Think, Invest! by

Friday, June 01, 2007

More thoughts on GM's demise

GM currently has $20 billion in cash. But it CURRENTLY owes its dealers about $10 billion in rebates, it has taken $10 billion in cash from rental car companies for fleet sales but it hasn't delivered the product yet (meaning it will incur costs but get no cash for this effort), and it owes its suppliers $30 billion. Add onto that nearly $5 billion in short-term debt, $33 billion in long-term debt, and health care liabilities of around $49 billion (I agree, pensions are fully funded at this point-in-time).

So even if I were to buy the argument that GM is well on its way to profitability (which I don't think it is), where does it come up with the money to pay what it CURRENTLY owes????

Please answer me this!!!!!!!!

This is the essence of my argument. I'm not arguing whether June sales will be good or bad. Who knows? I'm arguing that even if June sales are good, this company is TOAST.

GM knows what I'm saying. That's why they are issuing debt against the equity value of their GMAC shares, that's why the are actively selling their Allison transmission plant (even though it generates EBIT of nearly $600 million a year, that is why they are pulling cash out of their pensions.

So, tell me, where does the money come from to pay what they ALREADY owe????


  • You are writing great stuff about GM. What you can't see is how GM could be the first (or second) domino that brings down the whole party.

    So, if your scenario is right, and GM dies a slow death (but starts to look pretty lifeless soon), who do you think is going to pay for GM's pension and retiree health benefits?

    I'm sure you can intuit the answer: The U.S. taxpayers. Same with Ford and Chrysler, eventually. Same with many airlines, newspapers, and "old economy" manufacturers.

    You're onto something. But open your eyes to something bigger.

    By Anonymous Anonymous, at 10:03 PM  

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