GM Running On Fumes
Bloomberg reports that General Motors has tapped the remaining $3.5b of a $4.5b revolving credit line. (Needless to say, the bad news arrived on a Friday– the by-now usual pattern for the embattled automaker.) In an official statement, GM said the cash “will go to help cover restructuring costs.” Or, as Bloomie’s put it, “GM, the largest U.S. automaker, has said it needs to raise $4 billion to $7 billion by selling assets and adding debt to ensure it has enough liquidity to operate through the end of 2009. GM has lost $69.8 billion since the end of 2004, its last profitable year.” The reality is that Q3 will show another big loss; the loss might have put GM in violation of certain covenants/ratios in the loan agreement, which would give the bankers the right to deny funding and pull the line. Of course, we don’t know the details. But, as TTAC’s Deep Throat put it, this company is running close to the edge. Meanwhile, GM’s former captive lender GMAC (The General now owns 49 percent) renewed a credit facility with Citigroup yesterday. GMAC now has access to $13.8b, down from last year’s $21.4b.
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