GM's annual report's out (just in time for the weekend!) and it's a shocker. The General's CEO, the company's former CFO, has admitted that the automaker's accounts are, how do we put this gently… unreliable. Here's the text: "Material weaknesses previously identified as of December 31, 2006 that continue to exist as of December 31, 2007: 1. Controls over the period-end financial reporting process were not effective. This has resulted in a significant number and magnitude of out-of-period adjustments to our consolidated financial statements and in previously reported restatements. Specifically, controls were not effective to ensure that significant non-routine transactions, accounting estimates, and other adjustments were appropriately reviewed, analyzed, and monitored by competent accounting staff on a timely basis. Additionally, some of the adjustments that have been recorded relate to account reconciliations not being performed effectively… 2. Controls to ensure our consolidated financial statements comply with IRS No, 109, Accounting for Income Taxes were not effective… 3. Controls over the accounting for employee benefit arrangements were not effective. We lacked sufficient control procedures as well as adequate involvement of technical accounting resources to ensure that employee benefit arrangements were accounted for properly." It's hard to grasp the full implications of this revelation. If GM severely over-reported its liquidity, the situation could be dire. Full Death Watch on Monday. [thanks to Buickman for the heads-up]
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well, that kinda says it all does it not. if the beancounters cannot count the beans, how the hell can they build a car, which we already know they cannot do. so what else is it they cannot do. or for a positive note, what is it they can do?
Every account is screwed up, but taken as a whole the financial statements can’t be beat.
And since the statements already showed negative equity, how can anyone claim they were misled into thinking GM is in great shape!
Actually, “material weaknesses” don’t necessarily mean the books were cooked; just that one can’t be sure they’re OK. Nevertheless, I suspect some serious flop sweat is occurring as GM execs and accountants furiously search the Sarbanes-Oxley Act for loopholes.
Announcing this over Memorial Day weekend is incredibly suspicious. There are going to be a lot of analysts pouring over it this weekend, and if they can't trust GM's accounts, it's going to be a bloodbath on Tuesday.
My bad on "under-reporting" GM's cash burn. Text amended. Oh, and there's also this… "In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, the Corporation has not maintained effective material control over financial reporting as of December 31, 2007" Deloitte & Touche LLP
It will be interesting to see how Wagoner will attempt to lay off an accounting debacle on his “go-to” collection of excuses for dismal GM performance — high fuel prices, government regulation, perception gap, tight credit, etc.
What does it take for this guy to get fired?!?!?!?
Some of the accounting was sold to Arthur Andersons (remember Enron???) and some is done by a company in Jamaica.
He could take a crap on live tv and blame it on Toyota and keep his job.
Shorter version:
We’ve been cooking the books to look good. Now there’s nothing left to cook the books with.
I cannot remember the last time a huge international company like GM got a qualified opinion from it’s outside auditors for an annual report. From page 81 of GM’s report, this being the statement of Deloitte & Touche: “In our opinion, because of the effect of the material weaknesses identified above on the achievement of the objectives of the control criteria, the Corporation has not maintained effective internal control over financial reporting as of December 31,2007, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission”
The normal language you expect is like this from Ford’s annual report where PricewaterhouseCoopers says: “In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material
respects, the financial position of Ford Motor Company and its subsidiaries at December 31, 2007 and December 31, 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 …” That there is normal auditor speak for a public company.
Wow, just wow. The scary part is the GM is run by MBA Financial Accounting types. If there are issues of “controls” that often means that one or more people were intentionally cooking the books. I don’t see any indication in the report that GM has misstated it’s cash position. What I do wonder about is how stable the ground is visa-vis GM’s spin-off of Delphi. It is now obvious that substantial liabilities remained with GM and that in many ways Delphi was never really spun out as an independent company. GM has done a whole lot of asset sales over recent years and one must wonder what other side-letter kinds of big liabilities are sitting in the weeds.
In the race for chapter 11, Chrysler was the favourite. GM has just caught up…..
I agree with truthbetold37, what does it take for this guy to get fired? For years, we’ve moaned that GM are run by accountants and not engineers. Well, now we can’t even say that, because they can’t even keep their accounts in order, let alone their cars.
I, therefore, can only conclude that GM is run by people who haven’t got a clue what they are doing. If that is the case, may I be the first to put myself forward as the next CEO of GM? I know naff all about accounts and I know quite a bit about cars, but I’ll do the job for half of what Rick Wagoner is doing it for!
Well, Rick’s proven he can’t build cars people want, why be surprised this former accountant can’t do accounts an auditor will approve of?
I agree with truthbetold37, WHAT DOES IT TAKE FOR THIS GUY TO GET FIRED?!?!?!?!
Well, actually, I know why he hasn’t gotten fired yet. All of GM’s board of bystanders, including Bob Lutz and Rick Wagoner, each have their heads deep inside their asses, and they all believe that they are Lee Iacocca. They think they know everything about turning around a struggling company, to the point that they are completely blind to the fact that GM is almost fucked up to the point of no repair.
I am just praying to god that this will be the final fuck up that gets Wagoner fired. And like KatiePuckrik said, I’ll get in line to be GM’s next CEO. Although, I am 16, so I can only work part time. My first day on the job, I’ll offer up Saab for sale, and send Saturn, GMC, and Hummer to the gassing room.
may I be the first to put myself forward as the next CEO of GM? I know naff all about accounts and I know quite a bit about cars, but I’ll do the job for half of what Rick Wagoner is doing it for!
I second that!
significant non-routine transactions
This has an ominous sound.
The pic at the head of this article should really be macroed:
“I can has bailout?”
@ Bancho:
haha, LOLfatcats. Adorable aren’t they?
RF, that should be the title of a deathwatch.
oh! i forgot, the bookkeeping must be done by the union boys too. they have the blame for everything else wrong with the company.
Something to keep in mind: auditors provide two opinions, one on the efficacy of internal controls, and the other on the financial statements. It was the former that makes GM look hapless. The F/S got a clean opinion.
WHO IS RICK WAGONER?
How in the hell did he get the job in the first place? Why was he chosen to be Chief Financial Officer at such a young age, leapfrogging others with vastly more knowledge, seniority, and experience? The man didn’t even have an accounting degree. Who has been pulling him up thru the ranks even while he accomplished virtually nothing along the way? There must be a reason. Step back, take an honest look, examine the facts, and you will wonder…exactly who is this guy and why is he running the show even after losing more billions in shareholder value than was lost on Enron? Time to WAKE UP!
As to accounting rules, they are made to be followed and if a multi national, multi billion corporation can’t do it there is a problem within said corporation. Making excuses for Red Ink Rick doesn’t change SEC mandated language disclosed in the fine print. Words like material combinations of deficiencies, misstatements, not maintained, not effective are quite serious concerns and have been going on for years under RIR. The impact of this man’s disastrous tenure has communities suffering as taxes are lowered and jobs are lost, policemen laid off, fire stations shuttered, schools closed, crime rising, families splitting apart.
Once again I am calling for the ouster of Red Ink Rick. How much worse might things be than are disclosed in the financials? How many more Billions in losses must we endure as a result of this man’s mismanagement and incompetence?
WHO IS THE BIG FISH PULLING THE STRINGS ON RED INK RICK?
Buickman, who is pulling the string? exactly what i am returning to ask. who does Wagnoner work for really? the Chinese or the Koreans or who? he certainly is not doing anything for Detroit.
Perhaps Deloitte & Touche LLP is making a proactive strike, because it doesn’t want to be the next Arthur Andersen, which was dragged down in the Enron debacle.
to find the answer, follow the money. six large banking institutions control roughly two thirds of the stock. George Fisher is the lead director. who is he affiliated with? the other key player is John Bryan of Goldman Sachs and British Petroleum.
who did JP Morgan really front for? what took him to Europe so often? who initially financed John D Rockefeller? who sent Jacob Schiff to Japan? how did August Belmont come into his money? who controls the Federal Reserve? who financed both sides of the Civil War? get the picture?
Buickman, is it too much to think, just for a moment, that the big 2.8 are throwing the fight. Just think of Rick and the boys doing what their illuminist handlers have told them to do and make it look like they tried. The golden parachute is in place for a reward, uh, I mean reason. Makes more sense than detroits explanation, huh? What better way to help take the econony down.
look where Wilbur Ross made his bones.
General Motors’ collapse could potentially tip the US economy into a recession for awhile, but it would not be nearly as bad for the US economy as it would have been in say, 1970, had GM thrown in the towel (over the UAW going on one of the longest strikes ever – GM caved, of course).
If the United States ceases to be in the near future, the reason for our national demise will be down to the FEDERAL RESERVE. Which is neither FEDERAL nor a RESERVE. It will also go down in history as the fault of the American public, as well, if the truth is recorded.
Here’s a quote from yesterday’s main article in http://www.thedailyreckoning.com “Welcome to Squanderville”
“First, let us pause for a moment of silence, in honor of our ancestors, our veterans and our war dead. Like Pericles, we recognize that we have a big debt to the generations that went before us — their sacrifices have helped made us what we are…and made the country what it is. They saved. They invented. They built. What we see around us is mostly the result of their hard work…and many years of saving. If our ancestors had used up everything they produced, there would have been nothing left behind. But they didn’t. They left us their inventions and their constructions. They left us money, too. In the post-WWI period up until the mid-‘1980s, America was the world’s biggest creditor. More people owed more money to Americans than to any other nation. Public finances were occasionally stretched – such as during WWII itself – but from the founding of the republic almost until the Reagan years, each federal administration generally tried to leave the government cash till in about the same state it found it.
But in the space of a single generation, that huge legacy of capital and custom has been squandered. Now, the United States is the world’s greatest debtor – by a huge margin. Every year, it spends approximately 6% more than it earns. Its leaders have abandoned the virtuous practices of their ancestors. They no longer even pay them the homage of hypocrisy; they don’t even pretend to balance the budget, and the latest tally reported in these reckonings put the total unfunded liability at $61 trillion. This has effectively bankrupted the average family. It also turns every new baby in the U.S.A. into a major debtor – with more than $100,000 worth of unpaid bills -on the day he is born.”
IIRC – GM was under an SEC investigation for accounting and I heard nothing of it in 2 years. I’d figure there’d be some notice of whether GM was guilty of “cooking the books” – and it seems they’ve finally admitted they did not use proper GAAP rules and were playing loosely on accounting in order to show growth and prosperity. And all this with the top guys all bean counters (you’d think they’d run a tight ship…but since no one is accountable and fudging numbers gets them those bonuses – who cares).
WHO IS DELOITTE & TOUCHE?
Deloitte, the same outfit that was auditor for Parmalat. Remember them, European conglomerate that imploded with a $5 Billion Cayman Island cash account that DID NOT EXIST? We’ve had the same audit company for over 70 years, hardly the appearance of an arm’s length relationship. How about the Jersey car dealer McNamara who burned us for $400 Million in vans which did not exist? Where was Deloitte then?
Deloitte was found guilty of dereliction of duty regarding Adelphia.
Before anyone heard of Enron, Just For Feet, a Super Bowl ad running shoe store chain went from a market cap of $700 Million to ZERO in three years with Deloitte’s accountants on watch. Deloitte’s consulting arm hit the company up for business to fix it’s internal control problems. Can you say “conflict of interest?” Instead of blowing the whistle, they sought additional business.
WHO IS JOHN GALT?
“But it cannot be done to you without your consent. If you permit it to be done, you deserve it.
“You, who are half-rational, half-coward, have been playing a con game with reality, but the victim you have conned is yourself. When men reduce their virtues to the approximate, then evil acquires the force of an absolute, when loyalty to an unyielding purpose is dropped by the virtuous, it’s picked up by scoundrels,and you get the indecent spectacle of a cringing, bargaining, traitorous good and a self-righteously uncompromising evil.”
Ayn Rand “Atlas Shrugged”
Now ask yourself…
WHO IS THE BIG FISH PULLING THE STRINGS ON RED INK RICK?
Golly, Buickman, I’m stymied. Who IS the big fish pulling the strings on red ink Rick?
I’m guessing it’s not J. P. Morgan (died 1913), Jacob Schiff (died 1920) or August Belmont (died 1924). Or Deloitte & Touche (audit firms have had to separate from their consulting arms). Or John Galt (fictional character). Or Mr. Powell of the Illuminati (he’s more interested in triangles).
So is it the Board of Directors, collectively, who is running GM into the ground?
the banksters blow GM into oblivion and reorg the pieces having dished legacy costs and union pay scale production. they privatize and refloat after having milked the cow down to nothing but a skeleton. how many Billions do you suppose are gone to the likes of Morgan, Deutsche, BOA, Merrill, and Sachs in interest and investment banking fees?
who could ever have imagined Olds closing, GMAC being sold, Buick being starved to death intentionally, our ratings tanked, our dividends slashed, dealers shuttered, employees cut loose by the tens of thousands, retirees screwed out of their security, and customers leaving in droves? who could ever have imagined Toyota outselling Chevrolet in the USA and on pace to eclipse all of GM within the next two years? meanwhile, Red Ink Rick and the Board of Bystanders go about their merry way.
I say throw the bum out and NOW!
If you look at the annual report, there was quite a lot of detailed explanation behind the accounting problems, two of which were disclosed in 2006, and are still problems today (maybe that’s what got Levine’s absence requested…) and the other is a problem with how to account for the UAW/IUE legal fund (whoda thunk those guys negotiated for free lawyers).
I’m no accountant, so maybe someone can step up and explain what GM is saying in those paragraphs in the A.R., rather than….oh stop it, that will just get the post deleted…