Does GM have cash to fund comeback? - 03/30/06 - The Detroit News

General Motor's (First) Cash Crunch

Let's review shall we? At the end of last year, GM maintained that though there were problems, its cash position was strong, with $20 billion in the bank. Some analysts say that GM must have about $10 billion in cash to handle the cash flow from regular operations. GM was losing $10/billion a year on operations based on its disclosed operations. So if everything stayed the same in the last three months, GM would have lost about $2.5 million. On the other hand, assuming the money is already in the bank, GM would have made $2.76 billion in its sales of the Subaru and Suzuki shares, and another 1.5 billion on the sale of its GMAC commercial properties, so the quarterly loss is about cancelled out, and perhaps GM is a little ahead.

Now, last week, GM cut a deal with Delphi and the union that was going to have a cash impact of perhaps $5 billion to Delphi, and with the buy-outs, another 5 billion (give or take) to the UAW workers. We don't know when those payments will be due either from a payout or accounting segregation basis, but you're looking at $10 billion in negative cash flow arising from those transactions.

It should therefore come as no surprise that cash is still a precious commodity at General Motors. Today the story is about a possible sale of GM's share of Isuzu. Standard & Poor's cut GM's credit rating to B3. Since the cuts have already gone through B1, and B2, GM can take cold comfort that with just two more cuts, it'll have a BINGO. At least the price money will come in handy.

Does GM have cash to fund comeback? - 03/30/06 - The Detroit News