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 General Motors Corp. issued a dire warning about its prospects on Friday. On Monday, Wall Street took that warning to heart.
Shares of the automaker on Monday hit lows not seen since 1946 on fears that the company might run out of cash. GM, which bled through more than $2 billion a month in the third quarter, on Friday said that absent a government bailout or a dramatic upswing for the economy it would fall below its threshold of $11 billion to $14 billion in cash needed to run the business by mid-next-year. The stock price movement Monday could also be tied to the negative sentiment coming from analysts over the weekend. Deutsche Bank AG in a note to investors predicted GM could be underfunded by early January, and cut its target price to $0. Barclays Capital meanwhile cut its rating to "underweight," setting a target price of $1 per share. While most expect some sort of government intervention that will allow the automaker to at the very least delay, if not avoid, a filing, the analysts offered little good news for equity investors. Barclays analyst Brian A. Johnson in a note said any government assistance would likely significantly dilute GM's equity. A solution similar to the 1979 bailout of Chrysler Corp., Johnson wrote, would likely transfer 98% of the recapitalized GM's equity to a union healthcare trust, existing debtholders and the government, leaving little for shareholders. - Lou Whiteman See TheDeal.com story on GM's warning Lou Whiteman is The Deal's senior airline and automotive reporter. CategoriesComments
From: PacificGatePost,
ONLY VERY DRASTIC ACTION WILL SAVE DETROIT CONGRESS: Here’s a radical plan… http://pacificgatepost.blogspot.com/2008/11/solution-for-detroit-gm-friends.html It’s this, or bankruptcy. The American Auto industry should be saved but under new conditions.
Posted on:
November 10, 2008 8:59 PM
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Remember when Circuit City was a favorite in "Good to Great" by Jim Collins? Remember when we thought being big like GM gave you clout with customers and vendors to produce long-term returns (Michael Porter's 5 Forces Model)? It's time we recognize that the old approach to management doesn't work in a rapidly shifting competitive world. There are winners in today's market, but they follow a different approach. Read more at http://www.ThePhoenixPrinciple.com