[doh]

http://biz.yahoo.com/rb/080514/generalmotors_research_lehman.html?.v=1

Reuters) - General Motors Corp (NYSE:GM - News) needs to raise about $9 billion over the next two years to refinance debt, and may seek more for operational cash burn as it faces production headwinds and commodity price increases, Lehman Brothers analyst Brian Johnson said.

GM will need to refinance close to $8.7 billion of debt due between now and January 2010, as well as absorb additional cash burn of close to $11 billion, Johnson said.

"When we last looked in depth at the GM liquidity position in March, GM credit spreads had spiked close to their widest levels of late 2005 and about 1000 basis points wider than their lowest point in 2007," he said in a note to clients.

Johnson said as the overall high yield market improved, GM spreads tightened about 300 basis points while rival Ford Motor Co (NYSE:F - News) spreads tightened more than 400 basis points, indicating greater relative comfort with Ford's liquidity position.

Last week, Fitch Ratings said both GM and Ford will continue to face heavy cash drains in 2008 and are likely to burn cash through 2009 unless industry sales rebound.

GM will likely see its liquidity eroded due to operating losses in the North American market and restructuring costs, Fitch said, adding that the company faces the risk of another ratings downgrade this year.

GM, which lost a combined $51 billion over the past three years, acknowledged at its annual Banker meeting that it would likely need to seek additional liquidity if selling conditions do not materially rebound in the second half of 2008, Lehman's Johnson said.

 

[windvale]

GM, which lost a combined $51 billion over the past three years, acknowledged at its annual Banker meeting that it would likely need to seek additional liquidity if selling conditions do not materially rebound in the second half of 2008, Lehman's Johnson said.

Ah yes, the "paper losses"...

$51 billion in the last three years. Unreal.

 

[Hotspur]

I know few people on this board want to see it, but Chapter 11 is looming dangerously close. 12 to 18 months, max.

 

[unkillsam]

I know few people on this board want to see it, but Chapter 11 is looming dangerously close. 12 to 18 months, max.

No it's not.

 

[unkillsam]

Ah yes, the "paper losses"...

$51 billion in the last three years. Unreal.

GM has not had $51 billion cash on hand ever. If GM lost $51billion real dollars they would have shut down operations a long time ago.

So yes, it is "paper losses".

 

[nimrod]

they sold all that could be sold. now SUV sales are in freefall. looks like a bumpy road ahead.

 

[goatgary]

May have to reconsider the heavy up-charge on the SUVs for Hybrid. I know they are trying to cover cost, but if they go for volume they may be able to take a grand out of it just to get the publicity and momentum back in that segment. They have historically taken a bath on small cars. They have to everything imaginable to get North America profitable.

 

[stevecmh]

i sure hope they can do it.. thats alot of cash

 

[Ming]

GM, which lost a combined $51 billion over the past three years

Jeebus. That's more than or right around the initial estimates of the cost of the war in Iraq back in 2003.

 

[prototype66]

I know few people on this board want to see it, but Chapter 11 is looming dangerously close. 12 to 18 months, max.

Your smokin dope!
No way thats happening.

 

[doh]

This coulld be pricey for GM in it's current state.

Our town's primary industry just went through the same thing April 1st this year. Some of the Senior notes went for as much as 15.5% due in 2010.

 

[mgescuro]

I know few people on this board want to see it, but Chapter 11 is looming dangerously close. 12 to 18 months, max.

I think the only true way for GM to fix itself is to file Chapter 11; however, the negative consequences of filing Chapter 11 most likely outweigh the positives.

GM's cash issue has been sketchy for some time now. And despite the continual improvement, it just hasn't been enough.

GM has wasted precious time and resources as well.

GM has failed to sustain a Cadillac turnaround. GM didn't get a great start off the blocks with Saturn. Buick is still only a 1 car brand. Pontiac is a 1 car brand and a bunch of rebadges. Chevy has been waiting for Camaro for far too long.
And worst of all, GM is still too dependent on trucks and SUV's. I'm afraid they won't be able to cover the losses with cars simply because their cars, though nicely designed, still trail the competition.
And GM hasn't quite tackled the issue of public perception... or dealership experience... or customer service...

It sucks that GM has to raise more cash. They've had 8 years now to effect a sustained turnaround. Lately, it just seems that they have hit one too many speed bumps.

And now with a significant economic downturn, and no non-cyclical products to bolster the bottomline, GM really needs to be alert. A $600 stimulus check will not buy you a car.

 

[goatgary]

GM has wasted precious time and resources as well.

GM has failed to sustain a Cadillac turnaround. GM didn't get a great start off the blocks with Saturn. Buick is still only a 1 car brand. Pontiac is a 1 car brand and a bunch of rebadges. Chevy has been waiting for Camaro for far too long.
And worst of all, GM is still too dependent on trucks and SUV's. I'm afraid they won't be able to cover the losses with cars simply because their cars, though nicely designed, still trail the competition.
.

Mgescuro, though you make some valid points, to say Cadillac turnaround has not been sustained, the sales figures prove you wrong...and the CTS V is about to debut along with the Coupe to follow next year, maybe a wagon and a replacement for DTS/STS. Only can do these major programs so fast. No luxury marque' is doing more.

Also consider there are a total of 14 new vehicles to roll out in the next 18 months.

AND the Malibu, CTS, G8 (even the Aura) hardly "trail the competition". Nor do the Lambdas.

Have to say though,the Camaro is about 1 year overdue. Shouldn't have brought the concept out so early.

 

[steverino]

Let's throw some more money at Delphi, American Axle, GMAC and UAW buyouts/buydowns.

 

[goatgary]

Let's throw some more money at Delphi, American Axle, GMAC and UAW buyouts/buydowns.

And let's not forget to cave in to the various UAW locals who still don't have contracts.

 

[doh]

And let's not forget to cave in to the various UAW locals who still don't have contracts.

And buy the Head Quarters

 

[Whitesky]

they sold all that could be sold. now SUV sales are in freefall. looks like a bumpy road ahead.

Not at all, they just bought $1b in real estate. There will be no chapter 11 or anything close.

 

[rozz]

Fire all of the UAW, rehire and GM will be debt free in an instant. Hehehe!

 

[Bigbee60]

The GM issue is not so much cash on hand ($24 billion) as it is current liquidity (a current ratio of .84) in a slow sales market. GM needs to pay suppliers in advance of sales and longer sales pipelines make the liquidity more of an issue.

GM short and long term debt is only $45 billion, so they have some headroom to expand, but the cost of the expansion may be high if the debt markets stay tight. They could sell additional stock to raise funds or hybrid, convertible debt.

A good portion of the $51 billion in losses were non-cash items where tax loss carryforwards were written off as GM does not forecast earning enough to use them before they expire.

The most worrysome item on the GM balance sheet is the $72.5 billion in Other Liabilities - a good chunk of which is the UAW health trust liability.

 

[BrickTamland]

Not at all, they just bought $1b in real estate. There will be no chapter 11 or anything close.

A bumpy road is almost certain. Purchasing their headquarters does not mean GM is without cash problems. Let's forget all that has been sold off. I am not saying a Chapter 11 is inevitable, but to say it will be smooth sailing is not realistic.