GM's Balance Sheet: A Sign of Impending Doom
#1
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GM's Balance Sheet: A Sign of Impending Doom
GM's Balance Sheet: A Sign of Impending Doom
http://biz.yahoo.com/seekingalpha/07...1_id.html?.v=1
O.K class, let's discuss why General Motors (NYSE: GM - News) is going bankrupt. Has anyone looked at their balance sheet lately? Let's review.
As of March 31st, they had cash of around $21 billion. They had receivables of around $10 billion. But they had accounts payable of $30 billion and accrued expenses of $34.5 billion. Ouch.
They have some other current assets (inventories, equipment on lease) but when you add up all the current assets it's still over $5 billion less than the current liabilities.
In addition, they have $33 billion in long-term debt, $49 billion in post-retirement benefits, and $11 billion in pensions.
One of the only things this organization seems to have as assets is deferred income taxes (a total of over $44 billion). But even with that, they still have a negative shareholder equity of over $4 billion!!!!
GM has just issued a secured loan against one of their last unleveraged assets (their equity in GMAC). So as expenses come due and if losses continue, who's going to lend to this frankenstein monster????
It may take a year. It may take two or three.
But as far as I'm concerned they are already bankrupt. Just read their balance sheet, and weep.
GM has spent the last two decades selling anything that made money: Hughes, EDS, GMAC. Yet they have emerged from this sales process with even more debt.
Now all that remains is their car business which is losing market share and probably has further to fall.
Don't get me wrong. There are many positives to GM. It is expanding internationally, it benefits from a weak dollar, Bob Lutz is unleashing creative talent and GM may achieve success in its negotiations with the UAW later this year.
However, all these positives are too little too late. This bureaucratic, old-school company has not moved fast enough and now it cannot escape that juggernaut, that reality: its balance sheet.
On the negative side, GM faces write-downs from Delphi, possible further restructuring costs and losses, and its expenses and payables coming due. Furthermore, there is increasing likelihood the U.S. economy could remain slow or even contract a little. If GM needs further financing, who will lend more money to this Frankenstein monster? I doubt any banks will lend unsecured to GM given its financial profiles, and I don't think it has many unsecured assets left!
Chrysler, which had some unsecured assets left, was essentially given away to Cerberus. GM, on the other hand, still has $17 billion in market cap at today's stock price of $30 a share. GM has had a nice bounce up, but it seems like a dead man's bounce. I doubt even private equity can save GM now.
As of March 31st, they had cash of around $21 billion. They had receivables of around $10 billion. But they had accounts payable of $30 billion and accrued expenses of $34.5 billion. Ouch.
They have some other current assets (inventories, equipment on lease) but when you add up all the current assets it's still over $5 billion less than the current liabilities.
In addition, they have $33 billion in long-term debt, $49 billion in post-retirement benefits, and $11 billion in pensions.
One of the only things this organization seems to have as assets is deferred income taxes (a total of over $44 billion). But even with that, they still have a negative shareholder equity of over $4 billion!!!!
GM has just issued a secured loan against one of their last unleveraged assets (their equity in GMAC). So as expenses come due and if losses continue, who's going to lend to this frankenstein monster????
It may take a year. It may take two or three.
But as far as I'm concerned they are already bankrupt. Just read their balance sheet, and weep.
GM has spent the last two decades selling anything that made money: Hughes, EDS, GMAC. Yet they have emerged from this sales process with even more debt.
Now all that remains is their car business which is losing market share and probably has further to fall.
Don't get me wrong. There are many positives to GM. It is expanding internationally, it benefits from a weak dollar, Bob Lutz is unleashing creative talent and GM may achieve success in its negotiations with the UAW later this year.
However, all these positives are too little too late. This bureaucratic, old-school company has not moved fast enough and now it cannot escape that juggernaut, that reality: its balance sheet.
On the negative side, GM faces write-downs from Delphi, possible further restructuring costs and losses, and its expenses and payables coming due. Furthermore, there is increasing likelihood the U.S. economy could remain slow or even contract a little. If GM needs further financing, who will lend more money to this Frankenstein monster? I doubt any banks will lend unsecured to GM given its financial profiles, and I don't think it has many unsecured assets left!
Chrysler, which had some unsecured assets left, was essentially given away to Cerberus. GM, on the other hand, still has $17 billion in market cap at today's stock price of $30 a share. GM has had a nice bounce up, but it seems like a dead man's bounce. I doubt even private equity can save GM now.
http://biz.yahoo.com/seekingalpha/07...1_id.html?.v=1
#2
Any doubt that the US three are in doo-doo has been erased. Ford sells Aston after finally making it into a real car company at a cost of Billions, and next will sell Volvo.
Chrysler given away a massive loss to MB and I'm surprized anyone took them to be honest.
GM is as bad as the other two.
It all stems to the future pensions and benifits that the UAW are owed. GM isn't a car company anymore they are a healthcare provider that sells cars as a means of paying these debts.
Maybe they can spin off GMC (someone may want the full size trucks?) and they could probably get a few dollars for Caddy.
But the fact of spin-offs and lay-offs does not eliminate the retired workers (except those who take a buy-out). So it just means a smaller market share (less workers) paying for healthcare for hundreds of thousands of retired workers who will be on the dole for decades to come.
Chrysler given away a massive loss to MB and I'm surprized anyone took them to be honest.
GM is as bad as the other two.
It all stems to the future pensions and benifits that the UAW are owed. GM isn't a car company anymore they are a healthcare provider that sells cars as a means of paying these debts.
Maybe they can spin off GMC (someone may want the full size trucks?) and they could probably get a few dollars for Caddy.
But the fact of spin-offs and lay-offs does not eliminate the retired workers (except those who take a buy-out). So it just means a smaller market share (less workers) paying for healthcare for hundreds of thousands of retired workers who will be on the dole for decades to come.
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