Bailout Watch 326: A Tale of Two Bailouts
From WLNS Channel 6 (Lansing, Michigan): “GM Bailout Appears to be Working” “The federal rescue of General Motors appears to be working. It’s a glimmer of hope in a dismal automotive scene. General Motors says it does have enough loan money to survive. Bloomberg News reports a spokesperson for GM says last month’s government rescue should be enough to cover even a worse case scenario for 2009. GM received a four billion dollar check from the treasury department last week with an additional 5.4 billion due later this month and four billion more in February. The company reportedly now says it will not need additional loans unless the economy worsens.” From the Economist: “No end to the nightmare” “Realistically, the most GM can hope for is that it will have done enough by March to keep the drip-feed going until the second half of 2009, when things may start to improve. As for Chrysler—don’t even ask.”
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Isn't GM burning though about $3 billion a month in losses for 2007/2008? That gov't bail out isn't going to last long even if sales are steady.
Don't believe Rick Wagoners's reassurances. He knows right now he will need mega, mucho taxpayer dollars and soon. First quarter production cuts which are justified given the sales implosion we are seeing will decimate the gross profit and revenue numbers for the first quarter. They are cutting production for the first quarter by almost half in North America which will do the same to gross profit . Those remaining profit dollars already woefully inadequate to cover costs will now have to do double duty. In business you watch your breakpoint which is where expenses equal gross profit. A dollar of gross above is profit and vice versa. The farther away from that break point you get profits or losses tend to grow exponentaly. This cut in production is already baked in the cake and Wagoner knows it. But when we get into april he will put on his act and be shocked how bad the economy is and line up for more free money. We the public are getting put together big time. Same rationale as the Vietnam War and the Iraq war get the commitment and then oh we can't back out now and waste all that money we foolishly gave them . It goes on and on.
My guess is that Rick is walking the tightrope by saying things are great in order to reassure potential buyers while he tries to paint a more realistic (i.e. gloomy) picture to bondholders and the UAW in order to get more concessions. My only hope is that he falls from the tithtrope with a leg on each side. (if you get the picture.)
Well put, Sherman! GM needs the sort of concessions they would get through bankruptcy, but they say they couldn't make it through bankruptcy for some reason. Seems to be the destiny for GM to be caught between rocks and hard places. Too bad they chased off anyone with the initiative to get them out of those places long ago.