That Is $39 With A B

The big business news this morning is that General Motors lost $39,000,000,000 in the third quarter of this year. For those who struggle with decimals, that is $39 billion. Most of us struggle with companies losing millions of dollars but $39 billion sounds more like an issue with the national debt than a loss sustained by a business. It is more than the gross national product of most African nations. The question is how can GM lose such a ginormous amount of money and still be solvent? It all on paper baby, just like the way our government handles its money.

One would think that since the UAW caved in the last round of labor negotiations and GM managed to shuck its health care costs, it would have been a positive to their bottom line. It looks more like they have been saving a whole list of things gone bad and waited until they could maximize the effect in a one time shot. All of the news I have been hearing on the GM side is that things are looking up and everything is coming up roses. Sounds like someone was putting on their game face.

Even after losing $39 Billion, GM is still in business and making vehicles. How many businesses can take a paper loss of that magnitude and still walk away from the ordeal? The loss was not due to a collapse in sales or the result of selling an under performing asset. Cars are on pace to sell just a few less than last year and GM has not lost that much market share this year. What we have is nothing more than the adjustment in the accounting process for years of poor decision making. What I hope is that it is a wakeup call to concentrate on the business of making cars and being profitable and giving up the aspirations of being a mega-conglomerate. When they make cars, they are good at it. When they branch out into other areas like data processing (EDS) and mortgages (GMAC) they lose focus on the end product, making good cars that consumers want. Who remembers the Lumina and the return of Nova? I am sure someone would like to forget them.

Icool

Cobb