GM Controller to Peers: Watch Your Assets

Hidden impairments and illiquid assets keep Nick Cyprus awake at night.

Being a controller has to be one of the toughest executive jobs right about now, depending on how your company and its industry are faring amid the general chaos. And the job at General Motors has got to rank among the toughest of the tough.

That didn’t stop GM’s Nick Cyprus from showing up to participate in a controllers’ roundtable at the Financial Executives International financial reporting conference in New York on Monday. That was the day before his boss’s boss flew to Washington to ask for billions of dollars worth of government money to keep the company going. The audience certainly appreciated the irony.

When moderator Thomas Tefft, the controller at Medtronic, asked his first question — “What keeps you up at night? What are the challenges you’re seeing and how are you dealing with them? Let’s start with you, Nick” — the hearty laugh that rumbled through the 750-person crowd could have been interpreted as anything from simple mirth to nervous relief to a touch of sadism.

His answer was not all that surprising. With sales way down in the high-fixed-cost automotive industry, “understanding where you might have hidden impairments that you didn’t think about in the past is a trick,” said Cyprus. Where most companies look at impairments annually, GM now is doing it continuously.

His advice to others: make absolutely sure you know what assets might be illiquid and how long they’ll be staying on the balance sheet — and with the end of the year approaching, if you don’t know, find out as soon as possible. “The only way to maintain credibility with the audit committee is to give a heads-up of where you have trouble and not let the auditors catch you at the end,” he said.

A fundamental change in the way GM operates these days is “managing the business for cash.” Assets that the company previously would have held onto are more likely to be sold. “If you need to make payments, sometimes you’re taking dramatic actions to sell assets,” he said.

At the same time, Cyprus said, it’s not a time to be penny-wise and pound-foolish — to say, for example, that you’re not going to have any more continuing professional education for accountants. The big picture still counts.

Seismic shifts are not particular to huge companies like General Motors. Another panelist, Joseph Durko of Standard Microsystems Corp., a $370 million semiconductor company, said the current financial environment has dramatically changed its risk profile. “We had always had limited receivable exposure, and we’re worried about that now,” he said. “We’d always had limited inventory exposure, and we’re worred about that too. We are reinventing some of our most basic views of balance sheet risk.”

Like GM, Standard Microsystems has moved to quarterly risk assessment, and at the same time is retrenching on resource deployment for future planning and business process improvement projects. “I’ve taken a lot of my talented accountants that were working working on building for the future and put them back on managing the present,” Durko said.

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