TTAC Called It: GM Cash Conflagration Goes Critical

Long time readers will know I've been advising them to watch GM's cash flow. The fact that the automaker has been selling everything that wasn't nailed down– propping-up their bottom line with tens of billions of dollars worth of "income" from former assets– was/is a sure sign GM was/is hurting for life-sustaining liquidity. Last week, I posted that " Our spies tell us GM's set to top-up its cash hoard by $10b– which would raises its debt to $50b." Confirmation came today via Bloomberg. "General Motors may borrow $10 billion as early as next quarter because rising commodity costs and falling U.S. sales are crimping cash flow, an analyst at JPMorgan Chase & Co. said. The largest U.S. automaker may secure a bank loan by borrowing against foreign operations, inventory, trademarks or its stake in lender GMAC." GMAC? I don't think so. CNNMoney reports that Moody's has just downgraded GMAC deeper into "junk status" (to B3 from B2). Lest we forget, GMAC recently obtained a new $11.4b credit line, partly to lend Residential Capital (resCap) $3.5b to keep their mortgage subsidiary solvent. GMAC's exposure to ResCap has increased from $750m to $4.6b. If ResCap fails… Meanwhile, even worse, "The downgrade also reflects growing pressure on the profitability of GMAC's auto finance operations, arising from higher average borrowing costs and weakening asset quality." Fan. Excrement. Collision.