July 5, 2006
Kerkorian and GM
The push by Kerkorian to join GM with Nissan and Renault is the subject of much speculation on whether it will work and whether the GM board will buy it. Kerkorian's motives have also been dissected. See Paul Ingrassia, Kerkorian Motors, WST today (Kerkorian wants new managers and likes Ghosn of Nissan). Many are missing the boat. GM's problem is an operating deficient caused by overpaying its workers, masking by a stash of cash. The company must wait for the cash to run out, sucked away by operating losses, before it can restructure in bankruptcy. An alternative is a merger. The GM shareholders, Kerkorian included, can use the merger to take cash out of the company and the new owners can restructure. It is a brilliant use of a well known acquisitions strategy. The GM board should go along.
Not for Profit Troubles
Not for Profit Corporations (or nonprofit corporations) have been repeatedly in the news recently for scams. Some are overpaying their CEOs (NYSE), some are making political contributions (churches), some are not doing what they promised in exchange for their status (hospitals that do not treat the indigent), and some are in illegal tying arrangements with for profit business (home down payment charities). Without oversight by private owners, we must rely on the IRS and state attorney generals for regulation of not for profits. Charities are not high on their list of concerns. Abuse is the inevitable consequence.