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GM’s Regulatory Run-Ins = Taxpayer Money Pit

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January 06, 2009 – Comments (0) | RELATED TICKERS: GM

By Elizabeth MacDonald

General Motors is on schedule to get $13.4 bn in federal bailout money, as it is now technically insolvent because its net worth, its assets minus liabilities, are a negative $59 bn.

But GM faces another serious challenge: Fixing its history of regulatory problems.

Namely, financial mismanagement, problems that are deeper than previously thought, due to the sleuthing done by the independent stock research firm Disclosure Insight of Plymouth, Minn.

Disclosure Insight scours public company filings as well as documents from the Securities and Exchange Commission it gets after successfully filing Freedom of Information Act requests.

Founded by John P. Gavin, a money manager and chartered financial analyst, Disclosure Insight’s work on companies like GM often shows that management oversight of a company’s operations and books are typically worse than expected.

Disclosure Insight’s recent findings on GM raises the question: What are taxpayers getting for their bailout of the automakers? “A potential taxpayer money pit, if GM’s wide array of internal problems are not fully vetted,” Gavin says.

And its history of regulatory problems should make taxpayers think twice about whether GM will meet the March 31 target deadline to prove to the US government it can be economically viable and therefore should get more taxpayer money beyond its emergency $13.4 bn loan.

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