By on May 29, 2008

montanafire.jpgThe Wall Street Journal [sub] has been busy reporting CEO Rick Wagoner's new new turnaround plan, which looks an awful lot like his last turnaround plan, which is based on the principle "Yes, you CAN cut your way to prosperity." Set for unveiling next Tuesday (June 3), "New restructuring actions could include the elimination of some slow-selling models. Mr. Wagoner also will unveil plans to boost revenue." For this you buy a subscription? Obviously not. At the bottom of the report, we get the money shot: "Some analysts, however, fear GM may be headed for rougher waters given its dwindling cash position. As of March 31, GM reported $24 billion, or $6 billion less than what was on hand September 31." Holy cash conflagration Batman! I make that a $1b per month cash burn. Do the math. Or hear this: "Mr. Gilbert [a fixed income analyst at Principal Global Investors] said that if GM doesn't figure out a solution, it may be headed down the same road as the airline industry, which saw several carriers file for bankruptcy protection in recent years. 'Liquidity is the one thing that always separated the two (industries)… If that goes away, the two will look a lot more similar.'"

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18 Comments on “GM Cash Burn: $1b Per Month...”


  • avatar
    jolo

    It averages out to a billion per month because of the AAM strike, Delphi difficulties and GMAC “issues”. The next six months will show them burning through ~$167 million per month less, allowing them to claim they are making headway and every 6 months, they will save a billion bucks. They will spin it so that Rick will come out smelling like a sow’s ear wrapped in a silk purse (or something like that).

  • avatar
    truthbetold37

    Since Ford announced white collar firings GM will follow suit.

    Start with Finance and Marketing and leave Engineering and Purchasing alone. The finance staff is BLOATED.

  • avatar

    It might be hard to fire finance people, seeing as there weren’t enough of them there to ensure proper financial reporting…

  • avatar
    gawdodirt

    It’s management that is bloated. How many Directors does a “downsizing” company need?

    And, they’re the highest paid ones in the system as well.

    Two birds with one stone you might say….

  • avatar
    gamper

    The 6 Billion in six months does include many one time expenses. But I think it is very reasonable to assume that supplier problems will continue to plague the Detroit automakers due to the sharp decline in demand for new autos, especially trucks. One thing not really taken into account by the article is the savings that GM will start to realize in the next 2 years from the VEBA and other UAW contract concessions.

    The biggest issue for GM, and the other Detroit automakers is the rapid decline in demand for Trucks and SUVs. If gas prices continue their upward trend say to $5/gallon, which doesnt look like much of a stretch at this point, demand for trucks and SUVs is going to fall off a cliff (much moreso than it already has). There will be such a glut of unsold used trucks, off lease trucks and new trucks that the decline will accelerate ever faster. The Detroit automakers need a more fuel efficient product mix and they need it yesterday. Their future depends largely on how quickly they can change their fleet makeup and of course the success of those new vehicles.

    Even then, smaller vehicles dont bring the sort of cash flow that the larger ones did, so there are still painful cuts to be made.

  • avatar
    hltguy

    “..$6 billion less than what they had on hand on September 31”, no wonder GM is in trouble, they don’t even realize September only has 30 days.
    A side note: here in Bakersfield, California, the average price of diesel is now $5.19 a gallon. Things are getting really UGLY!

  • avatar
    mikey

    Lets see,in the last 3yrs i’ve seen my wages frozen,my drug plan beat up.Ok then we lost 40hrs vacation.We said goodbye to our cleaners and shunt drivers.Thousands laid off,thousands more retired,and not replaced.I’ve had my shift hours changed then changed back.

    Rick:Do what you gotta do to keep my paycheck running, but I’m gonn’a hafta take a pass on any further restructing.

  • avatar

    Even before the AAM strike, BusinessWeek charted their cash burn at $1B per month. If the GMAC situation gets worse, $1B per month will be a fond memory.

    Other interesting amounts quoted by BusinessWeek:
    – GM is spending $8B+ on R&D this year, the most (by far) in a decade. Yes, that’s USD (for now).
    – GM has 22,000 engineers on staff. That’s twenty-two thousand. Unfortunately that’s heads, not US dollars.

  • avatar
    Vetteman

    This quarter’s cash burn has to be much higher. I can see two billion per month for april,may and june maybe more . That lost production really hurts as those are the highest profit vehicles they build and the cash stream abruptly ends when they don’t build vehicles. The reallly telling thing is dealers still have plenty of inventory which shows how badly sales have colapsed.

  • avatar
    blowfish

    Didnt the General just bought some big buildings not long ago? I dont think I was day dreamin.

  • avatar
    jl1280

    hitguy says that “Things are getting really UGLY!”
    Well, I say you ain’t seen UGLY with diesel @ $5.19. Wait until the sign on the pump says “No fuel”. That will spell UGLY! (And it’s coming to a station near you soon!)

  • avatar
    threeer

    jl1280,

    I don’t see it in the immediate future that stations run out of fuel. Availability of fuel isn’t the issue. Speculation, the dollar, etc…are driving the prices up.

  • avatar
    Rix

    Of course, that assumes that the accounting at GM is being done correctly. Can you tell me for sure that GM is doing the math right?

  • avatar
    NeonCat93

    Don’t forget, that 6 month period included Christmas. Maybe GM bought a lot of orphans presents and didn’t want to tell anyone. That could account for a lot of cash right there.

    Next Christmas, what will those orphans have to look forward to? A new 2008 SUV?

    Well, it would be one way to clear the inventory…

  • avatar
    Bunter1

    1.4 million per hour. Ouch.

    Sure there are some one time items.

    Recent history indicates there always are.

    Rix- Excellent question.
    Next question, do they tend to tell us an estimate that is optiminstic or pessimistic.

    I know where my vote goes.

    Mikey-I have been in a similar situation and truely feel for you. Wish the news was better.
    Seriously, look into what you can learn on wealth creation. Take care.

    Bunter


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