no third solution

Blogging about liberty, anarchy, economics and politics

Who Owns General Motors?

September 11th, 2008

Back in July, Shagya Blog commented on a New York Times piece about General Motors, about which I’d been meaning to comment since right around the time I first read it. The post notes that,

G.M. acknowledged in its most recent annual report that from 1993 to 2007 it spent $103 billion “to fund legacy pensions and retiree health care — an average of about $7 billion a year — a dramatic competitive and cash-flow disadvantage.” During those 15 years, G.M. paid only $13 billion or so in shareholder dividends. The company has been sending far more money to its retirees than to its owners.

I thought, that was a quite fascinating financial tidbit. General Motors gave $13B to its “owners” and it gave 850% of that to its former workers.

Unfortunately, the article concludes that “[T]he government is [a] better provider [than industry] of social insurance.” As I’ve previously commented on social insurance programs and specifically in regards to catastrophic re-insurance schema:

Social insurance programs necessarily … stimulate a morale hazard, by reducing the actual exposure of those most prone to the particular risk being “insured.” [S]uch programs, like most government programs, have the propensity to be self-perpetuating… I can find no justification for social insurance, so-called, which forces those wise enough to avoid a risk altogether, to bear its burden for the certain benefit of others.

I think we’ll have to agree to disagree on that point. But, back to the General.

As of September 11, 2008, General Motors stock is trading around $13/share.

There are 560M shares outstanding. General Motors has at least 263,000 full time employees, by definition, who work somewhere in the neighborhood of 2,000 hours per year. I’m going to go out on a limb here, and assume that FTEs at General Motors earn more than $13/hour in gross compensation.

No, seriously. Let’s crunch these numbers:

Think about it: $13/share X 2000 hours/FTE X 263,000 FTEs = General Motors’ market cap.

I’m just saying…

no third solution

Blogging about liberty, anarchy, economics and politics