GM's Balance Sheet: "They are already bankrupt"

[Black04GTO]

The view from the dark side:

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.

http://biz.yahoo.com/seekingalpha/07...1_id.html?.v=1

[Slowrider5]

Disclosure: Author has a short position in GM

Huh, what do you know. A "journalist" who stands to make money from GM stock going down writes a negative article about GM. What a coincidence.

I wish I had some of the articles I've read in the past 6 months that are the complete opposite of this one.

I think the bottom line is institutional investors aren't stupid. They wouldn't have been bidding up the price of GM over the past year if they thought it was on the verge of bankruptcy.

[likearock00]

I'm willing to bet GM doesn't go bankrupt....say $10,000...

[69Firebird400]

Originally Posted by likearock00

I'm willing to bet GM doesn't go bankrupt....say $10,000...

Do it! That would buy you about 330 shares.

Interesting that the author holds a short position in GM stock - that definitely makes it less credible. But it is scary no matter what. It would be a heck of shame to see GM go bankrupt as its products are among the best it has ever sold.

[redimpss5]

HAHA, compared to when?

[vcs2600]

Originally Posted by Slowrider5

Huh, what do you know. A "journalist" who stands to make money from GM stock going down writes a negative article about GM. What a coincidence.

GM isn't a penny stock, it's not going to shift significantly because Yahoo wrote an article about them. The short makes his position more credible, not less, IMO.

And bankrupcy wouldn't be the worst thing for GM as it would allow them to solve a lot of their structural problems (brands, dealerships, union, etc).

[mgescuro]

GM's balance sheet isn'te very healthy. But they do have a ready amount of cash. Last time I looked, it was around $18M. THe problem here is that the cash is almost 100% borrowed.
I haven't run the calculations recently, but they are fairly strapped for cash.

GM is no longer diversified. Any significant hit to the auto industry (recession, large fluctuations to gas prices) will doom GM. Not only do they have their eggs in 1 basket in terms of products (SUVs/Trucks instead of cars and fuel efficient compacts), they one have 1 main basket -- the car industry. They can't even hide behind GMAC's profits anymore, which might not be too bad, as the mortgage industry is teetering.

Fact is, despite improvements, GM is still way too slow to respond to market forces. And they are still way behind the curve in terms of market trends. Also, they believe they have buyer power, but in reality, they do not. They believe they have influence over much of the market, but in reality, they do not. But they act like they do.

[awalbert88]

Originally Posted by vcs2600

GM isn't a penny stock, it's not going to shift significantly because Yahoo wrote an article about them. The short makes his position more credible, not less, IMO.

And bankrupcy wouldn't be the worst thing for GM as it would allow them to solve a lot of their structural problems (brands, dealerships, union, etc).

Let's be clear: bankruptcy would destroy the perception of GM's brands. Perception is the reason sales are not where they need to be. GM produces cars that are on par with Toyota for quality (in some cases superior). GM produces trucks and SUVs that are in most cases more fuel efficient than those of Toyota. The only area in which Toyota has completely superior offerings to GM is in compact cars, where fuel economy is most crucial. Everywhere else, GM is either roughly on par with or ahead of Toyota in most major categories. Yet GM's sales are declining in the US, while Toyota is ahead. Why? Perception. If GM goes bankrupt, people will perceive GM products as a risky purchase ("If I have a warranty claim, will the company honor it? Will the company even still exist?").

Bankruptcy might solve the "structural problems" of the union and the dealerships (brands are not a structural problem), but it would also make a majority of people unwilling to purchase vehicles from them.

Having a short position on the stock means this guy benefits from GM going down. Fortunately anyone with any significant investment in the company is going to see that disclaimer and disregard this article as the nonsense it is.

[t-rex]

Here's a similar article that may be of interest to viewers:

http://bullnotbull.com/archive/zentay-5.html

[A Bum In A Bus]

Charles Zentay is about as smart as a brick...............

[Caleb02]

Originally Posted by Slowrider5

Huh, what do you know. A "journalist" who stands to make money from GM stock going down writes a negative article about GM. What a coincidence.

I wish I had some of the articles I've read in the past 6 months that are the complete opposite of this one.

I think the bottom line is institutional investors aren't stupid. They wouldn't have been bidding up the price of GM over the past year if they thought it was on the verge of bankruptcy.

I think the government should set a period of time that certain people must hold on to a stock, ie if a major investor buys stock they must hold on to it for 20 years if the stock is a fortune 100 company... Also this would stop people from shorting and also it would then get only people who are serious to buy stock

[K-1]

Originally Posted by Caleb02

I think the government should set a period of time that certain people must hold on to a stock, ie if a major investor buys stock they must hold on to it for 20 years if the stock is a fortune 100 company... Also this would stop people from shorting and also it would then get only people who are serious to buy stock

It would also make Wall Street an investment avenue (its original purpose), rather than the Get Rich Quick! scheme it is now.

[Stéphane Dumas]

Originally Posted by t-rex

Here's a similar article that may be of interest to viewers:

http://bullnotbull.com/archive/zentay-5.html

I spotted a interesting quote

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.

Now I wonder which private equity might eye GM if this opportunity came? And between a private equity or Carlos Ghosn which one is the less evil?

[mrgto]

Wait a year after the UAW issues are straigtned out....when's the major contract negotiations, July or August? So in August of 2008 we might see a bit better where they are headed.

[Hurricane]

Originally Posted by Caleb02

I think the government should set a period of time that certain people must hold on to a stock, ie if a major investor buys stock they must hold on to it for 20 years if the stock is a fortune 100 company... Also this would stop people from shorting and also it would then get only people who are serious to buy stock

This would also destroy liquidity. What major investor wants to tie up his capital in a stock he cannot sell for 20 years?