Tuesday, October 18, 2005

Speaking Truth to Power- the GM Situation

I’ve been following the GM/Delphi saga with much interest this past week. It’s not that I await their outcomes, expectantly on the edge of my seat. Rather, I marvel at the kid glove treatment both firms seem to be receiving in the press.

What has occurred to me regarding GM, though, is that this fallen automotive giant is still considered sufficiently potent, when it comes to spending money, that nobody will speak the truth to its power. Perhaps the best example of this was the reaction to today’s agreement between GM and the UAW which will lower benefit expenses for the latter.

Truly, as I have written in a prior post, this is simply not the company’s salient problem. GM cannot and does not design and produce vehicles which sufficient numbers of people will buy at prices which will sustain the company’s financial health. Period. It’s beyond me how lowering the cost structure of an inept designer and marketer of cars and trucks will suddenly create better designs.

You would not know any of this, to judge from the press’ reaction to the agreement. Or Wall Street’s reaction, for that matter.

I now wonder if GM, even in its last acts as a sustainably profitable enterprise, wields enough financial leverage to silence any significant, honest appraisal of its situation.

Do analysts worry that they will be shut out of conference calls if they point to GM’s revenue problems as insoluble? Do the bankers worry that they won’t get invited to participate in any subsequent last-ditch financings? Do the various media outlets worry that they will have seen the last GM ads in/on their medium, should they report candidly about the company’s prospects? Perhaps fund managers are concerned that candid remarks will lose them possible business with GM's pension funds or treasury functions.

It’s now beginning to seem to me that all these parties, “stakeholders,” if you will, literally have more to gain from a fatally bleeding GM than they do from a merged/acquired/failed GM.

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