By on November 7, 2008

The Wall Street Journal reports GM’s statement on its dismal Q3 results. The General’s general admits that “estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business.” So, essentially, unless GM gets a federal bailout by 12/31/08, the artist formerly known as the world’s largest automaker will be forced to file Chapter 11. And no wonder, given GM’s cash burn reported [with all the numbers] by Yahoo! Finance. “Cash, marketable securities, and readily-available assets of the Voluntary Employees’ Beneficiary Association (VEBA) trust totaled $16.2 billion on September 30, 2008, down from $21.0 billion on June 30, 2008… The change in liquidity reflects negative adjusted operating cash flow of $6.9 billion in the third quarter 2008.” The entire “money shot” quote after the jump.

“Even if GM implements the planned operating actions that are substantially within its control, GM’s estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business. Looking into the first two quarters of 2009, even with its planned actions, the company’s estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions significantly improve, it receives substantial proceeds from asset sales, takes more aggressive working capital initiatives, gains access to capital markets and other private sources of funding, receives government funding under one or more current or future programs, or some combination of the foregoing. The success of GM’s plans necessarily depends on other factors, including global economic conditions and the level of automotive sales, particularly in the United States and Western Europe.”

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79 Comments on “GM Books $4.2b Net Loss in Q3; Bankrupt By December...”


  • avatar
    4runner

    I think its now posted:

    http://finance.yahoo.com/news/GM-Reports-Third-Quarter-prnews-13501539.html

  • avatar
    Cicero

    Game over?

  • avatar
    Lichtronamo

    Unless they fundamentally restructure their business, any cash infusion from the US Government will be more bad money down the drain. Given FoMoCo’s reported rate of cash burn and assuming a similar if not worse rate for GM, the two would blow through an additional $25 Billion in three quarters or less.

  • avatar
    Lichtronamo

    Here’s the crux of the situation from the news release:

    Even if GM implements the planned operating actions that are substantially within its control, GM’s estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business. Looking into the first two quarters of 2009, even with its planned actions, the company’s estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions significantly improve, it receives substantial proceeds from asset sales, takes more aggressive working capital initiatives, gains access to capital markets and other private sources of funding, receives government funding under one or more current or future programs, or some combination of the foregoing. The success of GM’s plans necessarily depends on other factors, including global economic conditions and the level of automotive sales, particularly in the United States and Western Europe.

  • avatar
    snabster

    so it goes.

  • avatar
    TexN

    I must have missed the part about Rick Waggoner’s resignation. Or the BOD’s vote of confidence in him.

  • avatar

    Note: this admission renders GM ineligible for the Department of Energy’s $25b low-interest loan program.

  • avatar
    Lichtronamo

    If they need $14 billion to run the company and they have $16.2 billion in liquid assets and are burning $2.3 billion in cash per month, they won’t make it to the end of November.

    Can Pelosi, Reid, Obama and Bush even act that fast (even if they wanted to)?

  • avatar
    Point Given

    ICEBERG DEAD AHEAD

    This site has been repeatedly pointing out that this moment was coming, and finally GM has acknowledged publically what the critics have been saying but still denies bankruptcy is an option.

    At some point you have to say it’s not blissful optimism but out and out lying(very likely) or woeful incompetence.

    How do you save this ship? is it worth saving? I want a leader to take risks at GM now…do something!…enter chapter 11, shed brands and dealers…do something other than carry on, dabble on the margains and proceed as if it’s business as usual, optimistically (naively) expecting things to change

  • avatar
    golf4me

    I think the Govt would be wise to let GM go C11 THEN give them the money needed to restructure. I will bet that’s what happens.

    When the govt puts their money up, they should also give tax breaks to any consumer who buys their more efficient vehicles. Maybe they give half of what GM is asking directly into the business, and the other half toward the tax breaks. With the money they put directly into the business, they also take a stake in the company so that they can reap the reward on the sales side.

    I think that the tax break will get some more butts in the seats of some of the newer GM offerings which may turn the tide of consumer sentiment too, as I think that some of the current offerings (like the Malibu) might also help change some of the negative perceptions about GM vehicles as a whole. Or, maybe not.

    GM has to do their part and continue their current trend of improvement, and build the vehicles well too. On that front, when the UAW slobs actually see that they can have $0 and make nothing or $14 and keep working they might finally be grateful for the jobs they have…

  • avatar
    50merc

    GM just needs life support for a few months. Their game-changing super-duper new models will hit showrooms next year. Market share will shoot back up to fifty percent, as Americans buy millions of Camaros and Volts.

  • avatar
    autonut

    I hope that they will go Ch11. It will give chance to restructure board and management completely, disengage from unions and recover. But this will not happen: unions have good representation in congress and newly elected white house. They’ll be fixing that disaster with same or other geniuses at the helm

  • avatar

    How does this $4.2b loss compare to the Ford reported loss of $129m? Is that apples to apples, or should the Ford side of the equation be the $2.7b pre-tax loss (without special items)?

    I’m not an accountant, so I’m trying to understand the relative numbers here.

  • avatar
    Polishdon

    Well,

    Based on MSNBC:

    They even halted talks with Chrysler…

  • avatar

    Lichtronamo

    Good point. Headline amended.

  • avatar
    golf4me

    Oh, and BTW…what was the “Big Announcement” that was so important that the employees needed to watch the monitors for? I haven’t heard anything that I didn’t already know? No brand elimination? No $1 salaries for top execs? Anything? Beuller? Beuller? Anyone?

  • avatar
    indi500fan

    Fear not, boys.
    Barry, Nancy, and Harry to the rescue.

  • avatar
    Matthew Danda

    RF:

    What are your plans for the Death Watch series once C-11 really happens? Did you think it really would happen? I’m feeling surprised myself…so many years of watching and waiting and knowing its-gotta-happen that I’m actually feeling some anxiety at the thought that it is going to be real!!!

  • avatar
    TexN

    I am strong believer that the government will step in and give lots of our taxpayer money to “save” the auto industry. My question to the Best and Brightest is this: will the Ford family’s overriding ownership stake play any role in their ability to get their hands on the government’s (OUR) money? Any chance GM gets to participate while Ford sits on the sideline? I would like to read your thoughts on the subject.
    Tex

  • avatar
    tony-e30

    Robert,
    Do you believe this the ‘big announcement’ GM has been touting all week, or is there something else to follow?

  • avatar
    GTI

    Two things:

    The announcement that merger talks have been suspended means that Chrysler will go Chapter 7 by year end. I read somewhere today that they are restructuring their parts business to better align with individual brands (read Jeep) to ease a piece-meal break-up.

    Second, it seems that the process of delaying the report, halting trading, etc. was designed to make sure that the media would pay the maximum attention, a PR strategy for Nancy and Co.
    Who is the important constituency that the pols worry about? Look for any “aid” to benefit the UAW in one way or another, a la Robert’s post yesterday. The Dems will find a way to shove this up Wagoner’s a**, as they should.

  • avatar
    Engineer

    Fear not, boys.
    Barry, Nancy, and Harry to the rescue.
    O Vlok!
    They really are dead then…

  • avatar
    1996MEdition

    Matthew Danda:

    The real question should be, is their life after death?

  • avatar
    toxicroach

    GM just admitted it had 5 weeks to live.

    That’s pretty big. It’s now NEW, at least not to the Best & Brightest, but it is big.

  • avatar
    Conslaw

    If you were a GM supplier, and you just read this press release saying that GM admits it doesn’t have enough money to make it through the year, would you ship GM parts on a NET 60 basis?

  • avatar
    Bunter1

    Point Given :
    ICEBERG HAS PENETRATED THE HULL!

    I did post an estimate of 2B per month yesterday.
    As usual the General has exceeded my expectations.

    Freakin’ ouch.

    Bunter

  • avatar
    Redbarchetta

    Was their any report on if Bankruptcy is now on the table. Or are they still claiming they aren’t even thinking about it in the board room at all. I want to know do these guys have any plan at all, they don’t deserve a bit of help without a concrete and viable plan to get out of this mess. And continuing with the same plan is not a plan since it hasn’t netted any good results so far.

    I have been saying for a year that I didn’t think they were going to make it to 2009, the proof is in the pudding now.

    I’m sure the government will find a way to steel our money in truck loads at the very last minute to deliver to the RenCen without a single string attached so they can keep forging on business as usual, you know for the JOBS! Our government is pathetic you know it’s going to happen.

  • avatar
    gus

    David Cole, head of the Center for Automotive Research is a complete buffoon, far removed from reality and a total tool of the US auto industry. I’ll laugh when, unlike GM, Ford and Chrysler “employees” who are paid to not work, he’s on the unemployment line. It’s apologists like him, on the industry’s dole, who help keep us from a real solution for the industry, which is on death’s door.

  • avatar
    Kevin

    Since the American people have chosen not to hand over enough of their money to GM voluntarily, in exchange for goods, I think it’s only fair that the American people now be coerced by punitive government force to hand over their money to GM executives and unionists, in exchange for nothing.

    We can all agree on that, can’t we? After all, what’s good for GM is good for America, right?

  • avatar
    Conslaw

    I think we ought to bestow a new nickname on Rick Wagoner. We should call him “The Black Knight”.

    “It’s just a flesh wound.”

  • avatar
    Kevin Kluttz

    And those ignorant, oblivious people out there who believe all is Utopia are still buying their piece of shit cars. And SUVs. Poor, dumb bums. How will they get their service, which is inevitable with a GM product (mostly major repairs)??

  • avatar
    windswords

    Conslaw:

    “I think we ought to bestow a new nickname on Rick Wagoner. We should call him “The Black Knight”.”

    Wouldn’t that be B.O.? He’s supposed to rescue the country.

  • avatar
    Conslaw

    Windswords:

    Obama isn’t stuck in denial. Wagoner is. George W. must be hunkered down in the White House enjoying the sequel to My Pet Goat.

  • avatar
    gamper

    The fact that GM has not come out with any cuts in the wake of this news could be telling that a federal cash infusion is forthcoming.

    I dont see how Chrysler makes it out of this alive.

    The good news is that I saw my first $1.99 gasoline yesterday. If lending loosens up, and the stock market finally finds a bottom things could start turning around at the end of next year. However, I still feel that the bottom wont come until 4th quarter earnings are reported, particularly among retailers.

  • avatar
    Bunter1

    gus-I noticed in the CAR report that they had the same estimated loss of direct jobs for both the total collapse and 50% down senarios.
    The least they could do is have someone edit the report before publishing.
    50% of operating cap would be tough with 0% workers.

    Sad, and the MSM just soak it up without reading it.

    There is a difference between analysis and regurgitation…I think that difference is why most of us are on this site.

    Thanks RF.

    Bunter

  • avatar
    Ingvar

    Post C11, the GM Death Watch should be appropriately rebooted as GM Phoenix Watch. Hear that, Mr Farago? Remember where you heard it first…

  • avatar
    John Horner

    How long has it been since Wagoneer declared that “the fundamentals of our company are strong” …. or something like that :( ?

    File Chapter 11 and get on with the monumental task of trying to save the Titanic. A creditor or government appointed new management team needs to be in place, oh I don’t know, last year.

  • avatar
    gus

    Check out industry flunky Center for Automotive Research, and it’s arrogant head, David Cole….clearly in the back pocket of the US auto industry, continually spreading mistruths and denigrating anyone who dares to speak the obvious truth about the state of the industry. Just two weeks he was on the Newshour with Jim Lehrer, spouting nonsense about quality and cost improvements, and demeaning a University of Maryland Professor who dared disagree with him. Dr. Cole, do us a favor, disappear, and never “represent” again an industry which, largely due to self-inflicted wounds, is truly at the midnight hour.

  • avatar
    Lichtronamo

    The story about the meeting yesterday with Pelosi and statements by Reid suggest they want to do something under the Bush Admin so that their guy isn’t tainted.

    Its an interesting situation to have the President-elect be a member of the Senate trying to transition to their administration while still having to work with the sitting President.

    Can you vote “present” in the U.S. Senate?

  • avatar
    gus

    Watching Rick Wagoner on CNBC now is like taking driving lessons from Helen Keller.

  • avatar
    John

    RF,

    If you would hire a publicist, we’d be seeing you interviewed on Charlie Rose, in the business press, and who knows where else. And you’d deserve to be there, too.

    John

  • avatar
    aunt jemima

    Wagoner is on CNBC right now, not saying much of anything.

    Phil asked him about bankruptcy since the GM report mentioned liquidity issues and Rick said they are not thinking about Chpt 11. Phil asked him how low cash needs to get before they start thinking about next steps, and Rick danced around the issue…

    The irony of it is that he says the gov’t has to be thinking ahead and forward looking when it comes to helping the auto industry. This from a company that rushed SUV’s to market ahead of schedule right as gas prices were about to skyrocket.

  • avatar
    Cicero

    Any sign of life from the Board of Directors yet?

  • avatar
    indi500fan

    @Klutzz:
    you can still buy nearly all the parts for a 1955 Chevy over 50 years after manufacture. I wouldn’t be too concerned about servicing something built in 2008.

  • avatar
    Zammy

    N/T

  • avatar
    CarnotCycle

    It would be awesome if GM mailed it in on the same week Uncle Obama makes it official in the Capitol. The antics of the first hundred hours, much less the first hundred days, would be quite hilarious, something to laugh away the tears I suppose over losing perhaps the greatest icon of American industrial supremacy. I will be sad to see GM go, despite my satisfaction at seeing its current incarnation finally collapse. Obama and Wagoner might even know each other a bit from some Harvard confabs or something. Having a Harvard degree is looking more and more like something to avoid when looking at resumes these days judging from the success of their alumni in the real world lately. I hope it doesn’t apply to Obama as well.

    Either way, its the holidays and Rick Wagoner and the gang I am sure are thinking….BONUS TIME! I wonder how they’ll justify it this time around? It would seem pretty stupid to bonus yourself right now the common-sense person would say.

    But think about it, Ricky and the gang know that by this time next year GM isn’t going to be here or its going to be the People’s Republic of GMT900’s n’Things, and they won’t have full control over the coffers anymore (kinda like Saddam running Iraq, but with no-fly zones). This year is their final chance for the carcass-nibble fetish they seem to have every year. Anyone wanna take bets on the bonus amount and justification? Sounds kinda like fun to me at this point.

  • avatar
    Geo. Levecque

    I just saw Wagoner on CNBC being interviewed, he is a stubborn as ever, he would not even consider going to Chapter 11, he kept referring to what happened to Lehman Brothers, they are after Taxpayers money only! What a croc!

  • avatar
    John R

    Hey, Robert, I forwarded the editorial that was given to you anonymously to Barry O (http://change.gov/page/s/yourvision).

    What are the chances he’ll listen?

    [crickets]

  • avatar
    Ingvar

    The only thing I don’t get with GM:s cash burn: What is it that burns all that money?

  • avatar
    jaje

    GM is putting all the blame solely on the economy and really fronting that lie to Congress. The fact of the matter is they have lost market share precipitously over the past 8 years. GM has given away cars in order to make a sale – given loans to people who they know couldn’t afford it but their sole focus was move metal and sustain market share.

    Management is solely to blame and somehow they are not held to any level of responsibility and given free reign with no accountability. Fire the bastards and put some actual smart people in charge and not those who are “entitled”. I’m hoping they do go bankrupt so the courts can finally put some objective input into the fray – and get rid of the morons in charge who have only been pushing off the inevitable. Bankruptcy will not the end of GM – it will be the rebirth. But from these clowns who only focus on short term – they will never get it b/c it means they have to admit guilt and incompetency (here their pride is worth more than their employer).

  • avatar
    NickR

    Kevin:

    “Since the American people have chosen not to hand over enough of their money to GM voluntarily…”

    See, there’s your problem, thinking its your money. Clearly, you need to adopt a fresh perspective more in keeping with the times. Your money is what they choose to let you keep.

  • avatar

    Hubris meets Nemesis.

    It’s been obvious that this was going to happen, for years and years — the unwinding will now happen in just a few weeks.
    A large low-cost carrier went bankrupt in Europe last week. Up until an hour before they declared bankruptcy, they were selling tickets over the net. Thousands were stranded by their dishonesty.

    Buying a car is a bit bigger than buying cheapo air fare, and people will now avoid GM cars, even if they’re thrown at them.
    Again in Europe, there are Saab ads stating: Next year we launch an all-new Saab 9-5, which is why you should buy one now!

    Desperation doesn’t even begin to describe what’s going on.

    It could have been avoided, but they decided to go Full-Steam-Ahead right into very, very dangerous waters.

    GM will now (should now) be dismantled, and the first thing they can get rid of is the antediluvian bureaucracy and useless, overpaid management they have.
    They are literally going to have to reboot all their activities, and as stated here repeatedly: the only way forward for today’s automotive companies is to recognize that people don’t necessarily want cars, they want mobility, and there are better ways of offering that than the traditional way of selling three cars to every household in America … The companies that figure out the mobility-equation are going to become very prosperous.

  • avatar
    geeber

    Zammy,

    Lewis Booth is the CFO of Ford, not GM.

  • avatar
    dt

    Is anyone listening to the earnings call?

    So calm and CPA dull.
    By the numbers; line by insufferable line, ad infinitum……….for you Latin scholars.

    “Five O’Clock Follies” re-badged for Motown?

    Any attention to the crisis at hand, surreally absent.

  • avatar
    Lichtronamo

    Ingvar:

    GM made it through their crushing production costs, depreciation write-offs and legacy expenses through volume. With the tightening of credit and drastic decline in sales(especially of their primary source of “profit” in pickups and SUVs), the current volume doesn’t generate sufficent revenue to cover expenses.

  • avatar

    As someone already pointed out, I do find it interesting how none of the responsible CEO’s stepped up to the $1 paycheck as Steve Jobs did when he saved Apple (of course, other investments/stock options/etc. earned him money).

  • avatar
    GS650G

    Employees are going to start taking home tools and parts.

    @indi500fan :

    you can still buy nearly all the parts for a 1955 Chevy over 50 years after manufacture. I wouldn’t be too concerned about servicing something built in 2008.

    Yeah, except those cars are desirable, collectible and simple to reproduce. No one is going to be collecting a Yukon Denali 40 years from now

  • avatar
    Lichtronamo

    Bill Ford had stopped taking a salary as Chairman/CEO. Incidentally, Jobs copied that one from Iaccoca.

  • avatar
    Mike66Chryslers

    Many people here have predicted that Chrysler would fall first. It certainly looked like that was coming when they were talking about being swallowed-up by GM.

    I just read that “sources close to the issue” put Chrysler as running out of money in mid-2009, and they’re still saying that only a merger or a miracle will save them.

    If Chrysler is still a going concern when GM files for bankruptcy, I’ll personally consider that a win for Chrysler, regardless of what happens to GM after that.

  • avatar
    Lichtronamo

    GMI even has a thread started under the heading “Its Time to Panic, Folks” so we know this is REALLY bad.

  • avatar
    gus

    Which has been more mismanaged by the Ford family: the car company, or the Detroit Lions?

  • avatar
    blindfaith

    I have worked for GM,Chrysler, and suppliers for 40 years. I am from oriental heritage.

    I watched my father work 18 hours a day 7 days a week and never take a vacation. My fater never failed to get up never complained. never had health insurance or paid vacation.

    When I heard that the US workers had to compete against these folks for market share. I new they were on the wrong playing field.

    My father laughted at the ignorance of the US to think that the could compete against voluntary slave labor that was happy to get a meal.

  • avatar

    Lichtronamo :

    Bill Ford had stopped taking a salary as Chairman/CEO. Incidentally, Jobs copied that one from Iaccoca.

    Yes, well, not exactly… check out this link.

  • avatar
    Bridge2far

    In my opinion, GM is not going anywhere. They will somehow survive. Job cuts, bailout money or whatever else it takes.

  • avatar
    Lichtronamo

    RF:

    I forgot about that – of course with the way FoMoCo’s stock tanked, you couldn’t expect him to live off just that, right? ;-)

  • avatar

    “Total of $11.7B in net Delphi-related charges taken to date”

  • avatar
    netrun

    Anybody bring the weenie’s to the bonfire?

    I think plenty of buns are already in the fire.

    Problem is, I’m standing a little too close for comfort.

    I think it’s safe to say we can kiss housing values in Detroit goodbye for the next 5+ years.

    “Last one to leave Michigan, please turn out the lights.”

    Its 1980 all over again.

  • avatar
    newsmonkey

    Looting The American Dream: Prevent the bail out of Chrysler and GMAC

    Everyone should register and be heard!!!

  • avatar

    I’m SO pissed I leased a new truck a year ago…had I known of the fire sales to come, I’d have nursed that ten year old SAAB to eleven years.

    Memo to Self. Buy Charger Hemi R/T and mothball.

  • avatar

    China:
    GM reports only $50M of equity income from Chinese joint ventures in Q3.
    Yesterday Toyota said in their comments they earned $600M from their Chinese JV’s in Q3.

    So, from this it seems Toyota made 10 times more profit in China than GM.

  • avatar
    ronin

    >>”GM is putting all the blame solely on the economy and really fronting that lie to Congress>

    The economy is just another word for the environment in which business is done, and it’s the job of executives to lead the company to make money in the environment in which it does business.

    If all I needed to do was to throw up my hands and point to some bad external bully (“the economy”) for blame, then I too could be the executive of any company on earth.

    Where in the constitution is the right of GM, or any business, to get money no matter what happens, economy or no economy?

  • avatar
    Point Given

    Chryslers rental fleet concessions went up (those are beyond normal fleet dollars)

    More discounts yay!

  • avatar
    Mr. Sparky

    The always punctual S&P credit ratings agency (Enron, Mortgage Back Securities, AIG, etc) has downgraded GM to CCC+ from B-.

    If GM were applying for a car loan, GMAC would definitely turn them down… Probably while laughing them out of the building…

  • avatar
    DweezilSFV

    So is there any plan involved now? Anything? Or is Waggy bankrupt there too ?

  • avatar
    Droid800

    GM is dead. Nothing they can do will stop the bleeding. They had the chance to cut brands and dealers, but that opportunity is now gone. They barely have enough cash to keep the lights on, and are going to be limping their way into bankruptcy all the while hemorrhaging cash.

    All that we (and GM’s board) can do is sit back and watch the disaster unfold.

  • avatar
    Bill Wade

    # indi500fan :
    November 7th, 2008 at 1:52 pm

    @Klutzz:
    you can still buy nearly all the parts for a 1955 Chevy over 50 years after manufacture. I wouldn’t be too concerned about servicing something built in 2008.

    A 1955 Chevy isn’t made out of cheap plastic and electronic bits.

  • avatar
    limmin

    I have never agreed with RF’s anti-GM bias. However, the guy got it right as far back as a year ago—GM is insolvent and dead by Dec. RF called it.

  • avatar
    Happy_Endings

    Barry, Nancy, and Harry to the rescue.

    GM’s not lasting until January. They’ll be gone by Festivus if nothing is done. Which means the Republicans will also have to get involved somehow.

  • avatar
    tate

    It was coming, but its sooner than expected.
    The US Gov should sell all the brands to large Private Equity Companies (similar to a Chrysler and Cerebus Capital) and provide tax holidays and provide support for new green field production factories (thus helping economy) and in the meantime the brands can share production facilities at the existing factories and keep selling the current cars.
    This will develop new dealerships and supply chains etc and help boost the economy.
    Its hard and might sound stupid currently but will make sense in the long term future.
    For example- Maybe the Pontiac brand will down the years become a specialist high performance name like the Porsche or lotus. While Saab may become a specialty in hybrid technology.

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