Zombie companies like GM stink up the marketplace like a dead skunk on a Georgia country road. Bury the corpse we say. Otherwise the same corrupt, failed policies continue. Legally obligated expenses like inflated bonuses and cushy retirement packages, big brand advertising campaigns (such as the company name on a sports stadiums), union costs, health insurance, and over-capacity of office space, all must be paid… and the bill is being handed to the US taxpayer!

Then there are the lost opportunities for innovators and entrepreneurs who could pick up the pieces and create real value. Instead, the birth of new technologies and products is put on hold.

And consider the long term effects of retaliatory bailout policies from foreign governments. They are compelled to prop-up their national industries to stay competitive with free-money-financing from the US government. That’s the way it is with government intervention in the marketplace. The effects are so complicated and far-reaching the average bureaucrat couldn’t possibly fathom it.

GM has spent around $1 million a month on lobbying Washington over the last few years. This includes the first quarter 2009. In return, the company got $13.4 billion in bailout money. That’s a helluva of ROI. But it stinks to high heaven.

Under the restructuring plan GM detailed last month, government loans would convert to stock in the automaker, making Uncle Sam the majority owner. GM also owes the United Auto Workers Union $10 billion for a trust fund for retiree healthcare. If that were converted to stock the union would get a 39 percent stake in the restructured company.

With these two business geniuses as the new owners, the UAW and the US government, we’re sure the new restructured GM will be a great success… a big shining tribute to bailout culture.

• Heavy equipment maker Caterpillar Inc. (CAT) said it will offer voluntary early retirement packages to about 2,000 workers. Age and length of tenure will determine who gets the offer. “Our intent is to provide eligible employees the opportunity to retire early as we expect significant declines in all geographic regions,” Sid Banwart, vice president of human services, said in a release.

• Canada recorded its first monthly trade deficit in December, its first in more than 30 years. The C$458 million deficit ($366 million) stems from “collapsing commodity prices and the deep dive in U.S. spending, especially on autos,” Doug Porter, deputy chief economist at BMO Capital Markets in Toronto, told Bloomberg. The country is the No. 1 exporter of oil and natural gas to the U.S., and overall exports fell 9.7% in December.

• Research in Motion Ltd. (RIMM) said its quarterly earnings would meet the low end of expectations. “You probably see big financial institutions cutting costs … and the consumer is just not getting a new handset,” James Cordwell, an analyst with Atlantic Equities in London, told Reuters. “It just shows they’re not immune to the economic slowdown like anybody else.”

• General Electric Co. (GE) said it signed a $1 billion contract to build 30 gas turbines in Saudi Arabia. Demand for power is growing in the Middle East, and GE said it has sold 188 gas turbines in 2008 and may sell about 185 in 2009, Bloomberg reported.

• Investors flocked to the U.S dollar yesterday, as it rose against the yen and euro in volatile trading. The dollar was bolstered by a flight to safety surrounding uncertainty about the final size and scope of the U.S. stimulus package. The general consensus was that the U.S. bank bailout plan unveiled on Tuesday covered the key areas needed to stem the hemorrhaging in the banking sector, Reuters reported.  In late afternoon trading, the dollar was up 0.3% against the yen at 90.53 yen. The euro was down 0.4% at $1.2848.

• General Motors Corp. (GM) is asking Sweden to guarantee $600 million in European Investment Bank loans to keep the Saab Automobile unit operating until it can be restructured for sale, Bloomberg reported, citing an anonymous source. The money, along with about $400 million (3.36 billion kronor) from GM, would allow Saab to introduce new models that would keep Saab competitive, and possibly prevent it from being put into administration or closed down. GM is trying to figure out what to do with Saab by Feb. 17, the due date for a progress report to the U.S. Treasury on how it will become viable so it can repay $13.4 billion in government loans by 2011.

• Gold soared to a 7-month high on Wednesday as investors bought gold and bullion-backed exchange-traded funds.  U.S. gold futures pushed through resistance levels just above $930 and rose $30.80 to $944.50 an ounce for April delivery on the COMEX division of the New York Mercantile Exchange. Most analysts are projecting gold to rise above $1,000 this year, as safe-haven buying and demand for gold as a hedge against inflation are expected to continue, MarketWatchreported.

• China will make its biggest ever investment in a foreign company by injecting  $19.5 billion in cash into mining group Rio Tinto Group (ADR: RTP), the Financial Times reported.  Chinalco, a state-owned aluminum producer will increase its stake in Rio Tinto to 18%, grabbing a minority share in some of its best mining assets and an issue of convertible bonds.  The deal will come under intense scrutiny from Australian politicians, who had imposed a 15% limit on Chinalco’s holdings.

Source:  Global Investment News Briefs Thursday, February 12th, 2009