GM: "Our Internal Controls Over Financial Reporting Currently Not Effective"
[Ed is away at the Nissan Juke junket playing [Magic], so I’ll try to keep the ship afloat today]
There are plenty of caveats and warnings in GM’s IPO documents, but one doesn’t need to read all 734 pages to get a bit nervous. On page 25, there’s this:
“We have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan.”
For years, old GM had problems with its accounting controls and reporting (odd for a company run by head bean-counter Rick Wagoner), and in 2009 finally settled a case with the SEC. That supposedly led to a complete overhaul of financial controls and reporting.
Last year’s bankruptcy led to “fresh start accounting”, but the specter of mis-counted beans still haunts New GM:
“Until we have been able to test the operating effectiveness of remediated internal controls and ensure the effectiveness of our disclosure controls and procedures, any material weaknesses may materially adversely affect our ability to report accurately our financial condition and results of operations in the future in a timely and reliable manner. In addition, although we continually review and evaluate internal control systems to allow management to report on the sufficiency of our internal controls, we cannot assure you that we will not discover additional weaknesses in our internal control over financial reporting.”
One would have hoped that GM’s accounting systems had been dyno-tested before the big IPO, and all that’s riding on it. It’s a bit like the bad old days: new GM products being rushed to market before the bugs are all fleshed out.
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Here is my thought, as stated in my online journal late last week as roughly translated. I think in the end, Ford will may well be #1 if the Fiesta and other models are of any indication and if Chrysler and Fiat do their part in this partnership, Chrysler could well be #2, neither of them have ever been 1 or 2 as far as I know, GM will be #3 if what I read of Paul's post on their financial situation in regards to the IPO. I read that their most current chief stepped down, just before the IPO announcement and went home to Texas, the last thing GM needed and that left me with a feeling that GM may not be changing like they should and that was found in the Financial Times late last week. The operative word is that while Ford had their share of problems, they didn't seem to fall as far as GM did and Chrysler had relied on one platform for nearly all their fleet back in the 80's and early 90's, instead of using the money coming in to develop other platforms to grow their product line and Daimler basically robbed them and squeezed them dry so I can't say it was ALL Chrysler's fault for that. In the end, I think GM has more to amend than the other two in this regard and thus, that was what I read in this post by Paul, that the new GM is the old GM in essence. And I should add that this won't occur over night, but rather over time as things play out amongst all three, but it is clear they are making strides to update and upgrade their product, just that each is going at it differently, some more successfully than others.
This sounds like the automotive version of "close enough for government work".