GM's liabilities exceed assets by $42 billion, losing money. Why isn't it bankrupt?

Discussion in 'Stocks' started by The Kin, Jun 20, 2008.

  1. I just looked up GM's income and balance sheets. How the fuck is this company not bankrupt yet. They're losing billions every quarter and liabilities exceed assets by a little over $42 billion!

    Who the hell would give them money? Aren't they technically bankrupt?
  2. Daal


    they are insolvent but still have a decent cash balance to run the business(I believe its $20b). as that cash keeps being used shareholders will realize chapter 11 is coming
  3. Tums


    that's the limitation of GAAP.

    Some of the assets are not easily identified/quantified, therefore not recorded:

    -- Brand equity
    -- going concern
    -- real estate market value

  4. S2007S


    This company should have been bankrupt a long time ago. Look at Kerkorian. Owns 6.49% or 140.8 Million shares of F.

    He just bought 20 million shares at $8.50, F is trading at $5.86 right now.

    Almost a $53 MILLION dollar loss in a week.
  5. They are too recorded. I believe brand equity and going concern is classified as intangible assets. Real Estate is property, plant, and equipment. The real estate should even be marked down as prices are falling and who want's to buy an American car plant free union these days?
  6. IMO both GM and F will be bk within a year. Bad news for shareholders and pensioners. OTH post reorganization GM will be a FANTASTIC buy.
  7. If you purchase another company for a price greater than assets - liabilities, then that left-over amount gets allocated to say brand name, customer lists, etc.

    But if the company never gets 'bought' then the no $ value gets assigned to the 'brand equity' and it remains off the books.
  8. Thanks for the accounting insight. I still have a hard time believing that the intangibles and whatever else could make up the $42 billion shortfall. I guess we'll find out soon enough.
  9. One word: Volt.

  10. The main reason liabilities exceed their assets is due to their tremendous pension obligation (defined benefit plan)

    Their liabilities in theory could be reduced if they somehow are able to screw the retirees and just 'buy them out for pennies' instead of paying the full liability amount owed to them
    #10     Jun 20, 2008