Biden: Bin Laden Is Dead, GM Is Alive

Ahead of the one-year anniversary of the Bin Laden raid, Vice President Joe Biden proudly declared: "Bin Laden is dead, GM is alive."

Now, I'll buy Obama/Biden taking credit for the Bin Laden killing.  But, as far as GM being alive, the qualifier should be "just barely".   While the company looks profitable on paper, let's not forget that this profitability came at a very high cost to the taxpayer's with a $56 billion bailout.  At the same time, prior stockholders and creditors were literally thrown under the bus with Obama handing ownership over to the unions and the U.S. Treasury. And, with the stock price floundering, it looks like it will be a very long time before the taxpayer will get any of its money back.

However, lurking just below the surface, GM has a major problem that could, again, put that company into serious financial trouble. That problem is underfunded pension funds.  As of the end of last year, it was estimated that GM's pension funds were short $31 billion dollars; growing from a $22 billion deficit at the end of 2010.  That was a net deficit increase of $9 billion in just one year and far greater than the $7.6 billion in GM's profits for that same year.  What's more disturbing is the fact that, based on stock price, the total value of the company barely exceeds its pension deficit at the end of 2011.

Unless GM can get some concessions on existing pension liabilities, that company will be right back facing bankruptcy in as little as two years.  That's because the pension fund payouts are rising much faster than GM's profits and its contributions to pension funding.   This pension problem is one of the reasons that GM's stock price is floundering.   A problem that will only get worse with time.