General Motors (GM) executives refuse to acknowledge that their company is facing a liquidity crisis, but when you only have enough cash to last through the end of the year (as GM’s CFO said last week)–and it’s already July–you need to start selling the furniture.
GM has about $31 billion in cash and credit, but it’s burning through more than a $1 billion of cash each month. So Wall St. wants GM to raise cash sooner rather than later. NYT:
“The rapid change in the external environment, especially fuel prices and demand, has outpaced G.M.’s most aggressive restructuring timetable,” said John Casesa, managing partner of the consulting firm Casesa Shapiro Group in New York. “G.M. needs capital to finish the job.”…
One industry analyst, Himanshu Patel of JPMorgan Chase, forecasts that G.M. will burn through a combined $18 billion in cash this year and next. While he discounts fears of bankruptcy, Mr. Patel said in a research note that “liquidity concerns” will require G.M. to borrow up to $10 billion before the end of this year.
So why are most of the bankruptcy rumours swirling around GM and not Ford (F)? Ford has more cash and more willing investors:
- Ford has a bigger cash hoard of about $29 billion, because of a historic debt offering two years ago in which Ford pledged nearly all of its assets as collateral.
- Ford is burning less cash each month, according to analysts.
- Ford has a major investor, financier Kirk Kerkorian, who has indicated a willingness to lend the automaker money to finance its operations.
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