Friday, November 7, 2008

Memo to Michael Moore: Profits and Share Price are Important

I remember seeing Roger & Me back in the early 90's when I was a sympathetically leftist university student. The premise was that mean old GM CEO Roger Smith was laying off good folks who worked at the factory in Flint, Michigan and that wasn't fair. Why was he doing it? The reason... wait for it... profits! And that other evil... trying to increase the share price! The horror, the horror!

Fast forward to 2008. GM is not making profits and their shares are virtually worthless.

Quarterly losses at General Motors came in at $4.2 billion, or $7.35 per share -- roughly twice the consensus estimate for a $3.70-per-share loss --as revenue slid 13% to $37.9 billion.


GM was the largest U.S. corporation by revenue as recently as 2000, and the company's market capitalization peaked at $52 billion that year. Its market cap has since shrunk to $2.72 billion.

Can we have a Roger and Me II when every single GM employee is out of work after the bankruptcy? In this version Roger Smith tries to track down Michael Moore to explain why he considers profits as something that is unimportant.

Sadly, GM is probably going to get bailed out by the US government. The Michael Moores, and Buzz Hargroves of the world get rewarded for getting ridiculous and unprofitable concessions for unskilled labour. $27 an hour for screwing in lug nuts? No problem.

Update: Hey, while we're throwing around $700 billion, why not toss a few bucks to GM and Ford? It makes me sick.

Update II: Michael Bloomberg thinks GM should declare bankruptcy
A growing chorus of investors believes GM should be put into bankruptcy
protection to resolve its bloated labor contracts and debts, and start fresh
with new managers who'll make cars people really want.

"Reorganization will end GM's inefficiencies but if the government
props the company up with more bailouts, it will just extend the inefficiencies
and let them keep building cars no one wants to buy, at highly overpriced
labor," said Peter Schiff, president of Euro-Pacific Capital.


  1. This reminds me of a CBC News segment of some Canadian who was helping the Obama campaign by getting out the vote. He would call people in the US and read a script and encourage them to not only vote Obama but to get out and vote. They taped him on one call. It sounded like an elderly guy who sounded pretty depressed. He claimed he was laid off after working at the same plant for a very long time. The caller empathized with the guy and said, (loosely paraphrased) "This has to change. This is just not right. That's what we're working towards."

    What's not right? Sure, you would have to be haartless to not feel for the guy but how can anyone be guaranteed employment? It's a ridiculous notion.

  2. Yeah so many people see companies as a community service. They see employment as jobs for life. They bleed the company for more and more consessions and then wonder why they moved the plant to Mexico or shut down altogether.

    Shareholders are looked upon as unknown greedy/rich people. Funny that most middle class people have stocks or at least pension funds that own stock.