GM - what are the chances of bankruptcy?

Closed my short Jan06 15 puts. Made about 50% of the max profit with 3 weeks left.

I've been burned way too many times trying to squeeze out the last drop of profits....

Good trading to all!

 

GM US sales fall 10.3 percent in December

Wednesday January 4, 2:04 pm ET

CHICAGO (Reuters) - General Motors Corp. (NYSE:GM - News) on Wednesday said its U.S. sales fell 10.3 percent to 392,041 vehicles in December, as car sales dropped 19.4 percent and truck sales fell 4.9 percent.
GM results included its Saab brand and some medium and heavy-duty trucks.

GM, the world's largest automaker, said its first-quarter North American production forecast of 1.25 million vehicles, up 6 percent from a year earlier, remained unchanged.

 

GM an american icon when it comes to corporations in america....well that used to be the case. The bottom line with this company is if you want to continue playing make an excellent car that will last as long as the asian competitors. Anyone else agree with me on this? I feel all American car companies have put the nail in there own foot. Look at how the other car companies do it and follow suit.

 

General Motors Death Watch 58: Supply Side Economics

23 February 2006
By Robert Farago

A couple of days ago, I was talking to an auto industry analyst about the world’s largest automaker. We were discussing the cracks in GM’s hull, trying to figure out which of The General's compartments were already breached, which are filling with water and which remain viable. A wistful tone in the analyst’s voice indicated head-shaking dismay. “I’m no longer hearing anything positive about GM,” he revealed. “The conversations range from how bad it is, to how bad it’s going to get.” I didn’t want to sound like a paranoid fantasist to a new source, so I tried not to out-pessimist the doomsayers. But it wasn’t easy.

GM’s supply situation is dangerously dire. If former subsidiary and mission critical parts supplier Delphi doesn’t reach an agreement with its unionized workers by March 30th -- the third and “final” deadline -- a judge will void the company’s labor contracts. Pundits poo-poo the possibility; they reckon the UAW will make concessions and GM will fork over the necessary union blood money to keep Delphi chugging along. But… over at Tower Automotive, the smaller but equally bankrupt GM supplier tried to cut $1.50 to $3 from their union members’ $13 to $15 hourly wages. The United Auto Workers (UAW), United Steel Workers and International Union of Electrical Workers (IUEW) said no. On Monday, a judge will void Tower’s union contracts. The inevitable strike will deprive GM’s Hail Mary GMT900 SUV’s of vital suspension components (amongst other things).

This ominous development reflects the indisputable fact that the UAW and its brother unions are not prepared to surrender a single dime in their salaries, pensions or health care benefits. Not one. Not ever. (I doubt UAW Boss Big Ron Gettelfinger has ever said the word "concession" in public.) What's more, the unions are literally spoiling for a fight. To wit: members of IUEW will vote today to authorize its leaders to strike Delphi as and when. That’s 33,000 Delphi workers ready, willing and able to walk at a moment’s notice. It's not posturing; it’s preparation.

The unions own GM. If organized labor strikes even one key supplier, they'll be giving The General a 90-day death sentence. While some analysts believe that's no bad thing-- the situation forces the unions to accept responsibility for the fate of the company paying its wages, leading them to take the hit needed to keep those wages coming-- nothing could be further from the truth. The UAW and its fellow unions are like a cancer: they will feast on their host until it dies. End of story. Why would they walk out on Delphi and send GM into Chapter 11? Because they can. Look at the Rust Belt. How avoidable was that? By the same token, General Motors gives in to union demands when it can’t afford to because that’s what they do.

GM didn't rush in, bail out Tower and protect its new SUV's because the supplier is only the tip of an iceberg that’s gouging a hole in the General’s hull. GM’s constant efforts to low-ball its suppliers, its poor credit (downgraded by Moody’s on Tuesday to B1, five rungs below investment grade) and the looming prospect of bankruptcy are all inflicting fatal wounds to its supply chain. Suppliers are caught in the squeeze between rising commodity costs, declining production (due to lost market share) and contracts that reduce pricing over time. TTAC’s Deep Throat reports that an inferior part for the GMT-900 recently forced GM to return to a “quality supplier.” The supplier refused to invest its own money to create the part and demanded a contract stipulating that the automaker would pay a true market rate for the finished component.

This is not an isolated case. GM used to provide suppliers an advanced payment program arranged by GE Credit. Late last year, GE bailed on the entire business, in favor of GMAC (yes, the same GM-owned finance company currently on the block). If that wasn't a bad sign of GM's financial situation in and of itself, GMAC then tightened the restrictions. The payment program is no longer available to the broad spectrum of GM suppliers. Bottom line: GM's current procurement process fails to assure parts manufacturers adequate financial compensation, doesn’t provide protection against program termination due to budgetary constraints or model “realignment”, and can’t possibly guarantee payment if GM files for Chapter 11.

It’s not too much of a stretch to imagine that at some point, one way or another, GM’s entire supply chain will collapse. How’s that for dark? You want light? How about this: I’ve received dozens of emails from frustrated workers, designers and administrators inside GM. No question: there’s an enormous amount of creativity and passion locked-up inside General Motors. Once The General shakes off its union, deep-sixes its insufferable bureaucracy, dumps unnecessary brands and gets down to the business of building a limited number of great cars, it will build a limited number of great cars. When it comes to GM, the parts are greater than the whole.

http://www.thetruthaboutcars.com/content/11407149391580627324/index.php

 

GM will have to either spin off its GMAC unit, lay off more employees (and close plants), or lower its dividend even further. Whatever the case, Toyota will inevitably grab the #1 spot among automakers.

 

GM to restate GMAC results

Automaker completes revisions to 2005 financial report

By Shawn Langlois, MarketWatch

Last Update: 6:38 PM ET Mar 28, 2006


SAN FRANCISCO (MarketWatch) -- General Motors late Tuesday filed its delayed 2005 annual report with the SEC and said it would restate financial results for financing arm General Motors Acceptance Corp. from 2003 through the third quarter of 2005.
The Detroit giant had warned March 16 that it would restate these financial results after an internal investigation found problems with the accounting for cash flows from Residential Capital Corp., the mortgage unit of GM's financial subsidiary.

"We became aware of some of the erroneous classification, and as soon as we did, we moved to correct it," said GM spokesperson Gina Proia. "We are convinced that we have corrected the errors and that's reflected in all of our filings today."

http://www.marketwatch.com/News/Sto...564E11}&source=blq/yhoo&dist=yhoo&siteid=yhoo

 

If this and GM's own admission that they might not sell GMAC isn't the writing on the wall, what is? I guess someone has to buy the shares on the way down!

I just feel bad for the individuals at GM that will be impacted by this...massive amounts of carnage!

 

Don't forget everyone whose IRA has a stake in a mutual fund containing GM -- in other words, just about every one.

 

The common stock won't be too big of an issue to mutual fund investors because the market cap of GM is only 10-12 billion dollars right now and MF's restrict position size in their investment policyto limit exposure to any single security.

The potential impact to mutual fund investors will be any significant move by the general market in response to a bk at GM.

The general market will have a problem with the large amount of outstanding unsecured debt.

 

Bullshit! I hear this same thing from people who know squat about automobiles. If you want to do an unbiased review, go to autotrader.com and see which cars have the most miles on them, I guarantee it won't be toyota. I have seen 2000 Cadillacs with 370,000 miles and still looking and running like new. Your opinions are clearly biased and come from magazines that run initial 6 month quality surveys which is irrelevant to the cars actual long term durability. My experience with GM is car after car I am able to put 300,000 miles with little problems. You can't get any better than this.