Friday, April 30, 2010

GM's Give Back Gimmick ... Happy Talk on the Way to Its Next Bankruptcy

GM, short for Gubmint Motors, is telling a whopper of a fib in its new advertising campaign. Listen to Ed Whiticare's Happy Talk and you'll be informed that through his Masterful leadership GM has become so successful in the last year that it has paid back the government loans in "FULL" with interest 5 years ahead of schedule.

That would be wonderful news, as a matter of fact it would be the best news I've heard out of Detroit in ages, but nothing could be further from the truth. GM has not come roaring back to life after a successful rescue by the brilliant Pols in Washington. GM was, and is still a basket case, only now they have a bank account that is chock full of our money.

In fact, GM's story is just another in a long line of Bailout success stories to go along with Chrysler, AIG, Fannie and Freddie, all of whom received money from the US Taxpayers and will never pay it back. GM didn't pay back, as much as it gave back a tiny portion of the bailout money it received. I Thought paying something back implied that you had earned the money used to pay off your debt. In GM's case ,they got 60 some billion dollars from US taxpayers and gave 6.7 billion of the money back. GM lost 3.3 billion dollars in the 1st quarter of this year, which means there is no way they "paid back the money". That's a Give Back! Not a Pay Back!

More happy talk is on the way with the good news that GM continues to lose market share and is down to 17.6% versus a year ago number of 18%. That's just a small loss of market share, no need to worry right? No! Not right! Last year the economy and auto sales were in a free fall. This year we are in a recovery, albeit a tepid one, and GM is still losing market share. How can things get better when revenues and market share continue to fall and profits are something that you can only dream about having someday? Answer: It can’t and it won’t!

Maybe even more Happy Talk can turn things around. GM can disclose, as it did several weeks ago ,that its pension plan is massively underfunded and short a couple of billion dollars. Well, actually they are short 27 billion dollars, but Like Ed I'm trying to keep the happy talk going. Is there any question about who is going to get stuck with that bill when it comes due? Then there is the Healthcare VEBA. What happens when that goes bust?

GM didn't go bust last year, but should have and almost certainly will go bust at some point in the near future after proving to be the biggest money pit the US tax payers have ever had the pleasure of funding, no matter what kind of snake oil Ed Whiticare is peddling.

Friday, April 9, 2010

Mass Insanity Healthcare Rationing in the Bay State

If I told you a story of how one of the bluest of the blue states, Massachusetts, would of it's own accord institute health insurance rationing three months after electing a Republican to the Senate to stop Obamacare, that would normally be considered satire. That is unless the story was true, then we would just call it irony!

Ironically, it is very true that Massachusetts, with what is essentially it's own Obamacare program, has started to ration health insurance. Surely that wasn't Governor Patrick's intent when he rejected the insurance companies' request for premium increases. Like all politicians, he just wanted to get re-elected, and being tough on insurance companies is a very popular stance among Democrats these days. Never the less, that is precisely what the outcome has been. The insurance companies did what any business does when faced with a money losing product: they declined to sell any more of that money losing product. As a result you can't buy health insurance in Massachusetts, even though it is against the law not to! Ain't that a catch 22?

This is always the result when politicians dictate how businesses must operate; they always do what is politically expedient instead of what makes economic sense. Politicians constantly prove that they are checkers players in the chess match of business, unable to see even one move ahead. As a result, they compound their initial mistakes with additional ones, as the unintended consequences of the laws they've just passed undo what they were supposed to have accomplished.

The governor thought that by standing up to the greedy insurance companies he could portray himself as a hero in the fight against the high cost of health insurance. This is an awfully thin argument, considering that three of the four largest insurers in Mass are non profits, as noted by the Wall Street Journal in a recent article. Those high costs, I might add, were imposed by the state on it's residents when it mandated coverage for all , instituted community rating and eliminated the insurance companies' ability to refuse coverage to people with preexisting conditions. I'm sure it came as quite a shock to him that his savvy political skills had instead of making insurance more affordable to his constituents made it unobtainable. After all, who could have possibly foreseen this would be the result of his actions? I'll tell you who! Any businessman worth his salt would have seen that one coming a mile away, but that's because they are in the business of making economic decisions, not political decisions. Business owners understand that they are in business to make a profit and those who don't , don't hang around all that long.

The Mass insanity that is Playing out now in the Bay State is what's in store for the rest of us if Obamacare remains the law of the land. The government will mandate greater coverages for the insurance companies to provide while denying them the ability to recoup their cost though increased premiums. When insurers are prohibited from selling their products at anything but a loss they will be forced to stop selling them. It will then be time for more regulation to fix the problems the previous laws created. On it will go until it reaches it's inevitable conclusion: the government controlling health care cost through by rationing health care. That's when being politically connected will literally be a matter of life or death.