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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (480)	7/8/1998 11:03:00 PM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

<< There was an extraordinary large writedown last year(depreciation) >> Indeed, there was. Cash flow jumped by over $8 billion from the year before. This could be explained by the $4.3 billion gained from the spinoff of Hughes Electronics defense segment to Raytheon plus $4.3 billion dollars for "competitive studies". I didn't comment on the latter item in the year-end review, but frankly, I had to chuckle at this one. What's extraordinary, non-recurring, or otherwise not typical of ongoing operations about an auto maker, or any other company, engaging in "competive studies". It looks to me like another example of GAFF (Generally Accepted Fudge Factors), and possibly, one with very favorable tax consequences for GM. The Raytheon deal was reported in the financial press as unusually complicated, even by Wall Street standards. I spoke with an analyst covering GM and one covering GM Hughes at a very respected publisher of investment information. Neither one could make heads nor tails of the deal. This brings up a point that you may be able to help me with. Suppose a company's subsidiary has been taking depreciations through the years that have been consolidated onto the parent company's balance sheet. The parent then sells the subsidiary for a premium to book value that exceeds the accumulated depreciation. Does this call for a special credit on the parent company's balance sheet. If so, I think this would explain the reversed depreciation charges at GM in 1997. As to the pension fund liability, it has been often and widely reported that GM has erased this. As you know, this is largely due to the Bull Market raising the share price of the stocks the pension fund holds to levels that may come sharply down at some point in the future. The UAW knows this too. I honestly believe that its national board in their hearts wish that the metal stampers at Flint would grow up and go back to work, before they put everyone's retirement at further peril. On this last point, I read an interesting post on Yahoo. As you know, there is no guarantee that the author is actually a GM employee. But, for whatever its worth, I've copied it below: I work for GM. I am a member of middle management. Don't classify all UAW workers as the same. 75% of these workers do what is expected of them. If problems exist in quality and in inefficiencies...for the most part, Management and the union share in these problems...and a better relationship can improve the performance. 15% are followers of those that should not lead, they are misdirecting those that can be easily influenced. 10% of the UAW membership are real problems, and the 75% really wishes that management, and the union would address them. Both the union and management want quiet and peace more than they want to address this faction. That 10% is mostly in the maintenance, skilled trades and operations in part producing plants. Both management and the union should address this drag on their future. The union feels obligated to protect them right or wrong. Management would rather look the other way than dedicate time and energy toward this faction.....so they live and flourish. We need to remove the cancer while the patient can still stand the necessary surgery. Those that are raping this company need to be addressed....I think they should be fired and prosecuted, but don't put all of the UAW members in this box just because they belong to the same club. I do, however, think that if the union demands that this cancerous faction be protected, that they will demean the stature of both management and the good citizens of the UAW that want and deserve to have their jobs secured. The atrocities are so vile and unacceptable, that if they are not addressed, it will diminish the esteem and credibility of both groups. At that point we will have to close up shop and leave....and wouldn't that be sad?