An early review of press coverage relating to this morning's warning by General Motors that "there is substantial doubt about our ability to continue as a going concern" shows no coverage of the reason why, despite $13.4 billion in taxpayer money (NOT counting bailout money going to GMAC), things have gotten so much worse so quickly.
The reason is that sales in the two full months since the Bush-approved, Obama-cheered bailout took place have tanked (see graphic at this NB post yesterday):
- December 2008 (last [mostly] pre-bailout month) — down 31.2%
- January 2009 (first full bailout month) — down 48.9%
- February 2009 (second full bailout month — down 53.1%
Press reports I have seen are saying nothing about this frightening decay in the past 60 days:
- An 8:22 a.m. CNN report by Chris Isidore and Ben Rooney only said that "sales .... have plunged more than 40% in recent months, (and) must rebound by next year if it is to survive."
- An AP report during the 10:00 a.m. hour by Tom Krisher merely noted that "U.S. auto sales in February dropped to the lowest level since December 1981." Krisher did not tell readers that GM's February falloff was the worst of the six largest car makers. He also "helpfully" informed us that "sales volume .... dropped rapidly last year," staying silent about the past two months.
- AFP, during the 9:00 a.m. hour, reported that "Other substantial risks to GM's survival include an inability to restructure its debt by June 1, a further collapse in global auto sales amid the deepening recession, the potential failure of key suppliers amid a collapse in auto sales and the success of GM's restructuring plan." There was nothing about how potential buyers might continue to shun the company because of its bailed-out status, either because of warranty or parts concerns, or because of philosphical objections to the bailout.
- The Detroit News, in a not time-stamped report, has nothing about the last two awful months, but it does have this howler from an "expert" -- "The public, suppliers and people tied to the auto industry should not overreact, though, because the federal loans, Obama's economic-stimulus package and the automakers' restructuring plans will help salvage the industry, said Kimberly Rodriguez of the restructuring firm Grant Thornton LLP." Grant Thornton is surely involved in corporate restructurings, but it is in fact an "audit, tax and advisory organization."
The likelihood that GM can downsize itself to half it original size fast enough is obviously a lot lower than it would be if only a 30% scaleback were necessary. Whether accidental or deliberate, that's a fundamental point that reporters are totally missing.
While I'm in the neighborhood, perhaps someone here understands something I don't. It's mentioned in a couple of the articles cited. Here's the Detroit News's version:
GM has assessed and rejected the option of filing Chapter 11 bankruptcy, saying it would further hurt sales. The automaker also said it would need as much as $100 billion in government aid to operate after filing bankruptcy.
After shedding most of its liabilities in bankruptcy, why would GM even need any more government money? And if it really needs that much to become viable after a bankruptcy, how much more than that (no way it would be less) will it need to stay alive if it doesn't file?
A related post is at BizzyBlog.com.