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I was looking in investing into the GM company since stocks are at their lowest since GM's recorded sock history. Are there any posters that have some financial background? what are your inputs?
The bad news...
"As investors have sold off GM stock, they have pushed its market capitalization below $8.5 billion. That's only $1 billion more than Cerberus invested in Chrysler last year. If you valued GM on the terms Chrysler got last year, it implies that investors are getting GM's very profitable Asian and Latin American business for free.
With investor Kirk Kerkorian now holding a stake in the company, Ford at least has a committed investor on its side, which is effectively putting a floor under the price of its stock. There is nobody filling that role at GM
This stunning sales decline means that GM is continuing to burn cash at a fearsome rate - perhaps $1 billion a month by some estimates. Rod Lache of Deutsche Bank figures that GM will consume as much as $19 billion in cash over the next two years. Since it began the second quarter with $23.9 billion on hand and needs $10 billion to $15 billion to keep the lights turned on, that leaves a big hole.
To fill it, GM could follow the Chrysler example and start selling off its non-earning assets like land, empty plants, and even underperforming brands like Hummer and Saab. Or it could follow the example of Ford and borrow against its unencumbered assets like trademarks and real estate. Anybody want to make a guess as to how large a mortgage GM could get on its headquarters in downtown Detroit?
Whatever GM does, it is likely to be expensive. Borrowing $10 billion at around 10% interest would cost it $1 billion a year. Analyst Himanshu Patel of JP Morgan lopped $1.20 per share off his estimate for 2010 earnings to account for the interest payments.
It is also likely to leave GM weaker for the long haul. In order to attract financing, analyst Lache figures that GM will need to develop a comprehensive restructuring plan that would include cutting more overhead and further consolidating its brands..."
Sooner than later GM is going to be restructured and will produce fuel efficient cars. Don't you people think there is substantial amount of profit to be made from this company?
The bad news...
"As investors have sold off GM stock, they have pushed its market capitalization below $8.5 billion. That's only $1 billion more than Cerberus invested in Chrysler last year. If you valued GM on the terms Chrysler got last year, it implies that investors are getting GM's very profitable Asian and Latin American business for free.
With investor Kirk Kerkorian now holding a stake in the company, Ford at least has a committed investor on its side, which is effectively putting a floor under the price of its stock. There is nobody filling that role at GM
This stunning sales decline means that GM is continuing to burn cash at a fearsome rate - perhaps $1 billion a month by some estimates. Rod Lache of Deutsche Bank figures that GM will consume as much as $19 billion in cash over the next two years. Since it began the second quarter with $23.9 billion on hand and needs $10 billion to $15 billion to keep the lights turned on, that leaves a big hole.
To fill it, GM could follow the Chrysler example and start selling off its non-earning assets like land, empty plants, and even underperforming brands like Hummer and Saab. Or it could follow the example of Ford and borrow against its unencumbered assets like trademarks and real estate. Anybody want to make a guess as to how large a mortgage GM could get on its headquarters in downtown Detroit?
Whatever GM does, it is likely to be expensive. Borrowing $10 billion at around 10% interest would cost it $1 billion a year. Analyst Himanshu Patel of JP Morgan lopped $1.20 per share off his estimate for 2010 earnings to account for the interest payments.
It is also likely to leave GM weaker for the long haul. In order to attract financing, analyst Lache figures that GM will need to develop a comprehensive restructuring plan that would include cutting more overhead and further consolidating its brands..."
Sooner than later GM is going to be restructured and will produce fuel efficient cars. Don't you people think there is substantial amount of profit to be made from this company?
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