IF you wonder why it has been quiet lately, I have been in a time crunch. I have at least a half dozen postings at a draft stage that I haven't had time to fully complete. With any luck, I'll get a couple hours over Thanksgiving break to get things updated.
General Motors Update 11/21/06
Robert Farago just published installment 100 of his General Motors Death Watch series. Farago asserts that the General is just about out of cash and mechanisms to generate cash. Buried in shareholder disclosure documents is a warning about a negative (book value) net worth. Here's a quote and a link.
For those who’re listening, the klaxons are sounding loud and clear. Check this excerpt from a GM press release regarding an upcoming $1.5b seven year secured loan (tied to machinery and equipment and special tools at US production plants).
"GM's ability under some of its existing bond indentures to pledge U.S. property, plant and equipment is likely to be affected in the future by new rules applicable to pension and OPEB accounting, which could cause GM's shareholders' equity in its year-end 2006 financial statements to be negative.”
In other words, the well has run dry. With 51% of its GMAC finance unit (a.k.a. cash cow) set for sale, GM can no longer borrow from this once dependable internal source. As of next year, GM still won’t be able to take out unsecured loans, while the terms of its bond indentures rule out secured loans. With a negative cash flow from its North American operations and no ability to borrow, with debt payments due AND the need to fund Wagoner’s turnaround plan (new products, severance pay, depreciation, etc.), GM’s cash crunch is going critical. The only money available: $8.5b (plus another $4b over three years) from the GMAC sale.
Late last year, GM was reporting about $20 billion in cash available, but financial analysts suggested that less than 1/2 of that would actually be available for operations. So if in the last year, GM's operations, including buyouts and Delphi infusions, used up $10 billion, zero-hour may be at hand
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