GM Has $15.5 Billion Loss on U.S. Sales Drop, Leases

Aug. 1 (Bloomberg) — General Motors Corp., the largest U.S. automaker, reported a second-quarter loss of $15.5 billion because of plunging U.S. sales and the declining value of truck leases.
The deficit of $27.33 a share marks GM’s fourth straight quarterly loss and compares with a profit of $891 million, or $1.56, a year earlier. Excluding costs GM considers one-time, the per-share loss was 4 times bigger than analysts projected. Labor strikes contributed to a $9.9 billion drop in North American revenue, and sales worldwide tumbled 18 percent to $38.2 billion. [snip]

Big Oil rapes the Public

Exxon Mobil reported today its best quarterly profit in history…[],,,Senator Bernie Sanders (I-Vt.) reacted in remarks prepared for a Senate floor speech:

“Today there is some good news and some bad news. The bad news is that oil is at $123 a barrel and working people are paying $4 for a gallon of gas, and this coming winter residents of the Northeast could be paying over $5 for a gallon of heating oil. But there is some good news. Today, the CEOs of Exxon Mobil, Shell, BP and ConocoPhillips are celebrating. They’re feeling pretty good. And, they have good reason to feel that way. [snip]

Senator Sanders made no mention of giving GM any windfall loss tax rebate.
Rather curious that he thinks in that way, isn’t it?

Another thing Senator, the animal rights faction here at NER
want to know why you are wearing a lamb pelt on your head.

Wonders never do cease.

An avowed socialist has come half circle to applaud, no, to back corporate welfare. Abetting the bail out by the Fed is our own Don Quixote, who in past times vocalized his abhorrence of the rich getting richer via government largess.

OK Bernie, fess up, why the change? Could it be your corporate investments are endangered? Nothing occurs without reason.

The planets revolve around the Sun and you, on your steed, tilted at the corporations on behalf of the poor, the downtrodden, the little man.

Something cataclysmic must have materialized.

How about letting us, your myrmidons, know in what to invest? Should we buy Goldman Sachs stocks now? For all these years, we thought we were investing in the Radiant Future!

Now we find out you were investing in Bear Sterns.

Prophets of profit

WARNING: This post contains economic thought. Not compatible with Marxist drivel.
For Vermont Sandernistas, reading this might cause IBS.

Megan McCardle making sense about profits, pricing, and policy.

[snip]
So the most probable outcome of introducing monopsony power here [in the U.S.] is that the market for drugs shrinks to the point where it will support few-to-no new drugs.
[snip]

People who think that there will be continuing R&D in the pharmaceutical industry are basically thinking of it as a budgeting problem. They think of the pharmaceutical industry’s gross income as a budget to be allocated between various functions, such as marketing and R&D. [snip]

I don’t think of R&D as a budgeting problem; I think of it as an investment problem. After all, even if the pharmaceutical industry has no profits right now, they can borrow the money in the financial markets at fairly attractive rates.

The main obstacle to R&D, then, is not the current state of pharmaceutical industry profits; it is the potential return on the investment in R&D. After all, Merck doesn’t have to make drugs; it could generate a nice, safe return of 5% a year in government bonds. Or it could get into some other business, such as making soap. If you drive down the profits on new drugs too far, it stops making sense to invest in new drugs, even if there is a small profit to be made on current production.

Developing new drugs is very, very risky. Depending on what you think constitutes a drug candidate, somewhere between one in one thousand, and one in ten thousand drug candidates makes it from a lab bench to clinical trials. Each of the failed drugs was very expensive, particularly if it got partway through clinicals, which run about $500 million per course.

The problem is, once you’ve developed a drug, it’s easy to copy. It’s also usually trivially cheap to produce. And your patent is rapidly running out. This gives a monopsony buyer a lot of leverage to force down your price–you’re almost always better off taking something. This is particularly true if the monopsony buyer has the power to break your patent and license its generic manufacturers to turn out cheap but near-perfect imitations of your product². This is, in fact, what Europe has done; they make pharmaceutical firms sell to them at cost plus. The lion’s share of the profits on any drug come from the United States; what they get in Europe and Canada and the rest of the world is (thin) gravy, a price that is just a little bit better than not selling any drugs there.

Now imagine that America drives drug prices down to that sort of “cost+10″ or “cost+20″ level. The pharmaceutical firms will keep making the drugs they already have, because there will still be a little profit there. But they would have to be psychotic to invest billions of dollars over a 20 year time horizon in exchange for a one in a thousand chance of making that small a profit. Would you put 20% of your income now into an investment that might yield a profit of 10% of your income–in thirty years?

But they have to invest in R&D, say my interlocutors; otherwise they won’t have any drugs to sell! This makes the odd assumption that they can’t do anything else. But history is full of companies that used to do something else entirely–and also, of companies that went out of business when their market collapsed.

Think: tulips, buggy whips, Polaroid, Kodak film and paper, Studebaker, Pan Am. How many more can you remember.

As Vermont dug out from the season’s first major winter snow storm and temperatures plunged below freezing, emergency legislation to provide $1 billion for home heating assistance was introduced today in the Senate by Senators Bernie Sanders and Patrick Leahy and in the House of Representatives by Congressman Peter Welch.

Showtime!

Stage far left is Rep. Clarabell, shooting himself with seltzer. In the harlequin suits, providing comic relief from that clown are Vermont Sens. Jester and Fool. This misbegotten trio now engages in hand wringing and teeth gnashing over the cost of oil, the effect on Vermonters and of course, Bush did it!

Some quotes:

Sanders–“Skyrocketing home heating bills already are stretching household budgets.”…”Congress must act now to deal with this national emergency.”
Leahy–“The Bush administration is turning a blind eye… His veto has contributed to the looming emergency that this bill addresses.”
Welch—“ It is critical that we provide this emergency assistance to Vermonters facing these exorbitant fuel costs.”

The usual gang of suspects signed on to Sanders bill, a total o 23 out of 100, 18 Donks and 5 RINOs. Out of 435 members, Welch lined up 12 cosponsors including Donna Christensen, D-Virgin Islands who thinks cold is in her refrigerator.

Worse, these fiscal hooligans are the ones who voted against any American self-sufficiency in oil and energy. On drilling for oil in the Gulf of Mexico, Alaska, or the coasts, each cast a NO vote; they have blocked new refineries. Furthermore, each wishes to tax Big Oil, which will raise your energy costs even higher than present.

Remember, corporations do not pay taxes. They pass all cost of business through to the consumer.

Given that most moonbat Vermonters believe in global warming/climate change perhaps they will explain why the cost of heating is going up. Perhaps they would explain why we shouldn’t drill of oil. Is coal the answer?

Finally, why should taxpayers in the rest of the country pay for their idiocy? Vermont moonbats voted for these misfits; let the moonbats pay for their votes.