S&P understands credit, which ultimately focuses on the probability of bankruptcy. While they have been wrong before, they are generally good. Here is what they said in May: "Does GM or Ford face near-term liquidity problems? This is unlikely in our view, even if near-term business conditions are more harsh than we now expect. Parent-level cash flow is likely to be substantially negative in full-year 2005 on an "all-in" basis, taking account of planned capital spending, budgeted contributions to postretirement benefit plans, the cash earnings of the captive finance units expected to be transferred to the parents as dividends, and common dividend payouts. However, in both cases, the parent has a large cash position, relatively light debt maturities for the next few years, minimal required pension fund contributions, no requirement to prefund retiree medical liabilities, and substantial availability under committed credit facilities. "
When I last looked at the balance sheet a few months ago, I came to a similar conclusion about the short-term. Long term is where the risk is in owning GM and F stock. In the case of an economic downturn, I wonder if either company will be able to pay back the long-term debt. Even at relatively low interest rates, the debt levels are eye-popping, to say the least.
"However, in both cases, the parent has a large cash position, relatively light debt maturities for the next few years, minimal required pension fund contributions, no requirement to prefund retiree medical liabilities, and substantial availability under committed credit facilities." they looked at everything except GM and F making crappy cars and trucks.
Delphi bankruptcy today (Saturday) will cost GM ~ $6B. http://www.nytimes.com/2005/10/08/b...&en=8d22de3bad6c0e77&ei=5094&partner=homepage
Agreed. Long term could be a problem. Can you imagine if (or when) the PRC upgrades their quality and exports great cars to the US? Like Kia seems to be doing now.
Maybe bankruptsy would be a good thing. We need to let some of these dinosaurs (Delta, NWA, GM, F etc..) die. Their business model is obsolete. Why do you think the upstarts (KIA, LUV etc..) are doing so well? They obviously are responding to a market the big, dumb co's don't see. Go look at a GM, F product and then go look at a HONDA or Toy. No comparison. They are even losing share in the full size PU's which have been their bread and butter the past few years. I say RIP.
I think a major threat is the UAW walking off or striking at delphi.....I dont think they will accept 10$ wages in or out of bankruptcy. The uaw is the most militant union, second only to the airline unions.
Imagine what Japanese automakers could do if they had the chance to improve GM and F? Probably never will happen, but it is fun to think make believe.
actually its 11 billion dollars, if GM decides not to fight the uaw on its delphi obligations. http://quote.bloomberg.com/apps/news?pid=10000006&sid=a8Lm7c6C3Lg0&refer=home