The news is the news, right? Something as significant as, say, the earnings of one of the world’s largest industrial corporations, should be fairly uniformly reported in every credible news source, shouldn’t it?
Maybe so, but that wasn’t the case on Tuesday, as news organizations throughout the world sought to interpret General Motors Corp.’s quarterly and yearly results. Here are two examples:
“General Motors Corp. reported a $38.7 billion loss for 2007 on Tuesday, the largest annual loss ever for an automotive company, and said it is making a new round of buyout offers to U.S. hourly workers in hopes of replacing some of them with lower-paid help.
“The earnings report and buyout offer came as GM struggles to turn around its North American business as the economy weakens.” (Associated Press)
Sounds as if GM has fallen into a tailspin from which it may never recover, doesn’t it? But here’s a different take.
“General Motors Corp., the world’s largest automaker, posted a fourth-quarter loss on shrinking sales in North America while overseas revenue rose.
“The shares gained as much as 2.6 percent in New York trading as the Detroit-based company recorded a profit after excluding one-time costs. GM’s net loss of $722 million followed year-earlier net income of $950 million.
“The results suggest Chief Executive Officer Rick Wagoner is delivering on his goal to lift overseas sales while cutting expenses at home. He said he’ll offer buyouts to speed the hiring of lower-paid new workers in the U.S., where industrywide sales are projected to fall to a 10-year low in 2008.” (Bloomberg)
The AP story stresses the negative and the sensational — “largest annual loss ever for an automobile company … GM struggles … economy weakens.” The Bloomberg story looks at the reality underlying the figures and leads the reader to entirely different conclusions — “Shares gained 2.6 percent … recorded a profit … Rick Wagoner delivering on his goal.”
Bloomberg’s reporting is directed at a tiny fraction of Americans — the investment managers, bankers, traders and financial executives who need in-depth, minute-by-minute, financial analysis and news. The Associated Press wire goes out to thousands of news organizations, who have neither the resources nor the expertise to do their own financial reporting. Consequently, millions of Americans at least glanced at the AP headline and went away with the impression that GM is a weak, failing company.
“Losing $38.7 billion?” Most of us outside of the higher echelons of business think that losing money means literally what it says. You buy a stock for $20 per share and sell it for $10, you’ve lost money. You go to Cripple Creek with high hopes and $500 and come back deflated with $40, you’ve lost money. You lend your brother-in-law $1,000 to tide him over after he gets fired, you’ve lost money.
But that’s not the way it works at General Motors. The company’s chief accountant didn’t walk into CEO Rick Wagoner’s office one afternoon and say: “Hey boss, I was checking our bank balance this morning, and guess what? We somehow misplaced $38.7 billion!”
That $38.7 billion loss was the consequence of a $39 billion third-quarter expense related to a change in tax accounting. In fact, GM had $27.3 billion in cash, readily available assets and funds from a retirement fund at the end of December, a decline from $30 billion at the end of September. The automaker ended 2007 with a negative adjusted automotive cash flow of $2.4 billion, a $2 billion improvement compared to 2006.
So GM’s cash position had eroded somewhat during the fourth quarter, but the company seems to be very much on the right track. No wonder the stock rose.
The AP’s story clearly didn’t affect the judgment of the professional investors whose decisions collectively establish stock market values. But it probably affected, at some level, the perceptions and beliefs of ordinary Americans whose decisions collectively influence the direction of the economy.
Reading that story, are you more or less likely to drive down to Motor City and price new cars? Are you more optimistic about your own family economic situation or less?
The answers seem obvious. And that’s why the slow accretion of negative stories about the national economy, which are so often characterized by lack of nuance, misinformation or simple incomprehension by the reporter can be so damaging.
These are certainly trying times. But to those of us with long memories, who can recall the vicious local recessions that hit Colorado Springs during the 1970s and 1980s, our regional economy looks pretty good.
Meanwhile, most of the national pundits are predicting a McCain-Obama matchup come November.
I’d welcome such a contest, which, given the characters of the two men involved, might actually be a lesson in democracy and civic responsibility rather than the collision of two remorseless mudslinging machines.
And although the reporter in me longs for the return of the Clintons (Fights! Scandals! Intrigues! Interns! The first laddie!), the long-suppressed inner patriot wants inspiration, decency and a return to our shared values.
And in a burst of na