Posted on 11/13/2008 6:24:05 AM PST by reaganaut1
GM capital injections likely very dilutive; suspending equity rating.
What's changed: Following GM’s 3Q2008 $6.9 bn operating cash outflow, which left it with only $16.2 bn on its balance sheet, the need to secure government funding has significantly accelerated. We think GM needs an infusion of at least $22 bn in capital to bring operations back to positive FCF territory. We have suspended our investment rating and price target on GM because there is not currently a sufficient basis for determining an investment rating or price target for this company. Our previous investment rating and target are no longer in effect and should not be relied upon.
Implications: Capital injections will be very dilutive: We could see an estimated $13.5 bn in new equity issued at GM. This assumes an agreement for capital in line with Chrysler in 1979 and the current TARP package along with equity issued to debt holders and the UAW in exchange for concessions.
A new program to support automakers is most likely: Given GM’s large capital requirements, we believe a new government assistance program is most likely. The ability of Congress to pass such a measure this year is highly uncertain in our view; but it potentially increases after President-Elect Obama is inaugurated in January, as he has already expressed support for several proposals to assist the industry.
The Credit Research view: We think GM could require significant concessions from debt investors to create an entity with an appropriate capital structure. We continue to believe that GM’s unsecured bond(Underperform) look expensive relative to its secured bank debt.
Valuation: We are suspending our price target for GM shares.
Key risks: Primary operating risks would be limited concessions from the UAW and creditors as well as a continued deterioration in global auto demand.
If the Republicans go along with a bailout that does not involve major restructuring, including tearing up current union contracts and forcing bond-holders to take a big loss, they do not deserve to exist.
And we want to bail out this turkey? Let them go bankrupt and restructure the company.
Without your tax dollars where would Goldman Sacks be???
So...GOLDMAN SACS(investing in democrat coffers and Obama’s election win to the tune of millions..plus recieving bail-out money themselves) now helping to push American industry into socialism and Barney Franks plans to nationalize the American Auto Industry. Is that what is going on here?
I say pull your money out of GOLDMAN SACS!!
I’m staying the course, just as you tell me to.
GS is unsure about GM.
Talk about the blind leading the blind.
Goldman Sachs is in financial trouble themselves. They probably had to let go the auto analyst who covered the stock :)
GM is dead no matter how they do it. They can restructure all the want but they won’t be able to sell cars going forward. Who is going to choose a GM car over Honda or Toyota right now?
That would be me.
Good luck with that.
Me too, although there’s no case to be made for buying new right now. The buys on the used market are incredibly good and will only get better as the recession drags on.
2 year old low mileage luxury lease returns are going for bargain prices. You can buy a sweet loaded 06 Caddy for the same price as a new Honda or Toyota penalty box.
Look, GM is the old uncle we all loved but he’s on life support and is certified brain-dead. Time to pull the plug. Let Toyota salvage what they can.
Frankly, I’m ready to see the UAW broken by GM, Ford & Chrysler failures. I don’t see the same problems at Japanese auto plants in the US. The UAW had a big role in killing the golden goose. Let them reap the rewards.
I’ve never purchased anything but Ford or GM. I doubt I ever will again; if they are dead, I can’t. If they are on federal life support, buying from them only supports an inefficient socialist business model, and I’d get crap.
Anyone remember British Motors? Anyone? Anyone?
You know part of me is sad for what is coming to this country and the suffering I see. Most of those posting don’t remember the last real recession in the early 80’s. Times were really bad...then I read a post such as yours.
An American ( I assume you are an American can’t tell from your post) saying no one would buy an American car if they could choose a foreign car-withan American car profits go to America- -mycountry. You are a citizen of the globe-apparently. You do remember when people loved and believed in their country don’t you-even if you didn’t? You would choose a japanese car with profits that go right home to Japan over a car made by Americans. I think you and your kind deserve every financial hardship coming your way...it’s just too bad the rest of us have to go along for the ride.
The bailout is not about saving G.M., it is about providing a soft landing cushion for UAW members and corporate executives.
If G.M> was serious about saving the company it would do the following post haste:
Fire the entire upper management team and install a new one.
File for Chapter 11 bankruptcy relief immediately.
Strip the union benefits (through Chapter 13) to something comparable to Toyota.
Get rid of the Buick, Saturn, POntiac divisions altogether.
Reduce the size of its labor force by about 70%.
Will GM do any of these things in the near future? Not a chance.
The ‘union thing’ is the pablum given American people in order to explain why it is ok to destroy American manufacturing for short term profits. The Auto unions would do anything to survive. They have given massive concessions with more to come-I am management in the Auto industry. The union is not the bogeyman, the free traders are, and they will surely take your job next.
I agree. It is also about buying votes for Obama's second term.
What's un-American is the idea that folks ought to be forced to subsidize the failure of others. There's a word for that. It starts with a "C".
Buzz Off.
Chapter 11 and later a potential infusion.
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