despite government and media assistance, GM and Chrysler can only pretend to be performing well, while Ford and Toyota really are.

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Note: This column went up at Pajamas Media and was teased here at BizzyBlog on Friday. The title at PJM is “Fun with Numbers: GM ‘Payback’ of Taxpayer Loans.”

I have added the subtitles within the column.

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Whitacre’s Whoppers

On April 21, Government/General Motors Chairman Ed Whitacre went to the pages of the Wall Street Journal to crow about how well the company is supposedly doing. In “The GM Bailout: Paid in Full,” he told readers the following:

We’re paying back—in full, with interest, years ahead of schedule—loans made to help fund the new GM. Our ability to pay back these loans less than a year after emerging from bankruptcy is a sign that our plan for building a new GM is working.

Whitacre then took to the airwaves to announce the payoff as a done deal, saying we “have repaid” the loans.

There are two “little” problems with Whitacre’s presentation. First and foremost, the “Bailout Paid in Full” headline in the Journal doesn’t pass the truth test no matter how far you try to stretch it. As Forbes Magazine’s Jerry Flint reminded readers:

That still leaves $43 billion. GM can say they paid us back because of the $50 billion in total support, only $7 billion was counted as a loan and the rest was traded for equity in the company that emerged from bankruptcy. But that is really an accounting trick so that GM doesn’t have to pay interest on that money.

That’s a great point. The government poured tens of billions into GM in return for a 61% ownership stake. Unless and until GM goes public and the government cashes out its shares for at least the $43 billion cited plus at least 5% for each year of delay to account for the time value of money, taxpayers will be getting the short end of the stick.

What’s more, the funds for GM’s loan “repayment” did not come from cash generated by operations. In fact, the company’s latest available financial information indicates that from September 30 (Page 2 at link) to December 31 (Page 123 at link) it burned through $2.4 billion in cash and equivalents, while its working capital (current assets minus current liabilities) fell by $2.75 billion. TARP Inspector General Neil Barofsky has asserted, as paraphrased by Fox News, that GM “only repaid the bailout money by dipping into a separate pot of bailout money.” Good luck finding that critical piece of information anywhere else in the establishment press.

Chrysler Cratering

The situation isn’t any better at GM’s fellow bailout recipient Chrysler, nor is the press coverage.

Chrysler lost $3.8 billion during the 205 days after it emerged from bankruptcy last year. It lost another $197 million in the first quarter of 2010. Here was the Associated Press’s headline about those contemporaneous announcements: “Chrysler Posts $197M Loss But Cash Balance Grows.”

One analyst is justifiably unimpressed: “Positive cash flow is being driven by dealer restocking and stretching payables.” The available information bears him out. Chrysler’s December 31 balance sheet showed negative working capital of over $6.5 billion, and a stunning in context $5.6 billion in trade liabilities. The company’s first quarter 2010 financial release included no formal financial statements, but given that its sales during the period trailed last year’s disastrous first quarter by over 5%, it’s hard to see how it generated $1.5 billion in cash without even more interest-free borrowing from suppliers and vendors.

Situation and Outlook

The two bailed-out companies had better hope that industrywide sales ramp up sharply, and soon. That’s because, despite the press’s attempts to minimize the impact, their competitors are eating their lunch in the U.S. market. A smaller piece of a fast-growing pie may be GM’s and especially Chrysler’s only hope.

GM’s March sales were barely ahead of Ford’s and Toyota’s, the latter in spite (maybe because?) of what has from all appearances been an orchestrated media-government campaign to discredit the company’s safety record. Chrysler’s puny first-quarter market share of 9.2% trailed Honda, and was barely ahead of Nissan.

Press and Government Water-Carriers

The press continues to carry GM’s and Chrysler’s water, even when reporting poll results. Last week the Associated Press, after sitting on the information for 40 days, excitedly told readers that “Buy American” is back in the car business. Upon closer examination (i.e., looking at the actual poll data), I learned that Toyota’s loss of 10% in best-quality mind share during the past four years was essentially offset by a 9% gain at Ford. GM’s best-quality mind share dropped by 3%, while Chrysler’s stayed the same. So the only so-called “Buy American” beneficiary has been Ford. Since the early March AP poll seems to have been timed to hit Toyota when it was most vulnerable, it’s reasonable to expect that the Japanese company’s best-quality perception will come back a bit — and when it does, it will likely hit GM and Chrysler much harder than Ford.

The government’s efforts at propping up its two weak wards even extend to its fuel-economy benchmarks, also known as greenhouse gas (GHG) emission standards. GM and Chrysler, with their heavier mixes of light trucks, have been given lower miles-per-gallon and GHG targets to hit in 2016 than their competitors. If saving the environment is so important, why do they get a break?

The GHG standards also have loopholes that would appear at least initially to benefit GM and Chrysler. Of particular interest is the so-called “super credit,” whereby a manufacturer’s sales of electric and plug-in hybrid vehicles (e.g., the Chevy Volt and a portion of whatever teeny-tiny cars Chrysler part-owner Fiat will try to foist on the public) might be counted multiple times in determining fleet-wide miles per gallon and GHG emissions. Further, a number of lawmakers believe that the two companies’ competitors may have been browbeaten last year into accepting stricter standards while GM and Chrysler were going through their bankruptcy proceedings. Tellingly, the Obama administration is refusing to release documents relating to those negotiations.

What is not yet known is the real wild card in the deck: How many more outraged Americans will refuse to buy GM and Chrysler vehicles because of the health care monstrosity foisted on the nation in March by the same government that controls them? We’ll begin learning the answer to that question when April’s figures come out.

So … Where’s the Dispatch Poll?

It may be that the Columbus Dispatch did not commission an Ohio Primary poll this year, contrary to custom, or is waiting a day to release results, which would also be contrary to custom.

Given that the Dispatch itself acknowledges the contentiousness that’s occurring in both major parties (“Sleepy primary Tuesday? Hardly”), this a bit odd.

But then again, their polls’ results compared to reality during the past 4-1/2 years have been so pathetic that the paper may have decided to bag the whole enterprise. If so, that would be a good thing, because those polls were so bad, they constituted a public disservice.

As chronicled here, here, and here, the differences have been big, almost always 10% or more (sometimes a lot more), and have been in the direction of underestimating conservative victory margins or overestimating conservative margins of defeat. In two notable instances (Sandy O’Brien v. Jeannette Bradley in the 2006 GOP Treasurer primary and Mary Taylor vs. Barbara Sykes in the 2006 general election race for Auditor), the Dispatch’s poll predicted wins for the less conservative candidate, and was wrong. The 2006 primary poll predicted that O’Brien would lose by 5%; she won by 4%. The 2006 general election poll predicted that Taylor would lose by 10%; she won by 2%.

For most competitive races (Fisher-Brunner being a notable exception), we’re going to have to go to the polls on Tuesday and vote based on who the best candidates are, not on who is supposedly favored to win. What a concept.

Positivity: Students spend break assisting those impacted by Hurricane Katrina

Filed under: Positivity — Tom @ 8:04 am

From Long Island:

May 1, 2010 / 01:06 pm

It has been nearly five years since Hurricane Katrina struck the Mississippi Gulf Coast and, while the storm has long ceased being at the forefront of the national conscience, volunteer groups from all over the country, well aware that sometimes the scars you don’t see are more painful than the ones you do see, are still coming here to lend a helping hand.

A steady stream of volunteers continues to flow into Camp Hope in Lizana, Miss., where Project Hope and Compassion, an outreach ministry started by St. Ann Parish is headquartered.

Recently, 41 volunteers from Muskegon Catholic Central High School, including 31 students and 10 adults, spent a week at Camp Hope, where they established their base of operations before fanning out into the nearby city of Long Beach to help the Alexander Family, a family of four who have been living in a sugar cane shack that was converted into cramped living quarters after Katrina rendered their home uninhabitable.

“Our high school has been coming down every year since Katrina,” said Michael Tober, campus minister at Catholic Central High School. “I think most of the immediate Katrina stuff is done, but there are also a lot of people down here who just need help. There’s a lot of poverty in certain places, so this just kind of developed into us coming down during spring break and finding out who those people are and serving those who really need the help.” …

Go here for the rest of the story.