General Motors (GM) 01 (Jun 08 - Jul 10 )

[millionairemind]

First time I have seen an analyst say a stock is worth $0...

November 11, 2008

GM tumbles after downgrade
Fears grow for future of GM as its shares plunge after a Deutsche Bank analyst said they could be worth nothing within 12 months
Christine Buckley, Industrial Editor

Shares in General Motors crashed to their lowest level in 62 years yesterday after an analyst at Deutsche Bank said that they could be worth nothing at all within 12 months.The company gave warning on Friday that it could run out of cash early next year, but Deutsche Bank said that this could happen as early as next month.

Rod Lache, the Deutsche analyst, cut his 12-month price target on GM to $0, bringing it down from $4, and issued a “sell” recommendation. GM’s shares slumped to $3.02 in early trading, their lowest level since 1946, although they edged up again to close at $3.30, down $1.06 on the day.

Mr Lache said: “Even if GM succeeds in averting a bankruptcy, we believe that the company’s future path is likely to be bankruptcy-like.”

Although the prospects for a government bailout are seen to have risen since Barack Obama won the US presidential election last week, investors said that such action would come at a significant cost to existing shareholders. Barclays slashed its target price from $4 to $1 and recommended an “underweight” position, against its previous advice of “equal-weight”. It forecast that GM would end the year with $13.3 billion in cash and would fall below its stated minimum of between $11 billion and $14 billion early next year.

Yesterday GM announced production cuts in North America that would leave 5,500 workers, who are paid by the hour, idle. Such workers are technically laid off and paid federal unemployment benefits which are topped up with a General Motors-funded supplementary benefit. They also keep their health benefits.

The idling process allows car companies to halt production and stem oversupply and to cut staffing costs rapidly. In the event that factory lines are brought back into production, the company is required to call back the workers in a specific sequence.

On Friday the carmaker and Ford, its rival, sent fresh shockwaves through the market with third-quarter losses that were worse than expected. Both carmakers have been hit badly by dire sales at home and overseas. GM lost $4.2 billion (£2.68 billion) at operating level in the third quarter, while Ford lost $2.98 billion and announced further job cuts. GM also revealed that merger talks with Chrysler, seen as a lifeline for both businesses, had been called off.

Adding to its growing list of woes, Delphi, GM’s biggest parts supplier, may not be able to emerge from bankruptcy protection, GM said in a regulatory filing yesterday. On Friday GM said that it would run out of cash early next year unless the economy improved, which is seen as unlikely, or the company sold significant assets, which is also far from certain, or it obtained cash from the Government.

Last week the US Government turned down a request from GM for $10 billion to support a merger with Chrysler. It has also turned down requests from Ford and Chrysler for money beyond a $25 billion pot established to help green initiatives.

However, Mr Obama said that he was looking at policies to help the industry he described as “the backbone of American manufacturing”.

The implications of financial crisis in the big three US carmakers are huge. Last week analysts estimated that even if GM, Ford and Chrysler only halved output, 2.5 million jobs would be lost throughout the automotive industry and the Government would lose $100 billion in taxes.

[millionairemind]

Just let it go into chapt 11, then restructure the whole firm...

Y bailout a lousy company which makes products no body wants??

Pelosi Calls for `Emergency' Aid to U.S. Automakers (Update2)

By Laura Litvan and John Hughes

Nov. 11 (Bloomberg) -- House Speaker Nancy Pelosi said she wants ``immediate action'' to give automakers additional aid as shares of General Motors Corp. hit their lowest level since 1943.

The failure of ``one or more of the major American automobile manufacturers'' would have a ``devastating impact on our economy,'' Pelosi said in a statement e-mailed to reporters.

Pelosi said any aid to the automakers would come with conditions. She didn't specify the level of assistance she supports, but said it should come from the $700 billion Congress authorized the Treasury to use to help stabilize the financial services industry. Pelosi said she is tapping House Financial Services Committee Chairman Barney Frank to write the legislation that may be considered as early as next week.

``Emergency assistance to the automobile industry would be conditioned on executive-compensation restrictions, a prohibition on golden parachutes, rigorous independent oversight, and other taxpayer protections to ensure that any companies that benefit from this assistance - and not the taxpayers - bear the full burden of repaying any costs that are incurred,'' Pelosi said.

http://www.bloomberg.com/apps/news?pid= ... refer=home

[HengHeng]

Too many jobs at stake. I still remember about the GM not long ago still have strike , now just tell them go home and eat themselves. Strike strike strike ..now see lor .. how they die.

Lesser jobs -> Lesser consumption/spending -> Lesser Tax revenue -> Lesser money to help

[iam802]

I would think Chapter 11 is a better way.

Let the mgnt. think harder on how to pay off debts while operating the business under tight funding situation.

Seems a bit easy to be CEO of GM. Not enough money...just ask.

[iam802]

Posted previously was a call by a Deutsche Bank analyst that states GM has a target price of ZERO.

The following article points out that the same analyst has been giving BUY ratings on GM previously. How can things change so fast?



http://www.thestreet.com/story/10447426 ... on-gm.html

[winston]

by millionairemind on Sat Nov 15, 2008 5:58 pm

And here to scare you into a bailout package

GM Collapse at $200 Billion Would Exceed Bailout Tab, Firm Says
By Alex Ortolani and Mike Ramsey

Nov. 15 (Bloomberg) -- General Motors Corp., burning through cash as sales slump, would cost the government as much as $200 billion should the biggest U.S. automaker be forced to liquidate, a forecasting firm estimated.

A GM collapse would mean ``more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,'' Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, said yesterday in an interview.

Behravesh's projection of $100 billion to $200 billion in costs dwarfs the $25 billion industry bailout plan that will be debated in Congress next week to prop up Detroit-based GM, Ford Motor Co. and Chrysler LLC. The drain on taxpayers from a rescue or a GM failure is a central issue for U.S. lawmakers.

Included in the Global Insight estimate, which Behravesh supplied to Bloomberg News, are the anticipated costs for existing programs, such as unemployment insurance, and new measures that the economist said would be needed to revive economic growth after millions of auto-related job losses.

A GM shutdown would wipe out jobs among suppliers as well as at the automaker itself, pushing the U.S. unemployment rate next year to 9.5 percent, compared with current projections of as high as 8.5 percent, Behravesh said.

`Significantly Short'

GM said Nov. 7 it may not have enough operating cash by year's end, and would be ``significantly short'' of its needs by June unless it adds capital or the U.S. auto market recovers from its worst sales year since 1991. GM had $16.2 billion on hand as of Sept. 30, down from $21 billion at the end of June, and needs $11 billion to pay its monthly bills.

While some investors including Wilbur Ross say a GM bankruptcy would be a ``real mess'' that would end in liquidation, others such as hedge-fund manager William Ackman say there is no need for taxpayer funds and that GM should reorganize in court.

``A bankruptcy wouldn't address our immediate liquidity concerns,'' said Renee Rashid-Merem, a GM spokeswoman. ``It's not an option for GM because it creates more problems than it solves.''

The Center for Automotive Research projects that federal, state and local governments would lose $108.1 billion in taxes over three years in the event of a 50 percent reduction in U.S. automaker operations.

Job losses would total 2.5 million from an automaker failure in 2009, including 1.4 million people in industries not directly tied to manufacturing, the Ann Arbor, Michigan-based group said in a report on Nov. 4, three days before GM disclosed its cash drain.

`Real Costs'

``The government has real costs it would have to foot'' in a liquidation, said Bob Brusca, president of Fact & Opinion Economics in New York and a former chief of international markets at the New York Federal Reserve.

``They don't get those income taxes any more from the workers, they don't get the taxes from the corporation, they don't get local loss of taxes,'' Brusca said in an interview.

States pay an average of $279 a week for unemployment benefits for 26 weeks, according to Jennifer Kaplan, a U.S. Labor Department economist. The payments can last as long as 39 weeks in some states including Ohio, where the jobless rate was 7.2 percent in September.

`On the Hook'

The federal government also might ``be on the hook for the pension benefits and health benefits'' for workers thrown out of their jobs in an automaker collapse, said Dana Johnson, chief economist with Comerica Inc. in Dallas.

GM climbed 6 cents to $3.01 yesterday on the New York Stock Exchange. The shares have tumbled 88 percent this year.

The 15 percent slump in U.S. auto sales this year through October is overwhelming years of cost-cutting efforts at GM. The company has eliminated 46,000 U.S. jobs since 2004, when it last posted an annual profit.

Payroll cuts and plant closures at Ford and Chrysler have added to the erosion of auto jobs in states such as Ohio, home to assembly plants for all three companies and behind only Michigan in auto-industry employment.

The state may exhaust its unemployment trust fund by the end of December and is seeking a $500 million line of credit from the U.S. Department of Labor, said Brian Harter, spokesman for the Ohio Department of Job and Family Services.

``The health of the heartland of America would be devastated'' should GM stop operations along with many suppliers, former Michigan Governor Jim Buchanan, a Democrat, said yesterday in an interview. ``The loss of revenue to the federal government and the states would be horrendous.''

The fallout wouldn't be that dire should GM manage to keep operating while in bankruptcy protection, said George Eads, a senior consultant at economic business and consulting firm CRA International Inc.

``It would be a big tragedy, but not like some estimates,'' he said.

[iam802]

I wonder how much influence does Jack Welch still holds ??

--------------------

GM: The Case Against a Bailout
Jack and Suzy Welch say that bankruptcy reorganization, with the U.S. as financier, would open the doors to meaningful structural change

By Jack and Suzy Welch

Should the government bail out the U.S. auto industry to keep the players from going into bankruptcy?—Bill VanderMolen, Pittsfield Township, Mich.

How about this instead: The boards of Chrysler and General Motors (GM) put their companies into bankruptcy with the clear intent of reorganization and merger. As radical as that sounds, it's the best road we can see to a viable future for the industry.

And yes, the U.S. car industry does belong in the future. Free-market proponents have a point about the industry's "natural demise." Despite huge progress in American quality and design, well-run German, Japanese, and Korean companies have taken about half the U.S. market, and the competition—which will include China and India—is only getting tougher. But like many others, we believe that for the sake of jobs, national defense, and self-respect, America needs to keep its "true" domestic auto industry alive.

A government handout, however, isn't the way to make that happen. Washington would impose conditions and promise strict oversight, but it simply can't push through the kind of transformative change the industry needs. There would be too much political opposition, and regardless, the bailout sums being bandied about—$25 billion of taxpayer dollars, for starters—would only keep the Big Three heaving along, basically as they are. It's a life-support solution, not a cure.

TIME FOR A BOLD MOVE
That's why the boards of the automakers should take the courageous step of putting their companies into bankruptcy. Some creditors might make the case for liquidation, but given the diminished worth of the automakers' assets, that's an unattractive scenario. Instead, creditors would most likely opt for the government stepping in as the debtor-in-possession financier supporting the reorganization.

Talk about a fresh start. For more than a decade, U.S. carmakers have chipped away incrementally at massive legacy costs. But reorganization would open the doors to meaningful structural change through the renegotiation of contracts with creditors, dealers, and unions. And it would offer better odds of paying back taxpayers.

Once in Chapter 11, a merger would further galvanize real change. Three companies are too cumbersome to unite, and Ford (F) has a two-tiered, family-owned structure, so we'll leave them out of this for now and propose GM and Chrysler join forces. Such a merger could create $15 billion in synergies from reduced capacity and overhead, money that could lower production costs and boost R&D spending. Granted, GM and Chrysler could lose share during the transition, but a merged entity would still end up with more than a quarter of the U.S. market.

WORTH THE LONG, BUMPY RIDE
We don't want to make this sound easy. Mergers are challenging under any circumstances, and a merger of two companies in bankruptcy would be at the outer limits of difficulty, requiring the commitment of constituencies steeped in old, adversarial ways. And there will be real pain before a turnaround begins. Shareholders will see their investment evaporate. Thousands of jobs will be lost. Many employee benefits will shrink. And banks will see much of their debt converted to equity.

We also realize there are dozens of reasons to shoot at such a drastic solution. Some argue that American consumers won't "invest" $30,000 or more by buying a car from a bankrupt company. But Americans regularly invest their most precious asset—their lives—in bankrupt airlines when they fly. That said, if the government wants to see Chrysler and GM emerge from bankruptcy sooner rather than later, it could show its long-term support, perhaps by backing new-car warranties.

Others will argue that the mechanics of two bankruptcies and a merger are impossible to execute, and still others will say too many contractual concessions have already been made. Leaders, too, may balk at championing painful change. That's a brutal task in normal times—and it will be Herculean in this highly politicized environment.

But for the U.S. industry to get from here to there—"there" being a globally competitive future—it has to get off the beaten path of incrementalism. With reorganization and a merger, a long and bumpy trip awaits, but the destination should make it worth the ride.

[millionairemind]

If GM goes down, the mkt might go to hell.... fear due to the interdependency of its suppliers, car dealerships etc.. etc.. resulting in massive layoffs.

General Motors board weighs bankruptcy option: report
Sat Nov 22, 2008 12:02am EST Email | Print | Share| Reprints | Single Page | Recommend (-) [-] Text [+]

WASHINGTON (Reuters) - The board of directors of embattled U.S. automaker General Motors Corp is considering "all options" including bankruptcy, according to a report on the Wall Street Journal's website late on Friday.

The paper, citing people familiar with the board's thinking, said the stance puts it in conflict with chief executive Rick Wagoner, who told lawmakers this week bankruptcy is not a viable alternative for the company.

GM, in a statement to the newspaper, said the board has discussed bankruptcy, but said the board did not view it as a "viable solution to the company's liquidity problems."

A GM spokesman told the paper that management is doing everything it can to avoid a bankruptcy filing.

The company's board has been convening by phone each Friday to discuss GM's liquidity situation, according to the paper.

Wagoner, along with chief executives from Ford Motor Co, and Chrysler LLC, this week went to Capitol Hill to plea for $25 billion in aid from U.S. lawmakers.

On Thursday, Democratic lawmakers demanded that executives provide them with a plan of action in exchange for supporting any bailout.

[Poles]

probably it is a better deal to use the $$ to buy a jap car maker...more efficient cars for USA.

[ucypmas]

Anyone following the news?

A bankruptcy of General Motors and general default on its bonds will trigger billions of dollars of CDS wagers on the company. This thing has been rumbling along for so long that it is possible that the market participants would have got out of their positions by now. If not, we might be looking for another Lehman-style selldown to meet margin call on collaterals etc.

There is also the possibilty that most who needed / have to / want to sell would have got out by now and the market would not budge much - like a dead body being kicked around. In any case, its worth watching this train wreck in motion.

Links to news here - http://finance.yahoo.com/news/Automakers-plead-with-apf-13741250.html