Lehman Bros.: GM Needs $12.2b To Stay Afloat

lehman bros gm needs 12 2b to stay afloat

According to Bloomberg, Lehman Brothers' top auto analyst reckons GM "may" need to raise an additional $7.3b just to stay afloat through the end of '09. And that's just the start of it. "GM may 'burn through'' $6.9 billion of cash in the second half of 2008 and another $4.4 billion next year, according to the 'base case' of Lehman analyst Brian Johnson. If a worldwide economic slowdown causes auto sales to stall in the U.S. and fall by 10 percent in the rest of the world, GM may use an additional $4.9 billion of cash through 2009, forcing the company to raise as much as $12.2 billion, Johnson wrote in a note today." With the American automaker already paying $250m per month in interest on existing loans, with all of GM's "non-core" assets either sold or unsaleable, with its credit rating at Caa1 (seven levels below investment grade), with a negative shareholders’ equity, with profits from NA ops notable by their absence (and a short-term impossibility), where the Hell is this money going to come from? Answer: federal loan guarantees. And then what?

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  • Jaje Jaje on Aug 21, 2008

    A federal bailout will also not allow GM the flexibility to pare down it's bloated network and workforce in order to right its size for its diminished demand. They need the protection of CH11 in order to throw out the contracts and overcome the franchise laws. A bailout cannot help them with this problem except to spend it on millions in settlements and ransom to the UAW.

  • Pch101 Pch101 on Aug 21, 2008
    Yes, but will the new management really work at slimming down the brand portfolio? If the new guys understanding marketing and finance (which, believe it or not, the current guys do not), then they would take the low cost approach and starve them out. Since killing them outright is expensive and they can't afford it, putting them on the back burner will have to do.

  • Fred diesel Fred diesel on Aug 21, 2008

    Ironic that Lehman Bros. prolly needs $12B to stay afloat too!

  • Capeplates Capeplates on Aug 22, 2008

    Any investment in GM will be like pouring water into a seive - only the holes in this seive pass more water than the supplier - GM are on limited time