GM shares, Delphi bonds tumble on bankruptcy filing - Oct. 10, 2005

GM Stock down 5% on News of Delphi Bankruptcy
Can Delphi Bankrupt GM?

GM shares are down 5% today in early trading in the wake of the Delphi bankruptcy. According to CNN, the Delphi bankruptcy could cost GM as much as $11 Billion.

Honestly, none of this should have come as any surprise to investers, and the Delphi bankruptcy should have been priced into the stock.

Can a big Delphi loss bankrupt GM? I looked at GM's market cap. It's now at about 15.4 Billion. (The market cap, or market capitalization, is the total value of all outstanding shares at current prices. The book value per share was $44.00, though, so a balance sheet bankruptcy appears to be some ways off. Keep in mind, a cash-flow bankruptcy could be a much more real proposition. Many of GM's current marketplace problems are caused in part by a lack of cash flow compared to its competitors. A low gross margin causes a shortage of money for R&D across its car lines. This competitive disadvantage is likely to get worse before it gets better.


GM shares, Delphi bonds tumble on bankruptcy filing - Oct. 10, 2005