State-controlled General Motors issued a supposedly comprehensive 8-K report to the Securities and Exchange Commission last Friday.
If you only read the Associated Press's coverage of that document's release courtesy of reporter Tom Krisher, you would at least know that:
- The company doesn't expect sales to improve during the rest of the calendar year.
- That the $50 billion in post-bankruptcy funding it has received (over and above tens of billions in other forms of aid ranging from bailout loan write-offs to pension relief, none of which Krisher mentioned) may not last beyond "the short-term," which in accounting parlance usually means a year.
- Despite the item just mentioned, GM has taken steps to get ready for a hoped-for initial public offering next year. (Though only time will tell, yours truly, as explained below, thinks this move looks more like posturing and misdirection than anything substantive.)
All of that is nice, but the fact remains that GM produced no second quarter financial results. Further, as I noted this weekend, GM has said that second quarter financials won't be coming out for a long time, if ever.
Exhibiting very weak news judgment, Krisher saved that information for the last two paragraphs of his 23-paragraph story, which read as follows (saved here at host for fair use and discussion purposes, and for future reference after AP makes it inaccessible):
The company also disclosed Friday that it would not report second-quarter earnings this year, but it will disclose its performance for the three- and nine-month periods before Sept. 30. Those reports will come after the third quarter closes, and the company said they will not comply with general U.S. accounting principles. GM, however, will file reports that meet the accounting standards in 2010.Spokeswoman Renee Rashid-Merem said GM won't file the second-quarter earnings because of the extensive work still needed to set up the books for the new company. The new company also needs to finish accounting changes made necessary by selling its good assets to the new company.
"Would not report second-quarter earnings this year" in the first sentence above, combined with "won't file second-quarter earnings" in the second paragraph, would appear to really mean, "won't ever," or "won't ever, unless we decide to go public." And the GM spokeswoman's excuse for not filing is pathetic, given that accounting systems at the "old GM" were in place for decades, and in bygone days were seen as the model the world should follow.
Here are some other things one learns from the GM's 3,100-page 8-K (over 90 pages of primary test and followed by 3,000-plus pages of exhibits) that Krisher either chose to leave on the cutting-room floor, or didn't detect in the first place. These are the kinds of things you see either in poorly-run companies, or as is the case with this one, companies controlled by a government:
- "As part of our business plan, we have reduced compensation and have reduced and will continue to reduce headcount for our management and non-management salaried employees, which may adversely affect our ability to hire and retain salaried employees." Translation: Since the government is dictating salaries, good people may leave, and we may suffer.
- "Our plan to reduce the number of our retail channels and core brands and to consolidate our dealer network is likely to reduce our total sales volume ...." Translation: We're trying to shrink our way to profitability. That can work, but shrinking companies don't usually do IPOs, and an astute Krisher might have pointed that out.
- "MLC (Motors Liquidation Company, the new name of the "Old GM) determined that its internal controls over financial reporting were not effective. .... The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan." Translation: We didn't have a handle on things when the government started bailing us out, we still don't, and we don't know when if ever we will.
Also, one of the voluminous loan or security agreements in the 8-K exhibits has a limitation on purchases of corporate jets. I wonder how the car czars and the apparatchiks from Treasury (known as "UST") are getting to and from Detroit?
To me, here's the real kicker, showing that the administration's promise not to meddle in GM's affairs is in no way binding:
"The UST (or its designee) owns a controlling interest in us and its interests may differ from those of our other stockholders. .... To the extent the UST elects to exercise such influence or control over us, its interests (as a government entity) may differ from those of our other stockholders and it may influence matters including:
- The selection and tenure and compensation of our management;
- Our business strategy;
- Our relationship with our employees, unions and other constitutencies; and
- Our financing activities, including the issuance of debt and equity securities."
Translation: It only looks like we're in charge here.
Also, while GM cited customer confidence as a risk factor, it didn't cite the real and serious problem it has with the significant plurality of American consumers who are opposed to the bailout of the company, to the point where they have told pollsters that they won't buy GM vehicles under any circumstances. The risk to GM is that these people really mean it, and that they will stick to their no-buy pledge over the long-term.
Readers who have hung in there through this post will also be amused by this paragraph from the 8-K:
We are a private company (technically, they are, according to business definitions -- Ed.) and are not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. We are a voluntary filer with the Securities and Exchange Commission (SEC).
Translation: Even though U.S. taxpayers essentially own 61% of the company, we don't have to tell anyone anything if we don't want to. Be thankful for what you get, and leave us alone.
Cross-posted at BizzyBlog.com.
