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very first thing I see is “Deloitte and Touche”. that alone tells me to stay far away…this firm has audited GM for over seventy consecutive years. during the reign of Red Ink Rick we had “material weaknesses” disclosed in the financials year after year. there is no arms’ length in that relationship.
Buickman… it would appear you have absolutely no idea what you are talking about. D&T made sure the financial statements had every required disclosure in them. D&T is not responsible for the results of the financial statements, only that they are MATERIALLY accurate. Everyone knew that GM was on the verge of bankruptcy before it went. The financial statements had the required “going concern” disclosure.
As for the SOX material weakness, again all adequate disclosure was made.
Please don’t criticize D&T just because you don’t understand a set of financial statements. They are produced with a “knowledgeable reader” in mind. Obviously, that is not you.
As auditors/consultants for Parmalat and Adelphia, Deloitte was guilty of a dereliction of duty and failed to properly protect the shareholders from fraud. “Parmalat discloses an account in the Cayman Islands supposedly worth nearly $5 Billion is fake”. New York Times
“Just for Feet, a sorry -a## Super Bowl ad running shoe store chain went from a market cap of $700 Million to Zero in three years with Deloitte & Touches accountants on watch. Deloitte’s consulting arm hit the company up for business to fix it’s internal control problems.” Faber Report
btw, the financials statements were not materially accurate.
To be fair to Toilet, Douche and Tomato (as we called it) they’re no better or worse than Andersen was and E&Y, KPMG or PWC are.
It’s an industry that suffers an inherent ethical conflict, and for whom the incentive to improve isn’t really an incentive at all. The first one to break ranks and really crack down would bleed engagements like crazy to the other three.
As such, you have to treat the results of their work in relative terms, not as absolutes.
Sorry, I don’t read prospectuses for less than $400/hr.
Besides, I have to do the dishes.
tl;dr but did it mention the billions they stole from the US taxpayers?
You can’t steal what you have been given. And if it was stolen, why is the Treasury getting ready to sell their shares.
You may not like what happened, and I can’t argue that. But you can’t call it theft either.
jjster6,
It wasn’t given to them, part of the failout package was a “loan.” And where I come from, taking out a loan that you know you can’t afford to pay back in full is no different from stealing. I don’t care what GM is legally obligated to do at this point. They’re morally obligated to make the Treasury whole.
“For example, we have announced that we intend to produce by November 2010 the Chevrolet Volt, an electric car, which requires battery technology that has not yet proven to be commercially viable. There can be no assurance that these advances will occur in a timely or feasible way, that the funds that we have budgeted for these purposes will be adequate, or that we will be able to establish our right to these technologies. However, our competitors and others are pursuing similar technologies and other competing technologies, in some cases with more money available, and there can be no assurance that they will not acquire similar or superior technologies sooner than we do or on an exclusive basis or at a significant price advantage.”
These may be stock weasel words, but it amounts to another admission by GM that the Volt may always be a money-loser. This doesn’t seem like the winning strategy of a company determined to become profitable. The Volt’s completion is simply the result of government mandate, empowered by its ownership.
IPO prospectuses are full of hedged statements and warnings, so that if anything doesn’t develop exactly as hoped, the company can’t be sued for investment fraud. The paragraph on the Volt you cite is actually pretty tame compared to some I’ve seen in the high-tech world.
Not that your final conclusions are not 100% valid, however.
That’s the risk a new project runs. There’s no indication that the Feds leaned on GM to do the car (it got the green light prior to BK). There’s some carrot involved, as the Congress and Administration have provided support for electric cars, generally. They think it’s a strategically important part of the future market. They’re probably right.
The way the risk statement for the Volt reads, you could change a few key nouns and it could be applied to every vehicle and technique in GM’s arsenal:
— Variable valve timing? Is GM’s as good as the competition?
— Direct injection? Is GM’s as good…?
— Logistical systems? Are GM’s as good…?
@dhathewa: The Volt is a distinctly new technology paradigm, as GM mentions elsewhere. Its risks are substantially higher than development of VVT, DI, or internal processes. The ownership experience will be unconventional – requiring plug-in – and its $41000 MSRP places it well above other economy cars, which is what it claims to be.
The Volt was mentioned clearly by the Administration as a centerpiece for the new GM, as a car “Americans want to buy”. Its green qualities place it squarely on the Administration’s priorities, so any discussion of bailing out GM would have required the Volt development to continue. Killing it due to unprofitability was simply not going to be permitted.
It is amusing and frightening to think that Congress and the Administration think they know what’s strategically important for the future market. I can say with confidence that the market won’t embrace a $41k economy car from GM, but they may walk across the showroom and buy a $17k Cruze.