Monday, December 13, 2010

Critical to GM's stock price is their being able to convince the investing public that GM management knows what they're doing... for the obvious reason that investors don't buy stock in companies which are run by people thought to be idiots.

So... on first look, one might be impressed by the announcement that GM is looking to reduce its workforce by getting rid of 'the couple of thousand' workers it doesn't need.

But... why didn't GM make this reduction when it was reorganizing under bankruptcy, when presumably GM wouldn't have had to make $60,000 payments to each terminated worker? By my calculation, paying $60,000 to 2,000 (the common definition of 'couple') workers is going to cost GM stockholders $120 MILLION.... which is not an insignificant amount of money.

How competent can they be if they didn't know a mere year or so ago that they were keeping more workers than they needed? And that doing so was going to cost them a whole lot more money than if they got rid of them back then. It isn't as if GM's sales have fallen through the floor in recent months, at least not if you believe GM's pronouncements about how good they're doing.

And why didn't GM make this announcement in the days before their recent IPO? Did they not know even then that they had too many workers? Given that $120 million isn't a rounding error in GM's financial statements, doesn't withholding that information from prospective investors amount to some kind of serious breach on GM's part?

I can only guess at what was going on in their collective minds... and none of the possibilities make sense... at least not if one was trying to run a company for the benefit of its shareholders.