ratings

General Motors’ Losses Hidden by Deferral of Union Pension Obligations

by Hans Bader on October 21, 2010

in Bailout Watch, Economy, Employment, Labor, Regulation

Any General Motors bonds issued this year will be classified as junk by a key ratings agency.  Why?  There’s some risk GM will go bankrupt again, and it hasn’t really returned to profitability, the way it appeared to have. That’s because GM’s recent quarterly profit, which came after years of losses and tens of billions of dollars in taxpayer bailouts, was artificially created by the temporary deferral of billions of dollars in pension obligations that it owes to the United Auto Workers union.  Those unfunded pension obligations have risen by $6 billion since the end of 2009.  As Charles Lane of The Washington Post notes,

[A] little-noticed October 6 report from Fitch, the ratings agency, which highlighted the major unresolved issue of the bailout: pension obligations to its United Auto Workers employees. The union successfully resisted efforts to trim this long-term burden on the company through the bankruptcy process, and they continue to weigh heavily on the company’s future. Specifically, GM’s relatively robust free cash position – one of its major selling points in its pending IPO – is being artificially propped up by the fact that it is not yet legally required to make multi-billion-dollar payments into its ‘heavily underfunded’ U.S. pension funds. How underfunded are they? Well, the U.S. plans alone are $17 billion underfunded as of the end of 2009, Fitch says. When you include global operations, the total is $27 billion. . . GM’s pension obligations are actually $6 billion higher than they appeared at the end of 2009.

These obligations will likely have far more impact on GM’s financial future than the recent revelations that it lied about the Chevy Volt, which it was trumpeting in a “publicity stunt” to curry favor with politicians crusading against global warming.

Earlier, GM lied about whether it had paid back taxpayers for its bailout, which resulted in GM getting $50 billion in taxpayer money, and its finance arm GMAC getting another $17 billion.  (GM also received billions indirectly from taxpayers, through programs like the incredibly wasteful Cash for Clunkers, which cost  used-car and car-parts dealers billions.)

The Obama administration used the bailouts to keep the United Auto Workers’ massive compensation (worth up to $70 an hour), pension benefits, and rigid union work rules largely intact, while giving the UAW a big chunk of General Motors‘ stock, even though the UAW helped bankrupt the company.  The auto bailouts were so wasteful and so biased in favor of the UAW that they disturbed even the liberal Washington Post editorial board.

Another reason for treating GM bonds as junk is the way the Obama administration mistreated GM’s past bondholders.  It engineered the wiping out of General Motors’ bondholders, some of whom were non-union employees who had invested their life savings in the company, so that the GM stock that the Obama administration was giving the UAW would be worth more.

GM also faces increased regulatory burdens, such as CAFE rules ratcheted up in the name of global warming  (the initial tightening of those rules will wipe out at least 50,000 jobs in the auto industry), that will make it hard for it to expand its anemic 19 percent market share.  Other EPA global warming rules are expected to wipe out at least 800,000 American jobs and impose heavy costs on suppliers of materials used in manufacturing automobiles.  The EPA’s proposed ozone rules would wipe out 7.3 million jobs, according to one study.

More Grand Theft Common Sense

by Nick Brown on February 20, 2009 · 1 comment

in Regulation, Tech & Telecom

I used to think that the groups and individuals that sat around eagerly anticipating the launch of a new Grand Theft Auto (GTA) game were the fans.  I was wrong.  I am now positive the people salivating over these releases are those that intend to create an uproar over the games content and how it ‘endangers our children.’

Most recently to the forefront is media watchdog Common Sense Media.  The group that stated that HALO 3 was less violent than other first person shooters because, “there’s something a bit less impactful about killing creatures that don’t really exist.”  Just a hint CSM, but the characters in GTA IV don’t really exist either.

CSM’s recent review of GTA IV: The Lost & the Damned—episodic downloadable content (DLC) available exclusively on Xbox Live—highlighted the newest GTA controversy: FULL FRONTAL NUDITY.  Full frontal male nudity, to be specific.  As the scene has been described by countless outlets, it involves a politician in a steam room having a meeting with associates.  At some point in the scene it is revealed to the player that he isn’t clothed.

Hide your sons and your daughters!  They may see a digitized, pixelated version of something they’ve seen a thousand times on themselves, in the boys locker room, or health class.

Once again, this is an issue of parental supervision.  If you don’t want your kid playing it, don’t allow them to play it.  The Entertainment Software Association, the predominant trade association of the video game industry, reported last year that 94% of gamers under 18 were accompanied by a parent when they purchased their video games. Additionally, and more specifically, GTA IV: The Lost & the Damned is DLC off of Xbox Live.  You can’t go and buy it in a store.  You have to download it on your Xbox 360.  To do so, a  credit card transaction has to take place to purchase credits that you can exchange for online content in the Xbox Live store.  Or you can purchase a points card in a store to redeem on the system.

The bottom line is the DLC expansion of GTA IV must be purchased on Xbox Live.  What’s the significance?  Well in the first scenario.  If you child is purchasing content on Xbox Live with an adults credit card, there should be supervision over their purchases.  Secondly, and more importantly is that games have built in coding indicating their rating to the game system.  A parent can go into the game consoles settings and tell the system that it is not allowed to play games of a certain rating.  Then when the child puts a game into their system or tries to play downloaded content of a rating they are not allowed to play, the system doesn’t allow it to be played.

When parents are involved in what their kids are playing and watching on tv, common sense just tells us, that the children are less likely to be involved in content their parents don’t want them to be witness to.  I believe this message is beginning to get out, especially when considering some of the figures the ESA released in their report.  So there is a good chance that the message of watch dog groups advising parents of game content like Common Sense Media, the ESRB, and whattheyplay.com is reaching its intended audience.

But at the same time, it seems like some groups are trying to use bigger shock value to get people to their site or talking about their work at the detriment to the software.  However, if that is the method in which we are able to keep the ratings board unregulated and maintained by an impartial committee, I don’t have that big of a problem with it.

A Whole Lot of Qualification Going on

by Ivan Osorio on November 3, 2008 · 1 comment

in Culture, Nanny State

A new RAND Corporation study that purports to show a link between teen pregnancy and viewing TV shows with strong sexual content seems just like the kind of publicity-engendering publication that researchers love as a way to help attract research dollars. Indeed, a look at the study’s abstract reveals language so tentative as to bring the whole exercise into question. Under “Conclusions,” it reads:

This is the first study to demonstrate a prospective link between exposure to sexual content on television and the experience of a pregnancy before the age of 20. Limiting adolescent exposure to the sexual content on television and balancing portrayals of sex in the media with information about possible negative consequences might reduce the risk of teen pregnancy. Parents may be able to mitigate the influence of this sexual content by viewing with their children and discussing these depictions of sex. [Emphases added.]

So there is a “link” — so what? That doesn’t necessarily imply causation, which could just as easily run the other way: One could just as easily conclude that more libidinous individuals seek out sexual content. Yet such a banal statement would not get headlines. Still, I must give the authors credit with qualifying their language so much as to dilute the link’s significance.