General Motors Corp. capped a dismal 2008 with a $9.6 billion loss in the fourth quarter, brining its loss for the year to $30.9 billion.

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GM burned through $5.2 billion in cash during the fourth quarter… and $19 billion over the year…

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GM is now subsisting on $13.4 billion in government bailout loans… [and is asking for] as much as $16.4 billion more… GM also said it needs $7.5 billion in loans from the Energy Department to build more fuel-efficient vehicles.

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GM’s auditors must make a decision on the company’s “going concern” status by the end of March.

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GM also reported a major reversal in the health of its pension funds. It said its U.S. pension commitments for hourly and salaried retirees are underfunded by $12.4 billion… In early 2008, the company said the pensions were overfunded by $18.8 billion.

In addition, the earning report revealed a profound deterioration of GM’s once-booming operations outside the US. It reported a fourth-quarter loss of $1.9 billion in Europe, $917 million in Asia, and $181 million in Latin America.

Wow. Just wow. General Motors is a dead company. GM’s net worth went from negative $39 billion at the end of 2007 to negative $86 billion at the end of 2008. GM sold 8.144 million cars worldwide in 2008, meaning that they lost $2333 per vehicle.

As the article points out, GM now wants an additional $23.9 billion in loans. Those loans come from us, the US taxpayers. Folks, the math doesn’t work. There is no way GM can pay off these loans and build net worth into positive teritory. GM is a dead company that is being propped up with absolutely no chance of recovery. It’s like Weekend at Bernie’s, except this is the real-life destruction of wealth, with the blessing and aid of the politicians in Washington. We, the taxpayers, are getting absolutely screwed.

We can debate the reasons for the death of GM, but the fact is that the continued life support of General Motors is irresponsible, destructive, and dangerous. 

Add the bailouts of GM and Chrysler ($17+ billion, so far) to the bailouts of banks ($750 billion), AIG ($150 billion), Fannie Mae and Freddie Mac ($400 billion), and we have the looting of the Treasury going on right before our eyes. The bill, so far, is already over $1.3 trillion. That’s just in the last five months.

Yet, the looting continues. Change we can believe in, right?

By the way, this isn’t a partisan issue. Both parties are destroying America. …And it’s probably too late to do anything about it. Are you prepared?

I’d like to relate a story that was told to GR Pundit today by someone who is a project manager for a large computer manufacturing company.

This person, we’ll call him Ken, was doing a project at one of the big three automakers recently. We’ll call this automaker DA (for Detroit Automaker). Ken explained how he was attempting to help DA with its PC deployment process. Here’s how it worked: The computers would arrive. FedEx is not a unionized company, so the FedEx employees were not allowed to unload the computers. One unionized employee would move the PCs from the dock to the staging area. Another union employee would move them from the staging area to the storage area. Another union employee would move the computer from the storage area to the actual workstation of the person to use the PC. Each step would require a change order and a $50 charge from the union, plus the labor cost of each union employee. No one from Ken’s company was allowed to move the computers themselves, only the unionized employees could do so. Ken said the entire project was such a nightmare that they basically gave up trying to improve DA’s processes. Impossible due to UAW work rules.

This is why the UAW is desperate to prevent bankruptcy. It would ruin their “work rules” scam.

Perhaps this is one reason why 61% of Americans oppose the Detroit Three bailout.

General Motors, the City of Detroit, and Everyone Else Feeding At the Trough of Government

It was only a matter of time. Now that the Congress and US Treasury have decided that it is legitimate for the Federal Government to spend $700 billion “bailing out” various banks and financial companies, the line is getting longer of those holding their hands out for free money from heaven.

First, we were told that if the Federal Government didn’t spend $700 billion (a figure pulled out of thin air) to buy “toxic assets” from failing banks, that the world would end. Then, this week, we are told that they don’t plan to buy any toxic assets at all. Instead, everyone and their brother is holding their hands out to get more free money from the government.

General Motors is in dire straights as they burn through $2 billion in cash each month because they are such a colossal failure of a company. But hey, who cares, let’s lend them another $10 billion or more to keep the doors open, even though they already have a negative net worth of over $59 billion. Just because they’ve lost $75 billion over the last few years and they can’t pay the bills as it stands, borrowing more money from taxpayers, when no bank in the universe would do so, is a sure way to fix things, right?

But wait, don’t look twice. Now cities are asking for bailout money. That’s right, the City of Detroit is asking for $10 billion to shore up their budget. That’s in addition to Philadelphia, Phoenix, and Atlanta. More to come, just stay tuned.

Next, our own City of Grand Rapids admitted this week that their financial manager, apparently having the intelligence level of a monkey with a typewriter, has lost $225 million of pension funds since May. Nowhere in the discussion was mention of firing the idiot who has lost that much. No, instead they discussed how to dump an additional $10 million into the fund next year. Oh, and they promise they won’t raise taxes to do so (wink wink).

Folks, this is the worst financial crisis since the Great Depression and the moronity in Washington (and Lansing) seems to be at an all time peak. These bailouts do not come without consequence. Bad companies need to fail. Cities need to get their financial decks in order. Unsustainable pyramid-scheme defined-benefit pension plans are destined to fail. It’s just that no one wants to face the facts now, they prefer to defer those problems to future ill-informed politicians.

Well, the cows have come home, and we have yet to see any real intelligence shining through the political class. No, instead we have the Michigan House of Representatives ramming through a law to ban wine retailers from shipping to Michigan residents. Ah yes, priorities.

It looks like the national debt is going to increase by $2 trillion or more next year as the US Treasury issues debt like there’s no tomorrow. The next problem is that foreign countries will slow their buying of US debt. We’re already seeing a decrease in demand for treasury issues. Countries like China and Japan are more interested in spending money on their own people than buying US Treasury securities. The stuff is coming even closer to intersecting with the fan.

Folks, this problem was created by government in the first place. We have a federal reserve that prints money out of thin air, encourages malinvestment through artifically low interest rates, and encourages leverage through fractional reserve banking. This house of cards is beginning to fall. Government can not spend its way out of this. In fact, government is making things worse.

Stop the bailouts. Stop the futile “stimulus” discussions. Reduce taxes and spending dramatically. Phase out the Federal Reserve, Fannie Mae, Freddie Mac, and all the pseudo-government entities that created this mess in the first place. It will be painful and rotten, but it will clear out the cancer of perverse government incentives in the market and allow our economy to heal itself.

But, frankly, there is no hope of any of that happening. That’s why we ain’t seen nothin yet.

GM Is warning that they may run out of money to pay the bills by the end of this year. Essentially, they will be insolvent. Check out a few important stories on the subject:

• GM Says It May Run Out of Operating Cash This Year
• Ford Has $2.98 Billion Operating Loss as Sales Plunge

What’s going to happen? Most likely, GM will file for bankruptcy some time this year. Of course, they are angling for another $50 billion in low-interest loans from the governmet (in addition to the $25 billion already approved). This is the wrong thing to do. Why? Because GM and Ford (and Chrysler) failed to keep themselves solvent. They made bad decisions and they should pay for them.

A GM bankruptcy will not put the company out of business. It will allow them to reorganize, shed unprofitable lines of business and contracts, and emerge more fiscally sound. You don’t see Toyota with its hands out for government money. They have run their business well. Even though they are affected by the current economic mess, they can survive it because of past good decisions.

These bailouts just prolong the pain. One or more US car companies will fail, it’s just a matter of when. What happens to these loans if/when these companies goes under? The taxpayers get stuck with more bad debt. The national debt is already over $10.5 trillion (almost three times higher than when George Bush took office). The government can’t (and shouldn’t) try to fix everything. Let the market work.

While the politicians in Lansing debate how best to tax businesses in Michigan, we notice the deafening silence on the issue that is truly the destroyer of Michigan’s economy – forced unionization. This past Saturday’s Wall Street Journal had an excellent editorial by Larry Reed of Midland’s Mackinac Center. He outlines the case for ending forced unionization. The concept is called “right-to-work,” which means that anyone is free to join a union or not. Today’s law in Michigan states that if you join a company with a union, you are forced to pay dues.

We only need to look south, within our own United States, to see the contrast between a heavily unionized state and a non-heavily unionized state. Alabama, which is seeing new car factories being built like crazy, is the exact opposite of Michigan. In fact, according to the editorial, “If current trends continue, Alabama will eclipse Michigan in per-capita income in just three years. With base pay and bonuses, and especially when the cost of living is factored in, nonunion workers in many auto plants in the south are better off than their union counterparts in Michigan.” That’s a powerful statement.

Michigan needs to pass right-to-work legislation immediately. Another interesting point, according to the editorial, is that, between 1970 and 2000, right-to-work states created 1.43 million manufacturing jobs, while non-right-to-work states lost 2.18 million jobs.

The politicians can tinker with taxes all they want, but nothing will substantially change until the real labor environment in Michigan changes. Car factories are being built in the south, while car factories and manufacturers are shuttering in Michigan.

“The domestic auto industry’s structure is not stable… And, simply put, we expect it will get worse before it gets better.”

We’re seeing the beginning of a dramatic restructuring of the US automotive industry, and by extension, the legacy manufacturing sector. As GM, Ford, and Chrysler are experiencing record amounts of idle time at factories, Toyota is scrambling to open more US plants.

Michigan is going to bear the brunt of the negative effects of this change, and we’d better be willing to face the realities of the situation. Michigan must be made attractive to business investment if we are to get through this.

1) Northwest Airline’s mechanics strike, which flopped and ended up in a busted union, had no consequence for NWA. This marks a major turning point for unions in Michigan – they have lost the organizational power and they don’t have the sympathy of the average Joe.

2) Delphi’s Bankruptcy. This will have some very far-reaching effects, and it is already starting to ripple. Not only is it likely that thousands more manufacturing jobs will be lost here in Michigan (including some in the Grand Rapids area), the Unions are suddenly on their heels. Nearly immediately after the Delphi Bankruptcy filing, GM and the United Auto Workers worked out an agreement to shave billions off GM’s health care bill.

3) Today, the Detroit News reported that October car sales dropped to a seven year low. Total Big Three US market share dropped from 57% in October of 2004, to 52.4% in October of 2005. In the mean time, Toyota captured 15.1% of the market, the highest ever for that company. This will continue to have far-reaching effects on the Big Three (Ford and GM in particular) and will put further pressure on those companies to achieve higher cost savings, in turn putting pressure on the UAW for more concessions.

Things aren’t looking good. What can be done to help? Michigan must aggressively become a business-friendly state to attract non-manufacturing jobs. How do we do that?

1) Eliminate the single business tax – the most onerous business tax in the nation.

2) Lift the cap on charter schools – our traditional public school systems are collapsing under their own bureaucratic weight. A market in education will fix this problem. Competition will improve achievement for all students.

3) Pass a “right to work” law which allows employees to decide whether or not to join a union when they take a job at a union shop.

Those are just first steps. Hopefully we can stand up to special interests in order to improve the economic situation for all Michiganders – but we’re not holding our GR Pundit breath.