Fisking the GM Proposal

Jim Manzi at NRO has a fine display of number-crunching the GM restructuring proposal. For those of you who've managed to avoid math for the last decade, I'll reduce the post to a Gerber-baby-dose of easy words (hooray poli-sci and sociology majors!):

- General Motors, it must be said, is already scheduled to receive $8 billion+ in government money. They're asking for $18-20 large on top of that.

- Manzi gathers (and I agree, btw) that GM's own assessment of its spending is wishful at best, and Michael-Jackson-in-Neverland delusional at worst. Even if every assumption GM makes about the restructuring were to come true, that the downsizing will happen at or under budget, they'll still blow through $10 billion by March. If demand drops 10% from current levels (and who doesn't think that will happen in our economy?), they're through $16-18 billion by June.

- GM claims they'll be able to reduce costs and improve competitiveness (mmm, business speak!), but provide no explanation for how they'll become more efficient. They've cut employment by 70,000 in the last 4 years, but the cost per manufacturing employee has remained the same. So they now promise that they'll cut more employees out, but then they claim that it'll cut costs by $700m above and beyond the mere removal of employees.

In other words, if I was firing 5 workers who each made $50k and I claimed that I was saving $333k in the move, you'd say, "Dude, wtf? Where's that other $83k coming from?" (5 x 50k = 250k. 333k - 250k = 83k. Stay with me psych majors!) And if I were GM I'd reply "Just trust me. It's your patriotic duty to support Detroit car companies. It'll all work out. Besides, I've been doing great so far!" This is where you should punch me in the face, tear up my business card, and say "Good day, sir!"

- GM, apropos of nothing, claims that they'll improve their market share by 10% of current holdings in 2009. Last year they projected that in 2009 their cars would account for 20.6% of the cars in the U.S. Now they claim it's going to be 22.5% for the year. Why/where they see this improvement in their performance, they don't say.

It could be anything: they project that the majority of Americans put money down on a Cavs-Lakers NBA Final next year at 17:1 odds and GM analysts like the addition of Mo Williams to the Cleveland squad? Sure! GM's managed to lock down the countless hordes of monkeys who've managed to get learner's permits? Sounds good! Any reason you can think of to suggest that GM will sell a greater of proportions next year, now's your chance!

This is me reading the GM proposal.

In a related move, I would like to announce that my previous projections for going on no dates with Christina Hendricks in 2009 has been revised. I now project that we'll hook up at at least 45 houseparties next year and eventually move in together around Thanksgiving. Why? DON'T YOU QUESTION MY NUMBERS, SIR!

Snowden's Blog Statute #12: No Joan Holloway Pics Left Behind

- I'll leave it to Manzi to wrap it up:

Now, the most obvious response to all of this is to say that I’m the fish at this table, because this is not a real business plan, but simply a political document. It exists to provide political cover to members of Congress. But if that’s the case, it’s an unintentionally beautiful illustration of why industrial policy fails. It’s both economically crucial and very hard to allocate capital well; that’s why people who are good at it make so much money. Businesses struggle to do this well, and they’re really trying. What do you think the odds are that this is a wise use of money, when the people involved are barely pretending to try?