At this point, there is probably nothing that can be done to salvage General Motors as we know it.
Two months ago, GM’s market cap was something like $6.5 Billion. Today it is less than $3B. General Motors is now spending, on a monthly basis, about as much money as GM’s total market valuation. General Motors now burning through $2.3 Billion, every month.
Let’s put it in perspective: General Motors has about 8 months of cash reserves left. In order to ultimately stave off bankruptcy.
GM would need to sell something like 5 million new cars over that period of time, in order to generate that sort of positive cash flow (assuming an average car payment of $400/month). That would potentially buy them three to four years, before those notes expired and the company would find itself in a very similar position, again.
No, really, let’s put it in perspective. General Motors sold just over 2.1 million vehicles in 3Q2008. They would need to literally double their sales over the next eight months to stay solvent, which would probably require that they double their capacity. This is inconceivable.
Although the merger talks with Chrysler are temporarily on hold, but GM (actually all of the Big 3) is still pandering for a bailout in the neighborhood of $25-50 Billion. A bailout is the only thing that could possibly keep General Motors in business, and for that reason alone, it is objectionable. In the event of a bailout, a handful of insiders are going to make a bunch of money that was taken from the rest of us, and the company is going to go under, anyways.
There is simply no good reason to force the rest of us to finance GM’s life-support, only delaying what is in all likelihood a foregone conclusion. General Motors will die, whether we keep it alive for a few more months (or years) is beside the point. There’s no justification for society’s productive members to be forced to pay higher taxes, and enjoy all the benefits of a reduced standard of living, just so a company that has failed so objectively and so perfectly can continue to make cars that nobody wants to buy.
One day, I want to investigate how much the union had to do with the current state of affairs of the auto companies as well as the government bailout efforts.
My first inclination is to believe the UAW had a significant impact on the Big 3 as well as pushing the government to react to the failure. I would not say it was the reason, but they certainly did not help to improve the situation by any means.
I always found it odd that GM has been having cash flow problems for a few years now, yet the UAW insists on requesting more pay, more jobs, more this, more that with no basis except for their ability to strike and put GM out of business, and oddly, themselves out of a job.
It looks bleak. GM stock is down over 20% today on downgrades from major brokerage houses.
Even a dump of public money cannot stop the avalanche.
When I lived in Detroit, I always wondered what the RenCen would look like if it was abandoned like the other skyscrapers. I guess we’ll have a chance to find out sooner than I thought.
I’m betting on them getting some sort of bailout. I’m interested what the climate will be in 5 years when they have to ask for another.
Maybe they will have a liquidation or going out of business sale like every other business around here. Do you think I’ll be able to get one of those Corvette Z06′s for 50% off?
I hope they hold out until the new Camaro’s are in production
These big car manufacturers make some shitty cars. My grandfather use to be able to fix cars no problem nowadays he has a lot more trouble because they are designed to force you to bring them to the shop (Still does not stop him at 73). To change a headlight bulb in my 2000 cavalier took us an hour, to change a f*cking bulb. This is only because my grandfather has the right tools and knows what he is doing. Still an hour to change a bulb!!!???
Burn motherf*ckers.