Editorial: General Motors Death Watch 222: The Truth Will Out
If you need proof that GM’s management hasn’t changed, consider the fact that the company is preparing not one but two rescue plans for Congress, The automaker claims it needs both a public plan and a top secret “for their eyes only” brief because sharing “proprietary information” in a public forum could be “problematic.” Total hogwash. There is only one reason GM won’t let the public view detailed information about its future– it doesn’t have one. With or without a look at the fine print, the truth remains: GM’s restructuring plan as presented to Congress will never work.
GM’s 10 to 12 page public document will cover, in broad strokes, the changes the otherwise and in any case C11-bound carmaker promises to make in return for some $12b worth of government loan guarantees. We already know most of what the document will include: a long-range vision of fewer brands and dealers, UAW concessions on the JOBS bank, and a “plan” to do a partial debt for equity exchange with its bondholders. We might even get to see a pro forma balance sheet and income statement that “proves” the plan works. We will definitely see GM’s PR maestro Steve Harris’ hand, ensuring that the headlines offer journalists a vision of Zion from the top of the RenCen.
Bullshit. Without specifics GM’s public plan is a sham. It’s a PR exercise designed to convince Congress that GM has “gone back to the drawing board” while hiding the truth of the company’s prospects (such as they are) from those of us who earn a living dissecting these “promised land” statements. There will be nothing in the public report that will prove that GM has the capacity to restructure in such a way to become profitable.
As always, the devil is in the details. Yes, brands will be dropped. But the termination will occur as already planned: over time, not immediately. And those brands chopped will be part of an existing sales channel; dealers will lose a franchise, not their dealership. More specifically, Pontiac will die–- leaving most dealers with Buick and GMC. Saab and Hummer go away, leaving Cadillac to stand on its own. Saturn will be “re-energized” somehow, not killed. Add that up and it’s a whole lot of nothing. Literally.
Yes, the JOBS bank will disappear. United Auto Workers boss Ron Gettelfinger finally got the message that most Americans find it beyond ridiculous that union workers get 95 percent of their salary for doing nothing. The part we won’t see: JOBS bank members will get paid to not get paid not to work. Think of it as forced buyouts instead of voluntary; which also conforms existing attrition plans. As for the Mother of All Health Care Funds (a.k.a. VEBA), the UAW will agree to delay the $7b payment due– in lieu of immediate shortfall health-care compensation. Congress will miss the nuance of shifting a balance sheet liability to an operating expense.
Yes, there will be debt exchange. In theory. GM will say it needs federal money now to buy time to arrange the exchange. But there’s not a chance in the world that GM has gotten agreement from those bondholders in the two-week period since the disaster on the Hill– especially as GM’s plan for a restructuring won’t work. In any case, we’ve already written (and Porsche’s CEO agrees) that GM would have to surrender the company to the hedge funds if any such exchange takes place. GM’s dead if they do, dead if they don’t.
The secret plan we won’t see will prove to those knowledgeable about such things that GM’s new new new new new new turnaround plan can never work outside of bankruptcy. But those in-the-know will keep their mouths shut. All we’ll get are headlines about the “New GM.” Proof that GM is and will be making the “hard decisions” necessary to achieve profitability. Executives taking pay cuts. Dealers calving-off worthless brands (while still trying to flog “badge engineered” copycats from Chevrolet and Cadillac). A new, more compliant UAW. And bondholders “indicating” willingness to do an exchange-– without it actually being done.
Congress is about to risk $25b of OUR money on GM and their cross-town frenemies. We need to contact our representatives and demand that they give us the whole GM recovery plan, nothing less. Let the public see the fine print and render OUR opinion. Maybe the plan will contain some details we didn’t think about. Maybe it offers a remote chance of working. But given GM’s history of unrealized promises of turnarounds and great new products, the secrecy indicates that the truth is both unprofitable and unpalatable.
[If you have access, please email the “secret plan” to firstname.lastname@example.org]
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