General Motors might be on the brink of bankruptcy :noes:

Discussion in 'OT Driven' started by mucky, Jul 2, 2008.

  1. mucky

    mucky .

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    Merrill says GM bankruptcy possible
    By Soyoung Kim

    DETROIT (Reuters) - General Motors Corp will need to raise as much as $15 billion in cash to shore up liquidity and bankruptcy is "not impossible" if the U.S. auto market continues to slump, Merrill Lynch said.

    Other analysts have suggested GM, whose shares fell to a new 54-year low on Wednesday, needs to raise funds to ride out the downturn in the U.S. auto market through 2009.

    But Merrill's estimate of GM's financing needs is the highest yet. It also carried the most stark warning of the bankruptcy risk for the largest U.S. automaker.

    GM declined to comment directly on the Merrill Lynch report but it believes it has sufficient liquidity for 2008 despite lower volumes and could take more steps to cut costs if sales conditions worsen.

    "If conditions continue to deteriorate, we would consider other operating measures," GM spokeswoman Renee Rashid-Merem told Reuters.

    Merrill Lynch analyst John Murphy cut GM to "underperform" from "buy" and lowered his price target for the largest U.S. automaker to $7 from $28. Shares fell as much as 11 percent to $10.50 in Wednesday's trading in the New York Stock Exchange. The cost to insure GM's debt rose.

    Murphy also lowered his forecast for 2008 U.S. industry-wide light vehicle sales for the third time this year and said the recent drastic decline in sales would likely to continue through 2009.

    Murphy forecasts light vehicle sales of 14.3 million units this year and 14 million units for next year. That compares with 16.15 million units in 2007 and is sharply lower than the current forecast of most major automakers, including GM.

    "The recent extreme deterioration in volume and mix is driving much higher cash burn and eroding GM's cash position," Murphy said. "We believe $15 billion is necessary because there is downside risk to our current estimates and a greater cushion is essential."

    Any capital GM raises has the potential to dilute equity if it's done through convertible offering or the issuance of additional equity, both possibilities analysts have raised.

    DEEPER DOWNTURN AHEAD?

    The deepening concerns about the sales outlook for GM come after a June sales report that showed industry-wide auto sales dropping to a 15-year low.

    GM's own sales fell by a narrower-than-expected 8 percent on an adjusted basis after the automaker offered zero-percent financing for six years.

    But Deutsche Bank analyst Rod Lache said GM could see a "payback" from its June sale in coming months, with its U.S. market share dropping back below 20 percent from 22 percent in June as sales fall back.

    Several other Wall Street banks including Citigroup also downgraded automakers and parts suppliers on Wednesday and lowered their outlook for U.S. auto sales this year and next.

    Citigroup analyst Itay Michaeli lowered his forecast for 2008 U.S. vehicle sales to 14.5 million units from 15 million, saying plummeting resale values of trucks and SUVs was crimping demand already hurt by weak housing and tighter credit.

    Itay said a full recovery in the U.S. auto market would begin only in 2010 or 2011.

    Michaeli said GM has to weather the current downturn with considerably less backup liquidity than smaller rival Ford Motor Co, which tapped the leveraged loan market at its peak in late 2006 to raise $23 billion.

    "While we do not believe GM is facing an immediate cash crunch, the urgency to shore up liquidity to navigate through a difficult 2008-2009 has risen significantly in recent months," Michaeli said. He cut GM's target price to $14 from $21.

    Industry tracking firm Global Insight cut its forecast for the annualized sales rate in July to 14.4 million units and cut its 2009 forecast to 14.2 million units in sales, citing the risk of higher average oil prices in the months ahead.

    Credit option contracts on the Chicago Board Options Exchange that would pay out if GM or Ford default before September 2012 ticked higher. The contracts, which remain lightly traded, point to a roughly 73-percent default risk for GM and a 69-percent risk for Ford over that period.


    http://www.reuters.com/article/ousivMolt/idUSN0244077620080702
     
  2. MrRyan

    MrRyan Gary Johnson 2016 OT Supporter

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    I was thinking of looking at chebbie truck this weekend...
     
  3. Vivid

    Vivid OT Supporter

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    Like I said in the past. In 10 years GM will only be selling corvettes and escalades.
     
  4. Srdjan

    Srdjan Guest

  5. Strife

    Strife Active Member

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    No surprise, we've been here before and it was bound to happen with the amount of cash GM is leaking out right now.
     
  6. heebdawg16

    heebdawg16 New Member

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    oh my god thats a huge surprise, imagine that

    you make the idiotic decision to focus all of your manufacturing and creative efforts on building nothing but gigantic SUVs and trucks.

    combine on top of that the fact that the UAW has singlehandedly ruined the american car market FOREVER (no chance of recovery if the UAW still exists). We have to pay our unskilled workers $11ty billion to do the same shit that costs 1/10th the price in japan/mexico.

    Added together, you realize that you can only spend 20% as many labor hours per car as your competitors can, to be able to sell a car at the same price level.

    So gee let me think, am I going to buy the $22,000 Accord that is built amazingly well, gets great gas mileage, holds its value incredibly well, and has an interior that doesn't feel like a child superglued plastic pieces all over the place?

    Or should I "support my country" and pay $22,000 for a chevy malibu that will be worth $10,000 less two years from now, will fall apart, gets shitty as hell gas mileage, and has an interior that honestly feels like i could rip it apart without even trying?


    hrrrrrrrmmmmmm.............
     
  7. Grape_Ape

    Grape_Ape OT Supporter

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    They made the bed.....
     
  8. pharmokan

    pharmokan OT Supporter

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    in for getting rid of pontiac, gmc, saab, + saturn from their lineup
     
  9. heebdawg16

    heebdawg16 New Member

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    thats the other fucking problem.

    How the fuck does GM think they can get away with making one car, and slapping 5 different badges on it?

    They need to cut it down to just two companies: Chevrolet and Cadillac. You have your regular cars, and your luxury models. Thats fucking it.
     
  10. pharmokan

    pharmokan OT Supporter

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    :werd:
     
  11. pharmokan

    pharmokan OT Supporter

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    oh buick too.

    forgot about them (is buick even owned by GM? :rofl: )
     
  12. MSTRBKR

    MSTRBKR New Member

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  13. TriShield

    TriShield Super Moderator® Super Moderator

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    They've been on that brink for years, it's just accelerating now.
     
  14. Cannondale

    Cannondale OT Supporter

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    It's about time.
     
  15. loading

    loading OT Supporter

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    they say its possible, not that they are going to
     
  16. spooky

    spooky OT Supporter

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    buy buy buy
     
  17. mucky

    mucky .

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    This might be crazy talk, but I think as bad as Ford is, they're not in as bad shape as GM.
     
  18. pharmokan

    pharmokan OT Supporter

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    YOU CANT FUCK WITH MICROSOFT SYNC SON
     
  19. Gvidon

    Gvidon New Member

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    Mercury..
     
  20. mucky

    mucky .

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    Ford is strong outside of North America. All Ford needs to do is bring those subcompacts (e.g., Ford Festiva) they're selling elsewhere to the US and they're good.

    GM subcompacts are POS.
     
  21. mucky

    mucky .

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    :ugh:
     
  22. zxghostrider

    zxghostrider Sometimes you gotta hop on two wheels

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    Just keep corvette and cadillac, and GM is g2g
     
  23. Tony Stark

    Tony Stark John McCain has an illegitimate mexican baby

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    they need to consolidate.

    Chevrolet for the working class people(throw buick/pontiac in here)
    Cadillac for the rich people
    GMC for the truck people(but rename it GMC HUMMER)
    Saab
    Saturn


    I mean really, take pontiac for example, the G8 could work just as fine as a new Impala
     
  24. Japan Four

    Japan Four Guest

    . their cars are shit any how, save the ones mentioned.
     
  25. xioix

    xioix OT Supporter

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    Thats Ford
     

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