Archive for the Business Category

Some of my liberal friends linked this report on Whitacre’s departure from GM…

Posted in Business, Economy, General, Liberals on August 14, 2010 by johnmwilliams

from the WAPO trying to pretend that Whitacre’s leaving was totally voluntary:

Washington Post

Please read it to reference this post or you won’t have the context.  This is nothing more than Administration propaganda.  No “analyst”–other than a White House “analyst”–would estimate the offering to hit $70 billion.  The largest IPO in history thus far was at the height of the economic expansion in 2006 by the Industrial and Commerce Bank of China, and it was only $22 billion.  And the bank was, to put it mildly, wildly successful.  Anyone who thinks that a car company that has struggled to generate all of $2 billion dollars in profit in the last year and half, almost 80% of which can be attributed to a $16.7 billion tax credit scheme the White House cooked up to try to “cook the books” for those of us they consider their intellectual inferiors; that has not structurally changed anything that drove it into bankruptcy in the first place; and that made sure that real investors were pushed to the back of the line behind unions and other special interests in the first bankruptcy; could in any way generate a $70 billion IPO is living, as this Administration often does where matters of business and common sense are involved, in a fantasy world.

The last “real” estimate I heard for the IPO was $10-12 billion, and as I said–IMO, it won’t happen–unless, I guess, the Administration reprises its Godfather act and threatens Wall Street with more taxes and regulation if it doesn’t eat the crap sandwich.

And the story that it was either this or the long haul is bs, too. No board is going to lay down an ultimatum that its CEO agree to stay on for a protracted length of time or resign if the IPO looks like it has any chance to be successful. I can imagine it now–“Yeah, we like Eisner’s work at Disney and he’s put together an IPO that dwarfs any in history, but hey–he wouldn’t commit to the long term so we thought we’d let him go right before the offering..” If that makes any sense, you need to get out more. It wasn’t voluntary or a business-based decision (see “Obama Administration”). Now, I may be off on the reason, but the timing submarines the IPO and will shake market confidence such that it could be postponed indefinitely. And Whitacre (and the board, if it isn’t made up of leftist hacks) is smart enough to know that–the Administration, not so much.  And even if, as reported in Bloomberg, the underwriters needed a succession plan for their “road show” (where the underwriter tries to sign up subscribers to the IPO before it hits the market), it didn’t require that Whitacre resign–only that he present an acceptable replacement candidate to the board.

There would have been nothing untoward about waiting until after the IPO for Whitacre to announce he was leaving. Even if he was required to give any kind of notice, it would have delayed his departure by only days. But if the IPO looked like it wasn’t going to make it at all, his exit would be a convenient excuse instead of announcing there just wasn’t any interest in investing in a company the government already runs like a fiefdom.

The fact is GM has not been reorganized from the mess it was as it nose-dived toward bankruptcy. All it’s done is get $60 billion of taxpayer money, unfettered access to the leftover billions from TARP1, and show a $1.6 billion “profit” that’s mostly due to a special $16.7 billion tax credit scheme. Meanwhile, Ford’s made roughly 3X more ($4.7 billion over the same period) without special credits or taxpayer money and its market cap is only $42 billion. As many predicted, we’ve just temporarily stabilized the situation and given the unions more time to push the inevitable end to this failed experiment into the future–there have been no structural changes. I have no doubt Whitacre knew this was the case. But putting off the announcement a week–especially if the successor was already known and ready to step up–in order to see the company through an IPO should have been automatic for both the board and Whitacre.

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Where are the jobs?

Posted in Business, Economy, General, Liberals, politics on August 13, 2010 by johnmwilliams
It takes $74k for a private sector employer to put $44k in the pocket of an employee in NJ. If you deduct the NJ state income tax, it’s still $74k for about $46k. And this Administration gives every indication that it’s going to get even more expensive:

Greedy Capitalist Refuses to Create New Jobs

Until this Administration can demonstrate that it’s not hostile to the private sector (which, IMO, it’s pathologically incapable of doing), there will be no new hiring.

Whitacre out at GM

Posted in Business, Demo-narcissists, Economy, General, Liberals, politics on August 13, 2010 by johnmwilliams

Ed Whitacre, the now-former CEO of GM, resigned yesterday–a day before the IPO for GM was supposed to hit the market (it was rumored that the latest date would be today, Friday, but it didn’t happen, and my explanation follows after the link).  But as for Mr. Whitacre, I see a pattern emerging here–libs, with no idea of how the market works or investors make their decisions, tell someone to implement policies that have absolutely zero chance of working.  When the successes they’ve manufactured in their minds don’t materialize, then the individual who was tasked with making their fairytale outcomes come true gets canned:

Model Corruption

Tell you what happened–at least in my opinion.  Obama’s “brain trust” thought, like some of my liberal friends, that the IPO would bail out the taxpayers, thus making them look like brilliant central planners who really have a nose for business.  Forget the fact that the largest IPO in history was $22 billion (Industrial and Commercial Bank of China, 2006) and they were looking for $50-60 billion–a government-run entity is sure to be more valuable to private investors, right?  But the expectations have gradually fallen over the months until the last estimate was that it would be $10-$12 billion.  But I’ll bet good money that even that wasn’t going to fly (hence, Whitaker gets wacked).  The only people who are going to buy any blocks of any size of that stock are the people guaranteed not to get hurt by it–the unions.  The rest has to be carried by Mom and Pop investors who do their own investing through discount brokerages (no sane broker would recommend GM).  Why?  The Administration has demonstrated that real investors put their money in the hands of the WH and their union partners.  The proceeds will be “invested” in the union pensions and benefits, not in making GM a better car company.  Anybody who’s been paying attention knows this.

The question is–will the central-planning leftist ideologues decide that their grand schemes don’t work?  Or do they decide that their grand schemes can’t work in America as it is today and double down on their “change?”  My bet’s the latter.