"...and then carry the one..."

Four hundred MILLION dollars!

Whoops. This week, GM retracts its earnings report from four years ago, saying it overstated its profits by somewhere between $300-400 million dollars. The tendency with a story like this is to cry “fraud!” and then denounce corporate America for its inherently corrupt nature. Now, who can say what the cause is of this slip-up (blunder, goof, unbelievably huge mathematical oh-oh?)? But in the absence of the whole story, how proper is pessimism? Is it possible to be ambivalent toward GM and give them the benefit of the doubt?

Detroit auto is in a bad way (for other ways Detroit is in a bad way, see here). With Delphi in big trouble, SUV sales plummeting, and a $1.6 billion dollar third-quarter loss (that’s billion with a ‘b’), why would GM come out and report a mistake this embarrassing at the most inopportune time? If there is scandal and GM was involved in shady, Enron-like accouting, why would they fess up now? One could easily say they would get caught anyway (the SEC has an investigation going), but even so, why pile sorrow upon sorrow if you are trying to deceive people?

Speculation can be healthy only to a certain point. So let’s at least give them the benefit of the doubt. For once, let’s make a point of recognizing what seems to be--at least at this point--corporate honesty. (You won’t hear that in the news.) See, not all guys in suits are trying to take over the world.

Comments

Display comments as (Linear | Threaded)

Matt Huisman says:
#1 2005-11-10 17:29 (Reply)
Speculation Alert: GM is currently negotiating with the union for concessions on grounds that they are in deep trouble...now the trouble is $300-400 million dollars worse.
John Powers says:
#2 2005-11-12 21:52 (Reply)
Not really any worse at all. The cash reporting is the same, it is just the nebulous nature of financial and regulatory accouting that changes the reported earnings.

I guarantee you GM’s lenders know enough about GM’s cash position and ability to pay off their future debts, regardless of reported earnings. These reported earnings are only there to keep the regulators and the stock analysts busy, they mean basically nothing in negotiatinos with employees, vendors, or bankers.

JBP

Name
Email
Homepage
In reply to
Comment	Enclosing asterisks marks text as bold (word), underscore are made via _word_. E-Mail addresses will not be displayed and will only be used for E-Mail notifications To prevent automated Bots from commentspamming, please enter the string you see in the image below in the appropriate input box. Your comment will only be submitted if the strings match. Please ensure that your browser supports and accepts cookies, or your comment cannot be verified correctly. Enter the string from the spam-prevention image above: BBCode format allowed
	Remember Information? Subscribe to this entry
Submitted comments will be subject to moderation before being displayed.

	November '08
Sun	Mon	Tue	Wed	Thu	Fri	Sat
						1
2	3	4	5	6	7	8
9	10	11	12	13	14	15
16	17	18	19	20	21	22
23	24	25	26	27	28	29
30

Trackbacks

Comments

Add Comment

Recent Video