Kiss the Money Goodbye

From New York City

What's good for General Motors is no longer good for America - if it ever was. In fact, it is not even clear the General Motors period is good for America.

Since last spring when you and I poured $52 billion into GM they have accomplished the impossible: More chief executive officers have been fired by GM this than Daniel Snyder has fired Redskins head coaches.

In a big hoo-hah announcement a couple of weeks ago, GM announced that in spite of the fact it had lost $1.1 billion in the third quarter of this year, it would make a payment on the $6.7 billion we lent them - as opposed to the other $46 billion which represents our owning 60-something percent of the company.

I am not that terrific at high finance or sophisticated accounting practices, so I wondered how a company, which was bankrupt, could lose $1.1 billion and still say it was going to repay its debt ahead of schedule.

Well, the answer is easy. According to the Associated Press in a November 16 piece:

The automaker will draw on about $13 billion that remains deposited in escrow by the government to help make the payments.

See? This is why you and I will never own car companies. Who among us would have had the audacity - or chutzpah - to use part of the money we got from the U.S. government to pay the U.S. government back?

Earlier this week the GM board fired its second CEO of 2009, Fritz Henderson, pretty suddenly. Seems he couldn't sell off GM assets fast enough. The Saturn deal had fallen through and then the Opel sale collapsed, and no one even wanted to talk seriously about buying Saab.

Ok, so, that's yesterday's (or at least Tuesday's) news. Last night's news was that GM was selling off some more assets - actually giving away assets - to China.

GM and the Shanghai Automotive Industry Corporation (S.A.I.C. which must annoy the dickens out of the US engineering and defense contracting firm Science Applications International Corporation, better known as …SAIC) have had a 50-50 deal.

Follow me here. GM has a big subsidiary in South Korea called Daewoo. Daewoo, according to the NY Times, "lost $2 billion last year on a bad bet on financial derivatives based on the Korean won (which is the Korean unit of currency).

GM's subsidiary in India is also hemorrhaging money, so GM sold half of that business to S.A.I.C.

Because the geniuses in Detroit were busy running the mother ship into bankruptcy, there was no money available to bail out Daewoo there, so GM had to go looking for handouts elsewhere.

The handout came from the Chinese who will get an additional one-percent ownership stake in the joint venture tilting the scale to 51 percent for the Chinese to 49 percent for US. And by that I mean us, you and me. Our $52 billion is being treated like fake money in an international game of Monopoly.

Although reporter Keith Bradsher points out that the deal appears to preserve GM's voting rights, you and I both know that sooner or later there will be a disagreement and the Chinese will hold up 51 percent of their ownership and ask GM to count its share and guess what?

We lose.

Refresh my memory. How many times have we been told that GM is doing wonderfully everywhere except North America? I guess they meant to say everywhere except North American, Europe and Asia.

Mark my words. Before this is all over GM will be a Chinese-controlled (if not outright Chinese-owned) car company.

And we can kiss our $52 billion zài jiàn.

On the Secret Decoder Ring today: A link to the NY Times article which helps explain all this. Also a Mullfoto which will thrill satellite radio fans and a Catchy Caption of the Day.