I'm suprised that more news stories don't report on this, but what if there was a slowdown in consumer spending? As savings go up, car sales will inevitably slow, and that could tip them into bankruptcy. They were very lucky, that post 2000, Uncle Al kept the economy afloat, and car sales humming. Everyone seems to assume that record car sales will go on forever. To say nothing of their cost structure, foreign competition, over dependence on SUV's, or just crummy cars. Not good.
Kinda reminds me of the "hockey stick" forecasts the dot.coms were putting out just before the bubble broke-lousy today but gonna be great soon. DS
Flavor of the week. "This" is not an overnight development. For the last 3 or 4 years, two thirds of EPS has come from Ditech and GMAC, rather than their core business. As for that core, incentives is/was a clue. You don't give away the store. Being the BEST performing Dow stock for the first few days of 2006 another clue. The under-funded pension liablitity is also no recent revelation. Chances are, the govt. won't let GM "fail" ala' Chrysler 1971. That doesn't mean the common stock wouldn't be cancelled from BK . But tax concessions, union concessions, influx from the printing press, prefential contracts, etc. LOL, they still have a backlog of orders for 'vettes. Supply and demand.
General Motors Posts Big Loss, Shares Dip "General Motors Corp., which is planning big job cuts and plant closings as it fights to avoid bankruptcy, said Thursday it lost $4.8 billion in the fourth quarter and $8.6 billion in all of 2005, dragged down by losses in its North American division. The loss amounts to $8.45 per share for the quarter and $15.13 per share for the year." Chinese cars coming soon.
The worst news on the horizon for GM is the inevitable downturn for GMAC. GMAC has made a lot of money in the mortgage business. The real estate boom is at best slowing and at worst a buble about to burst. When the mortgage related earnings begin to slide GMAC will be in some trouble and will not be able to prop up GM in the same manner it has for the past few years. That combined with their other problems will make them go under.
Bankruptcy does not mean the end of the company. Its just a clearing of debt and the loss of share value to current stockholders. New stock and bonds will be issued to the new suckers as the comany exits bankruptcy. See Kmart.
GM will be no more than a shadow of its fathers. click here to see the future: http://www.geely.com.cn/index.asp
Historically, GM arose from combining stranded companies - albeit some takeovers. (That's a long time before cars came from Japan, Korea or China )