New GM's Projected Cash Burn is . . . Unspecified

Robert Farago
by Robert Farago

There’s a lot of analysis that needs doing re: GM’s first post-C11 financial statement. For now, let’s focus on the only important metric: cash burn. Never mind the headline—using taxpayer money to repay taxpayer money at a relatively paltry rate. How much cash does the nationalized automaker have, how much is it burning and when will it stop burning it? Taxpayer money given to GM (not including the Department of Energy’s $10 billion, 25-year, no-to-low interest “retooling’ loan): $52 billion. Current cash pile: $42.6 billion. Cash flow (according to Automotive News source): was $3 billion. And what of future cash flow? On this key issue—the only key issue—GM’s non-standard accounting of its accounts is, by no account, clear.

GM expects to have negative net cash flows in the fourth quarter of 2009 due to a number of factors including cash outflows relating to the Delphi settlement of $2.8 billion, the working capital impact of payment term adjustments of approximately $2 billion, payments for U.S., Canada, Ontario and Germany government loans of approximately $2.5 billion and continuing restructuring cash costs of approximately $1 billion. As a result, global cash balances at the end of 2009 are expected to be materially lower than third quarter levels of $42.6 billion.

Robert Farago
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  • Mark MacInnis Mark MacInnis on Nov 16, 2009

    What were once vices are now habits, or so the Doobie Brothers once taught me. GM is still (ab)using the slow-as-molasses payment terms they embraced to slow cash burn at the end of the inventory build amid increase in cash flow for the quarter was paid for by...GM suppliers (and their banks!), which means that, if GM had been paying suppliers according to pre-bailout, pre-C11 terms, some of the 4th quarter cash burn woulda shoulda been 3rd quarter cash burn...then there's the (short-term, non-renewable) impact on the quarter results from C4C..... The accounting legerdemain continues. Don't buy the hype..... Only at GM would a $1.2 BN loss be good news. Less bad continues it's worldwide trend as the new good. Still. Again.

  • Rnc Rnc on Nov 16, 2009

    What they don't break out is cash from "readily available assets in VEBA", marketable securities such as valuation (and how they valued) of ownership in Ally Bank, thier stake in Delphi now that it has emerged, etc. Thier stake in Ally is getting ready to be materially impacted as well. And they haven't received a DOE loan yet (they will soon I imagine and the fact that they are applying for that amount (and counting on them) implies that the $42 billion is not all it seems) , just as Ford doesn't have a LOC with the federal government.

  • Rod Panhard Rod Panhard on Nov 16, 2009

    Nine graphs into the NYTimes story, we can read this: G.M. said the numbers were preliminary and could not be compared to other periods because they do not comply with generally accepted accounting principles and do not represent a full quarter. In other words, there is still nothing to report here. They aren't counting their credits and debits like any other company you'd want to invest in. The quarter was also propped up with a $3500 discount for pickup trucks when Old Bessie was pulled out of the barn and back on the street. The fact remains that in the past, GM propped itself up with pickup truck and SUV sales., and told us repeatedly that they couldn't make money selling small cars because there's no margin in small cars because of legacy obligations. The legacy obligations haven't gone away. The SUV fad has gone the way of stationwagons, muscle cars, personal luxury cars ... all fads that have passed. In the past, GM got lucky and was able to latch onto the next fad because of marketshare, less competition and momentum. Now their market share is at historic lows, there's more competition and they have lost their momentum. All they've got going for them is Buicks in China, which are sort of like Opels from Europe, morphed into American Buicks, and repurposed for China. So the good news is that somebody at GM woke up and realized that selling Opel would have been the company's death knell. Now, I'd bet that somebody in there has realized that the whole value of the Saturn brand is that their products compete less on price than, say an Aveo. Or in other words, the customers don't expect to bargain down the price of an economy car for a Saturn. But when it comes to the Cruze? That'll be all about sharpened pencils. Good Luck, GM. You're really only entered the woods. It's a very, very long way out.

  • Porschespeed Porschespeed on Nov 16, 2009

    We will likely never see accurate numbers for the 'new GM' while it continues to suckle. IIRC, the 'Old GM' was a publicly traded firm that was required to accurately report results. The last 5 years of Old GM filings were nothing but smoke and mirrors accounting. The Old GM followed GAAP in the most sketchy and tortured way possible. If anyone thinks that a big pile of Uncle Sugar cash and a bunch of new secrecy could have possibly changed the accounting climate in New GM for the better best lay off the 'shrooms for awhile. Really.