NYT Writer on GM 'Repayment': Company Is Guilty of 'Employing Spin and Selective Disclosure'
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 BizzyBlog.com.