Can General Motors Recover?

Can General Motors Recover?
http://www.time.com/time/business/article/0,8599,1820418,00.html

Two months short of the company's 100th anniversary, General Motors
Corp. executives remain defiantly upbeat in the face of a weak economy,
terrible sales and Wall Street speculation that the giant automaker
could ultimately wind up in bankruptcy court if the slump continues.

GM's stock price dropped below $10 this week to its lowest level in 54
years, and down significantly from $43 last autumn after the automaker
had signed a new four-year labor contract with the United Auto Workers
that included significant concessions. JP Morgan said the company has to
raise $10 billion in fresh capital in the next several months. Merrill
Lynch was even less optimistic. "We believe there is potential downside
in the stock below $7 and that bankruptcy is not impossible if the
market continues to deteriorate and significant incremental capital is
not raised," Merrill Lynch analyst John Murphy wrote in a note to investors.

GM officials dismissed the report from Merrill, with the implication
that Merrill — which is itself desperate for cash having lost billions
in the real estate bust — doesn't have the best financial acumen. "We
won't comment on market speculation or the Merrill reports
specifically," said GM spokeswoman Renee Rashid-Merem. She said GM was
not cash short: "We continue to believe the company has sufficient
liquidity and financial flexibility to meet its 2008 funding
requirements, despite lower U.S industry volumes," she said. More than
17,000 blue-collar workers dropped off GM's payroll last week as part of
a buyout of long-term employees, which should help lower costs.

To balance the bad news, GM executives pointed to the overseas market,
where the company is anything but troubled. The company had record sales
in Europe during the first half of the year and posted double-digit
sales gains in Latin America and China, where the company expects to
sell more than a million vehicles again this year, said Mike DiGiovanni,
GM's general director of market analysis. Even the bad news had a
silverish lining: "We actually picked up market share [In North America]
in June," said Mark LaNeve, GM vice president for vehicle sales, service
and marketing. Predictions that Toyota would surpass GM in sales during
June proved inaccurate, as the rival company suffered an even larger
drop in sales than GM.

One of the big issues for auto companies is adequate supply of hybrids,
and GM says it is winning that battle. "Hybrid demand and availability
continues to build, and we're seeing really positive momentum with the
Chevrolet Tahoe and GMC Yukon 2-mode hybrids," LaNeve added. At the same
time, GM is still planning to roll out the Chevrolet Volt, a plug-in
electric vehicle that will run on battery power rather than gasoline, in
late 2010 despite some skepticism about whether the lithium-ion battery
will be ready for the road.

GM also insists it's moving to address trim costs and adjust to the new
reality created by $4/gallon gasoline, including selling its Hummer
brand. GM has also suspended design and engineering work on its next
generation of pickup truck and sport utility vehicles as it waits to see
how the market will shake out. LaNeve said in a recent interview with
TIME that capital spending was a key reason that Hummer had to go. With
the market shifting away from trucks, GM felt it did not have enough
resources to support four distinct truck brands, and Hummer's reputation
as a gas-guzzling toy for rich boys couldn't have helped its cause.


--
Civis Romanus Sum

On Jul 5, 10:00 pm, Jim Higgins wrote:
> Can General Motors Recover?http://www.time.com/time/business/article/0,8599,1820418,00.html
>
> Two months short of the company's 100th anniversary, General Motors
> Corp. executives remain defiantly upbeat in the face of a weak economy,
> terrible sales and Wall Street speculation that the giant automaker
> could ultimately wind up in bankruptcy court if the slump continues.
>
> GM's stock price dropped below $10 this week to its lowest level in 54
> years, and down significantly from $43 last autumn after the automaker
> had signed a new four-year labor contract with the United Auto Workers
> that included significant concessions. JP Morgan said the company has to
> raise $10 billion in fresh capital in the next several months. Merrill
> Lynch was even less optimistic. "We believe there is potential downside
> in the stock below $7 and that bankruptcy is not impossible if the
> market continues to deteriorate and significant incremental capital is
> not raised," Merrill Lynch analyst John Murphy wrote in a note to investors.
>
> GM officials dismissed the report from Merrill, with the implication
> that Merrill — which is itself desperate for cash having lost billions
> in the real estate bust — doesn't have the best financial acumen. "We
> won't comment on market speculation or the Merrill reports
> specifically," said GM spokeswoman Renee Rashid-Merem. She said GM was
> not cash short: "We continue to believe the company has sufficient
> liquidity and financial flexibility to meet its 2008 funding
> requirements, despite lower U.S industry volumes," she said. More than
> 17,000 blue-collar workers dropped off GM's payroll last week as part of
> a buyout of long-term employees, which should help lower costs.
>
> To balance the bad news, GM executives pointed to the overseas market,
> where the company is anything but troubled. The company had record sales
> in Europe during the first half of the year and posted double-digit
> sales gains in Latin America and China, where the company expects to
> sell more than a million vehicles again this year, said Mike DiGiovanni,
> GM's general director of market analysis. Even the bad news had a
> silverish lining: "We actually picked up market share [In North America]
> in June," said Mark LaNeve, GM vice president for vehicle sales, service
> and marketing. Predictions that Toyota would surpass GM in sales during
> June proved inaccurate, as the rival company suffered an even larger
> drop in sales than GM.
>
> One of the big issues for auto companies is adequate supply of hybrids,
> and GM says it is winning that battle. "Hybrid demand and availability
> continues to build, and we're seeing really positive momentum with the
> Chevrolet Tahoe and GMC Yukon 2-mode hybrids," LaNeve added. At the same
> time, GM is still planning to roll out the Chevrolet Volt, a plug-in
> electric vehicle that will run on battery power rather than gasoline, in
> late 2010 despite some skepticism about whether the lithium-ion battery
> will be ready for the road.
>
> GM also insists it's moving to address trim costs and adjust to the new
> reality created by $4/gallon gasoline, including selling its Hummer
> brand. GM has also suspended design and engineering work on its next
> generation of pickup truck and sport utility vehicles as it waits to see
> how the market will shake out. LaNeve said in a recent interview with
> TIME that capital spending was a key reason that Hummer had to go. With
> the market shifting away from trucks, GM felt it did not have enough
> resources to support four distinct truck brands, and Hummer's reputation
> as a gas-guzzling toy for rich boys couldn't have helped its cause.
>
> --
> Civis Romanus Sum

If Gm was ever having a chance of recovering it looks like that time
has passed.
There are so many tell tale signs that the point of no return has been
reached.
The stock market does not think the GM story is very believable.
The price of the stock seems to be in freefall.
Where is the value of GM and what can be sold in case of a firesale?
The company as a whole is hardly of any interest.
It is over staffed, incompetent management, hardly possible for anyone
to turn the boat even if competent management were introduced.
As late as a few months or even weeks ago a thin possibility would
have been to restructure.
Only thing to do now is to go into chapter 11 and split GM up into
pieces and sell off.
Any time from now and until final resignation will only make matters
worse.