Bailout Watch 233: CS First Boston on GM Plan: "another Check Before the End of 2Q09"

Robert Farago
by Robert Farago

• GM’s liquidity situation is dire. According to the company’s restructuring plan that was submitted to Congress on Tuesday, it looks like GM burned another $7 billion in October and November, and should be about cash flow neutral in December; making Q4 another $7b burn quarter.

• As such, GM requires $4 billion of government loans immediately, with another $4 billion in January and an additional $2 billion by the end of 1Q09.

• At the end of 1Q09, GM will have drawn $10 billion under its base case assumption, and possibly as much as $15 billion under its downside demand assumption.

• The $18b in requested funding ($12b in loans and a $6b credit line) is in addition to the estimated $8.3 billion that GM is anticipating in Government loans under the ($25b) DOE program for fuel efficient powertrain technology investments.

• One of our primary concerns here is that the downside scenario is not much worse than the current run rate of sales (about 10 million units) and would still leave GM in the liquidity danger zone (with about $13 billion at the end of March) despite having drawn $15 billion in Federal funds.

• And what happens after that? If US sales remain in the 10-12m range and GM burns another $7 billion in 2Q09 it could see its liquidity drop to only $9 billion, even after drawing the final $3 billion in Government money (maxing out at the requested $18 billion). In this case, the Government may have to write another check before the end of 2Q09.

Join the conversation
4 of 15 comments
  • on Dec 03, 2008

    Oh yeah, money given to GM is certainly well spent. P.S. I relly like the 58 Chevys too. I've got a 58 Chevy truck that I think is fabulous.

  • Jpcavanaugh Jpcavanaugh on Dec 03, 2008

    Robert & Lumbergh21: I have to be the contrarian. I've always felt that although the 58 GM line had a certain attractiveness, it did not hold a candle to the 58 MoPars (which were year-old designs in 58). Both in looks and in performance. The DeSoto is my personal favorite. Long, low, clean. Recall that GM panicked and pulled the plug on the 58s before they even went on sale. The 59s were a crash program started in late 56 when the new MoPar Forward Look hit the streets. I'm forming this thesis in my head as I type, so I am open to other ideas, but is the axing of the 1958 GM line after a single year the last example of GM reacting visibly and decisively in response to a plan gone wrong? I think that GM was at the top of its game in 1958. A company that is a genuine leader will recognize when it has been leapfrogged. GM recognized it in 1956-58, but seems to have lost that ability later, certainly by the end of the 60s, in my view.

  • Bumpy Bumpy on Dec 03, 2008

    How GM Makes Money Vanish* *- numbers are for illustrative purposes only. The reality is likely far worse. GM sat down at the end of the month to tally up its bills. It had 15 billion at the beginning of the month, paid 5 billion in loan-shark payments, 4 billion to make some cars and trucks, 7 billion for retired UAW Viagra, and another 3 billion for that Delphi ickyness. The yessirhowhighsir market forecasters said they'd bring in 16 billion in product sales for that month since the car business was in a rough patch, but the dealers only took 12 billion of stuff. Oops, bye bye 7 billion. One more month of that and *clang*. For the record, 1958 ushered in an era of astonishingly hideous vehicles from all of Detroit which wouldn't lift until 1963 or so.

  • Adub Adub on Dec 03, 2008

    It's almost too bad that dealers are independent operators- GM should hire Buickman to train their sales staff. Really, I leave whenever I encounter a sleazy salesman, nice car or not.