GM to Halt Savings-Plan Payments Amid Wider Slowdown

[BunsGettingFirm]

You can never run the cash down to zero, various analysts have said that the "floor" to keep GM operating is between 11 and 14 billion cash. That leaves them a cushion of no more than 9, and they are burning that at almost 1 bil per month. At the current rate, that puts them in Ch 11 next summer.
There are probably some desperation moves they could make, or the sales might improve, but it will take a major good event to keep them out of bankruptcy sometime next year.
That doesn't mean GM wil disappear, but they will emerge like most of the airlines did: smaller and weaker.

You're right. I'm sure a lot of GM creditors would come a calling because of loan covenant violation. Damn, $19 billion is not enough. I wonder what else GM can do.

 

[Zathras]

It may well be too late for them to fix things.
They COULD have fixed it years ago, but now, I am just not so sure they can prevent bankruptcy.
They needed to revamp their production lines to be more flexible.
They also needed to be able to make smaller more fuel efficent cars which could also make money on.
These are still things they need to do. I just don't know if they can do it without declaring bankruptcy.

 

[chinaco]

Car manufacturers are in serious trouble... especially the Americans...

The govt may bail it out... If the govt does not bail them out, Ford and GM will probably fail.

Investors stock is worthless now and will probably go to zero. Bonds could be jeopardy... pennies on the $.

And the car manufacturers are at the center of a larger network of suppliers and sellers of the product. There is a multiplier effect that could be devastating.... to all of our portfolios... many people could lose their jobs.

 

[samclem]

And the car manufacturers are at the center of a larger network of suppliers and sellers of the product. There is a multiplier effect that could be devastating.... to all of our portfolios... many people could lose their jobs.

If the car companies declare bankruptcy but continue to operate, reducing their labor costs and other costs, these other supplier companies might not get hurt much. Yes, they'd take a bath on the amount they were owed for items already delivered, but they'd still be selling rims and wiper motors as they always have. There will be a cash crunch as these suppliers will want their money up front. For this reason, any "bailout" money would go a lot farther after the inevitable bankruptcies are declared. At least then the bailout $$ would be paying for products and services, not paying people not to work.

 

[FinanceDude]

The doemstic carmakers made SO MANY DUMB decisions in the past 20 years, its flat out breathtaking.

They will all go into some form of bankruptcy, but will emerge smaller and hopefully smarter. The fact that Honda and Toyota showed you can make a small fuel efficient reliable car and folks will buy it NO MATTER how low gas prices are shows they missed the boat.

 

[samclem]

I agree 100%. Small additions for emphasis:

The fact that Honda and Toyota showed you can profitably make a small fuel efficient reliable car in the United States and folks will buy it NO MATTER how low gas prices are shows they missed the boat.

We're about to see "creative destruction" at work. It's very painful, but the trick is to assure that it's not just destruction, but also creates something.

 

[FinanceDude]

I agree 100%. Small additions for emphasis:


We're about to see "creative destruction" at work. It's very painful, but the trick is to assure that it's not just destruction, but also creates something.

Good additions...... For YEARS, GM has said they lose money on every small car they made. Small wonder, I owned some of those crappy Cavaliers and Sunbirds and they sucked. I owned a 78 Corolla that got 7 MPG better than a 93 Sunbird........

I read they are coming out with a new SMALL car called the Cruz or Crux or something, with a 1.6 liter engine that gets 40mpg. Where the HECK was that car 15 years ago?

 

[al_bundy]

You're right. I'm sure a lot of GM creditors would come a calling because of loan covenant violation. Damn, $19 billion is not enough. I wonder what else GM can do.

the amount of money in the bank is not as important as working capital requirements. there is a formula to calculate it, but i forgot it.

 

[FinanceDude]

the amount of money in the bank is not as important as working capital requirements. there is a formula to calculate it, but i forgot it.

True, if GM gets too out of whack with their lines of credit, then the real "stuff hits the fan"..........

 

[Khan]

The doemstic carmakers made SO MANY DUMB decisions in the past 20 years, its flat out breathtaking.

They will all go into some form of bankruptcy, but will emerge smaller and hopefully smarter. The fact that Honda and Toyota showed you can make a small fuel efficient reliable car and folks will buy it NO MATTER how low gas prices are shows they missed the boat.

Turning the screws a little tighter: Toyota is offering 0% financing.

 

[FinanceDude]

Turning the screws a little tighter: Toyota is offering 0% financing.

I heard Honda has 1.9% for 72 months........

 

[Gearhead Jim]

The doemstic carmakers made SO MANY DUMB decisions in the past 20 years, its flat out breathtaking.

They will all go into some form of bankruptcy, but will emerge smaller and hopefully smarter. The fact that Honda and Toyota showed you can make a small fuel efficient reliable car and folks will buy it NO MATTER how low gas prices are shows they missed the boat.

"...smaller and hopefully smarter..."
A careful look at United Airlines will show that "smarter" does not necessarily follow "smaller".

 

[Bestwifeever]

GM might have help soon--

STLtoday - Feds may help with GM-Chrysler deal

 

[jIMOh]

Good additions...... For YEARS, GM has said they lose money on every small car they made. Small wonder, I owned some of those crappy Cavaliers and Sunbirds and they sucked. I owned a 78 Corolla that got 7 MPG better than a 93 Sunbird........

I read they are coming out with a new SMALL car called the Cruz or Crux or something, with a 1.6 liter engine that gets 40mpg. Where the HECK was that car 15 years ago?

The 1.6 L engine and the mpg will be welcome advertising points.

But that does not say if the car will last 10 years.

That Honda or Toyota will do much better. Even if mpg is 10 less ... because it will last 10-15 years. I have little confidence that even if the marketing points are hit by the GMs or Fords of the world, they will still miss the mark on quality.