A shocking number, but not a death knell

[MonaroSS]

Originally Posted by fp115

They have $21b plus up to $5b in credit.

He knows that.

You need to read closer. What he is saying is that of that $26 Billion total cash & credit, they may burn through all of that before getting to profitability yet in a near $200 Billion turnover company just keeping the lights on means fluctuations in outgoings can vary throughout the year to the tune of +/- $14 Billion, so before profitability there is the risk that large outgoings can drain cash before incomings replenish cash back to it's median range.

So he says they need about an $14 Billion (in addition to the $26 Billion cash reserves) in petty cash, not to burn through, but just to cover normal outgoings fluctuations.

[MadTruckMan]

i kinda like the idea of taking GM private. they have enough cash to buy the shares, then they wouldnt have to worry about all this Sarbanes-Oxley crap that public companies worry about. plus, you can then hear all the media people whine and complain because they cant get any information about GM. kinda like the way they do with chrysler now. take GM public in about 5 years or so and watch the cash flow in!!

[tom3]

Wonder if this loss includes the billions lost with GMAC in which GM still has a large minority share? Tough times right now.

[akbar]

Originally Posted by Tstag

GM do not have $21 billion in available cash. They have $7-10 billion because they need roughly $14 billion dollars to keep the lights on and manage day to day affairs.
...

That can be true if GM had $0 revenue coming in. They dip into the cash reserves to the extent that incoming revenues fall short of the outgoing expense.
So my take of all this financial mumbo/jumbo is, that if GM keeps up with their current incoming revenues and outgoing expenses, they will use about $4 billion of their savings every quarter. With $26 billion in total available they will have approx 7 quarters before they are out of time. Longer if they can keep cutting costs further, increase rvenue somewhat (by increased small car sales etc), or sell additional assets or borrow more money.
So mid late 2010 would be the defining moment for GM

[Rocket 88]

Originally Posted by Orbit Orange

Could you elaborate on these wholesale changes please? I'm curious as to what will bring GM back to health.

Divine intervention might to do it.

I think the frustration for a lot of folks is Rick and Bob are competent but not revolutionary. The scope of the problems at GM seems to require greater vision to find real solutions and that seems to be lacking.

As for what will bring GM back to health, it is a problem beyond my grasp.

[lio45]

Originally Posted by MadTruckMan

i kinda like the idea of taking GM private. they have enough cash to buy the shares, then they wouldnt have to worry about all this Sarbanes-Oxley crap that public companies worry about...

Um, they need that money (pretty much down to the last cent) to keep operating until the "turnaround" is completed and they're back in the black... what you just suggested is absolutely not an option.

[lio45]

Originally Posted by MonaroSS

I hate to burst some people's bubbles but there is a reason why the law makes companies include these so called "paper" and "non-operational" losses in their financial reports.

The reason they have to is because they are REAL losses of wealth.

You don't just lose money when it's hard cash. When they come and take your car and house away you also lose the equity in them, even though it wasn't hard cash.

The $2 Billion loss from vehicle leases may not be cash, but it was the loss of an asset which was that coming off of lease GM thought they would have had $2 Billion dollars more in the value of those vehicles that would have then been sold and that asset converted into hard cash. So that's $2 Billion in future hard cash that GM has lost. Is it GM's fault that suddenly SUV's and Trucks are worth far less due to $4 gas? Yes.

GM decided the bulk of their sales would be SUV's and Trucks whereas Toyota decided the bulk of it's sales, and thus the vehicle lease residuals it was exposed to, would be more frugal cars that have not suffered devaluation due to $4 gas. So if you make a strategic decision and it pays off then you can rightly claim you made a good decision, but when you make a business forecast and decide badly, then it is your fault.

When they wrote off $30+ Billion in tax offsets, that was $30+ Billion of real hard cash that GM would not have had to pay the IRS in tax on profits had they have made any.

OK you can argue they lost nothing as they had no profit to tax and thus nothing to offset, but the point is that HAD they have been managed to make money, as they are meant to, then that is $30 Billion that should by now be in GM’s bank account and going into better future product. I'm sure Toyota is and has been able to pocket all it's legitimate tax offsets and thus convert them into real hard cash. So that 'paper' loss by GM gives Toyota’s war chest $30 Billion further advantage over them. These things are real, with real consequences.

This whole parsing of results saying "no the real loss is a lot less" is bullcrap. These are ALL real losses. That's why GAAP makes you legally have to declare them to the public.

What you said is right, but you have missed the point... GM has only a limited number of cold hard cash on hand, and borrowing more (if needed) is definitely not going to be easy. If the savings don't last long enough for GM to get back to profitability (something that's not going to happen anytime soon), it's the end.

So, yeah, their cash situation deserves special attention. Losing $1B out of that $20B chest isn't the same as, say, having some $3B plant/land/asset that they own being suddenly re-evaluated at $2B.

[lio45]

Originally Posted by Ming

For starters, don't fret that GM will collapse this weekend, or next month, or next year. Only $3.6 billion of the $15.5 billion of red ink was in hard cash, and when companies fail, it's usually when the hard cash runs out and they can't pay their bills or employees. GM still has $21 billion of cash on hand and access to a credit line for $5 billion more if needed.

I have a question.

How "safe" is that $5 billion in potential credit that we keep hearing about? Is it already granted and greenlighted regardless of the situation GM might be in in the future? Or is it simply available now and that's is?

'Cause if I were that potential creditor, I could be willing to lend $5B to GM right now but I might definitely want to reconsider by the time GM is down to their last dollars and actually needs to tap into my $5B... the company is likely by then to be in a much worse shape.

[Orbit Orange]

Divine intervention might to do it.

I think the frustration for a lot of folks is Rick and Bob are competent but not revolutionary. The scope of the problems at GM seems to require greater vision to find real solutions and that seems to be lacking.

As for what will bring GM back to health, it is a problem beyond my grasp.

Thanks for your honest answer. I'll be truthful as well, I don't have a master plan as well, ideas that I think might help, but not some master plan. I guess the problem I saw with the original quote I responded to (with the above reply and question) was that if you are going to say something needs an overhaul, but leave it at that then why complain? If change is needed, what is the change? To change something just for changes sake is a fools folly. Continuing something that is sinking fast is a folly as well. I don't want to see GM go the way of the dodo. If people have ideas that they can share I'd love to see them.

Complaining about a problem won't solve it. Not buying a GM vehicle won't solve it. Ideas and foresight and a willingness to buy GM products and show a loyalty even if it isn't the "TOP" vehicle in it's class will help. I don't want this company to go under. This slow bleeding of GM actually bleeds my car "soul" as well. I think there are others out there as myself that feel this way. I don't have delusions of grandeur that GM will return to it's glorious heydays of the 50's and 60's. I do have hopes and aspirations that GM will trim the fat, build up the muscle and plant themselves firmly back into the American automobile landscape as a leader for decades to come.

[tollytime]

I don't care how many billions GM has. They've showed us how fast they can burn through that!! It will be real easy to do since they haven't made a profit since 2005!!! GM has abandon it's customers!! When we asked for new products and better fuel economy, GM responded with huge rebates on gas guzzlers. I've been on this board for years and there has been a lot of fustration and disapointment from big time GM fans. These aren't just fans, but real car people that know the market better than any executive at GM. This forum has given sound advice and direction for the staff at GM. It's sad to see good people like you fustrated when the company you root for won't even use some common sense to succeed.

[ghughes]

"Could you elaborate on these wholesale changes please? I'm curious as to what will bring GM back to health." Not to be an advertiser, but CNBC is having a 2 hour special SAVING GM, this weekend. Should be interesting - or not.

[supermoto]

Originally Posted by MonaroSS

GM decided the bulk of their sales would be SUV's and Trucks whereas Toyota decided the bulk of it's sales, and thus the vehicle lease residuals it was exposed to, would be more frugal cars that have not suffered devaluation due to $4 gas. So if you make a strategic decision and it pays off then you can rightly claim you made a good decision, but when you make a business forecast and decide badly, then it is your fault.

GM didn't decide that the bulk of their sales would be trucks and SUVs, the market did. Toyota didn't decide where the bulk of their sales would be either. Toyota spent billions on a new truck, SUV and assembly plant to capitalize on that market and delayed the intro of a new Corolla during the same time, not to mention making little change to an important product.

Good thing their customers don't pay attention to their mistakes and keep buying whatever they have for small cars. The Cobalt now gets better mileage than the Corolla. The Malibu gets better mileage than the Camry. Who's not investing enough in new and improved products in the small and midsize segment?

[Orbit Orange]

GM has abandon it's customers!!

It may seem that way to some but I beg to differ. GM has brought me the GTO, a soon to be (2009) purchase of a G8 and hopefully shortly thereafter a G8 ST as well. It has given it's truck fans a plethora of choices and models. It has given it's Corvette fans cool choices. Camaro fans are soon to be rewarded. The new Malibu seems to be a long-awaited reward for mid-size front drive family car fans. Cadillac has rewarded fans with the CTS. There are lots of vehicles rewarding the fans out there. Does it reward all? NO. It's obvious you feel slighted and there must be a vehicle you desire that they don't have. Please don't issue blanket statements that say GM has abandoned their owners. They haven't. Out of curiosity, what do you own and drive?

Not to be an advertiser, but CNBC is having a 2 hour special SAVING GM, this weekend. Should be interesting - or not.

Guess I'll try to find the time to watch. You'll excuse me if I find it hard to put much creedence though in a news network thinking it can run a car company. Maybe it will make some points though. Thanks for the heads-up.

[ChevroletRevived]

There's no doubt about it; right now the situation at GM is awful. Short term outlook is very bleak and there's no sugar coating it. GM firmly believies it will hit profitability in either late 2009 or early 2010. So, the company is preparing to have enough cash to carry itself to that date. Next year and 2010 espessially will be defining, make or break years for GM unless they can generate even more cash then what they're planning. Obviously the market believes in the plan; the stock only took a small drop. That really is quite amazing given the size of the loss. Long term GM is set to become very profitable. Cost savings, resurging economy should make 2010 a realistic date. We'll see.

[marinerbc]

Originally Posted by MonaroSS

GM decided the bulk of their sales would be SUV's and Trucks whereas Toyota decided the bulk of it's sales, and thus the vehicle lease residuals it was exposed to, would be more frugal cars that have not suffered devaluation due to $4 gas. So if you make a strategic decision and it pays off then you can rightly claim you made a good decision, but when you make a business forecast and decide badly, then it is your fault.

Incorrect at best, libelous at worst.

No one but NO ONE invested more money in trucks and SUVs over the past 5 years in North America than Toyota did. They had Jim Press build them an overpriced and late plant in Texas for Tundra production, and now they too are forced to shutter the thing for 3 months, because nobody wants a Tundra either.

Sequoias down, all SUVs are down. GM is lucky that they had the GMT-900s introduced when they did, and that they didn't have to spend 2 billion to build a plant to do it.

Nice try though.