General Motors Death Watch 183: Credit Where Credit's Due. Or Not.

Earlier today, GM CEO Rick Wagoner told the world that the automaker has “adequate liquidity” until the end of the year. So I guess no one believed him the first time. Ipso facto. Wagoner’s reassurance came on the same day GM’s stock price sank to a forty-year low. The same day Goldman Sachs recommended that investors run for the hills. No surprise, then, that Wagoner felt compelled to go beyond his previous “we’re good” guarantee. "We have a lot of options to fund beyond that," Wagoner soothed. Unless they don’t. In which case, it’s fork sticking time.

The idea that GM’s cash burn will force them to go back to the well to keep the flames at bay is gaining momentum. The Bank of America and Goldman both hold this opinion, and peg the amount required at around $10b. And then, today, GM's cost of borrowing increased. Again. Fitch Ratings downgraded the ailing American automaker to B-, six steps below investment grade. That’s not good with a capital S, for hello New York? SELL!

Remember: GM is already paying $3b a year in interest ($250m per month). Also keep mind that Fitch Ratings is not a populist stock picker like Jim Cramer. The agency has access to information that the average investor will never see— including projections. If Fitch jerks your chain, you’re definitely barking up the wrong tree. Even worse: Fitch gave GM a negative rating, leaving the door open for further downgrades.

How low can GM go? The company’s fortunes and rep can sink to the point where Wagoner’s “other funding options” disappear. If GM's bankers think the automaker is headed for a massive default, the money men are under no obligation to let GM play with other people's money. (In fact, just the opposite.) New lenders? What makes you think the people who can write billion dollar loans are more clueless than the average TTAC reader? I mean, now.

In terms of raising money, credit ratings are more important that GM's horrific stock price/market capitalization. But the sinking share price reflects the general take on General Motors: there's no boffo sequel to virtually extinct high-profit light trucks.

Pawning GM foreign ops to fund GM NA would be even greater lunacy than the current set-up, where cash generated outside the U.S. disappears down the corporate rat hole. There's nothing to stop GM declaring NA kaput and hiving-off the rest of the world, in the same way Delphi’s done. There's everything to lose by NOT doing so. Literally.

If GM can’t raise additional money, and even if they can, the artist formerly known as the world's largest automaker needs to file for Chapter 11 sooner rather than later. The more cash General Motors has going into bankruptcy, the better the chances are that they can make it out. Not intact– that would defeat the entire purpose of the exercise. But out.

At the moment, there’s only one real glimmer of hope on the horizon: Chrysler files first.

When ChryCo goes, it will NOT be coming back. Their C11 will leave a Honda-sized hole in the American market. Presumably, Chrysler-favoring domestic loyalists will then head for GM and Ford stores. But they may not. They may apportion themselves to other automakers as they do now— which is to say they’d continue leaving Detroit metal for transplant products in ever greater numbers. Alternatively, the U.S. new vehicle market may contract so radically that Chrysler going away wouldn’t make that much difference to anyone.

Meanwhile and in any case, Wagoner is sounding increasingly Nixonian. I don’t know if Rick is kibitzing with a portrait of Roger Smith at the top of RenCen, but statements like “GM has moved quite proactively to address the dramatic consumer shift away from light trucks,” and taken "some very tough measures” sounds both revisionist and, well, nuts. Given GM’s double digit sales declines and sub-20 percent market share, Wagoner’s “we knew this was going to happen” assertion can only strike a handful of people as even remotely credible.

I still think that GM will be felled by something out of left field; some unexpected big ticket item that will do the straw camel’s back thing. A key supplier hitting the wall that GM can’t afford to bail out. A court ruling of some sort. GMAC’s collapse.

But perhaps not. Perhaps GM’s Board of Directors will allow GM’s management to keep flying until the corporation runs out of gas, and falls out of the sky. Which is a shame. Chapter 11 was designed to offer dying companies a chance at a gentler landing and a fresh start. But I suspect that the people running GM couldn’t give a shit about GM.