Is GM going bankrupt?

[DanS]

You heard it first here. It looks to me like it is.

The company's $300 billion in debt is about to be cut to junk status by the ratings agencies, dramatically raising its cost of money. The market seems to be pricing in something like a bankruptcy, since the market capitalization for the entire company is only $15 billion.

But more importantly, GM's lineup of cars are ****ty. I rented a Chevy Malibu over Christmas and it felt like I was getting into a brand new $20,000 piece of trash. Maybe these are very reliable pieces of trash, but there you are.

Does anybody have any countervailing evidence?

When the **** hits the fan, this one's going to be really ugly in the business and political worlds.

[Lancer]

I can support your position, I finally broke down and bought a foreign car a year ago.

I now drive a Toyota. Ford screwed me over but good and Dolores thought the RAV4 was 'cute'...the rest is history. My last GM car was a Chevy Celebrity. That was the end of that.

[Verto]

You bought a RAV4?

...

My condolensces.

[VetLegion]

Market capitalization is value of stock, right? Are total assets of the company larger? I assume they are. How is $300 billio of debt compared with that?

[Lancer]

"You bought a RAV4?

...

My condolensces."

I kinda like it, for around town which is 99.99% of our driving.

Besides, it's cute.

[Japher]

I hope not, but I have been noticing the same decline DanS. I was going to buy them a year or so ago but was concerned then.... bought CAG instead.

I think they'll make it though.

[Verto]

If by cute you mean totally fugly, then I would agree.

[DanS]

Yes, the market capitalization of $15 billion is the value of the stock.

Assets of the company are $480 billion and liabilities are $450 billion.

http://www.marketwatch.com/tools/quotes/financials.asp?symb=gm&sid=2160&report=2&freq=1

[Lancer]

"If by cute you mean totally fugly, then I would agree."



That's what I meant. I also meant that the wife is happy, so I'm happy. Happily toeing the party line, yea.

[pchang]

480 - 450 != 15
Makes you wonder about the 480 bit.

[DanS]

$480 - $450 = $30

Shareholder's equity is the $30 billion difference. The $15 billion is the market cap.

The stock is selling at 1/2 book value.

[pchang]

I know that is the conventional wisdom, but institutional guys aren't stupid. The discount is there for a reason.

[DanS]

You're right. And that reason probably is that a bankruptcy is priced in.

[Dinner]

The main reason GM's debt got down graded was the unexpected $2 billion it had to pay to FIAT and the highest in industry incentives it has to give to sell its cars. I'm afriad its corporate culture prevents worthless executives from being forced out so even though Wagner has been a bean pusher more then a hard nosed exec he still sits on the top spot with no fear of being forced out.

Combining with the lack of accountability and massive red tape is the fact that for decades GM has been run by accountants. They're good at balancing accounts and squeezing the last penny out of suppliers but they don't know jack about the business of making a good car. That's why GM tends to have the worst interiors and why its engines are usually using older technology instead of the latest. The accountants have decided it is better to spend $2000 less in specifications in a car which will then need $2000 of incentives to sell then to just spend the $2000 up front to build a car which doesn't need incentives. The editor of Car and Driver Magazine, who worked for GM for 25 years said that GM's management is so diluted that even if designers and enginers came up with the theortically perfect car it would never get built because so many people who know so little about cars or the industry have the power to demand changes be made.

[KrazyHorse]

Re: Is GM going bankrupt?

Originally posted by DanS
You heard it first here. It looks to me like it is.

The company's $300 billion in debt

Holy ****.

The national debt of Canada is only around 500 billion