Was GM Always "Government Motors"?

My buddy called me yesterday.

"Don't you think GM has been "Government Motors" all along?" he said. "They were handing out pensions and benefits like they were the government all the time."

For a man who had just come back from vacation, you would think he would still be pretty mellow from all the sun and sand filled beaches he enjoyed all last week, but not him. Nope, he was right back where we had left off two weeks ago, when Sonia Sotomayor was the topic of discussion.

I thought about his question for a second.

"You know, I think you're oversimplifying things. What you really need to do is look at GM as if it is a financial supermarket that is attached to the car business. I don't think GM did anything wrong by offering the kind of pensions they did, back when they initiated them, or by providing the level of healthcare coverage their employees and retirees received. They counted the numbers and scoured their projections as closely now as they did then.

The thing you might want to think about, though, is a phrase nobody talks about very much anymore. "Overfunded pension fund". That was the buzzword of the eighties, wasn't it?"

"Uh, yep. You're right."

Think about it this way - if you were to put all the of the over funded dollars that were siphoned off back on the books, there probably wouldn't be a pension shortage today. Does that make any sense?"

"You got a point."

The guys who man the books at GM are like the guys who have manned the books at all major institutions since Benjamin Graham's seminal volume, Security Analysis, which detailed how to value the modern corporation.

If the houses in your subdivision were built the way the balance sheets of most conglomerates have been assembled for the past few decades, your subdivision would look just like one of the famed Hollywood backlots, with intricately detailed facades facing the cul-de-sacs even as the struts behind them struggled to keep the one dimensional structures from falling flat.

In many ways, I think we have ended up looking at GM like its problems are a moral failing of some sort, as if the company would have been okay if it had only adhered to a spartan financial regimen. But the web based businesses as we revere today didn't get here because the internet sector was super efficient at deploying investor capital - many of the companies who inhabited this space wasted billions of dollars in failing efforts to gain market share and become profitable.

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