Once again, the media is uncritically reporting inaccurate claims by General Motors. GM says it is creating 4,200 jobs by spending $2 billion of taxpayer money on plant investments, but it is using the same misleading calculations employed by the Obama administration about job creation through the stimulus program. GM states that it will “invest” $2 billion, thereby “creating OR preserving” more than 4,000 jobs at 17 facilities. In other words, GM is equating keeping people employed in their present jobs with job creation.
GM went bankrupt, took over $50 billion of taxpayer money, and then went on a spending spree before taxpayers were paid back. This hardly seems like cause to rejoice. My guess is that the strategy of boasting about “creating or preserving” jobs at a time when the US Treasury is close to selling taxpayers’ stake in GM at a huge loss is a red herring. Now that the Obama Administration cannot proclaim victory for making money on its bailout of GM, they can at least brag about all the perceived job creation.
A review of quarterly GM 10Q SEC filings reveals that, over the past six months, GM’s cash and cash equivalents has gone down from $27.5 billion at the end of 3rd quarter 2010 to $21 billion at the end of 1st quarter 2011. GM continuing its old habits of burning money may be part of the reason its share price is stuck below the IPO price of $33 and well below the $53 per share needed for taxpayers to be paid back on the portion of money put in during the Obama term.
GM seems to be focusing on politically driven public relations campaigns (as also demonstrated by the Chevy Volt hype) rather than on maximizing profits. Investors should be wary if the trend continues.
Mark Modica is an NLPC Associate Fellow and a spokesman for GM Main Street Bondholders.
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