Is GM dead?

April 22, 2009

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USA Today is reporting that GM will shut down 15 of its plants for 9 weeks between May and July.  GM has a total of 21 plants.

Clearly, by any measure, GM is in a world of hurt.  At the end of 2008, they had a book value (assets – liabilities) of  -$85 billion.  This number has been sinking even lower during 2009 as they chew through bailouts funds given to them by the government.

Here are a few things that will help put this into perspective a bit.

  1. If GM were to begin making $10B in profits annually – something they have never done in their history) -starting in 2009, it would take 9 years until the balance sheet was positive.  A more realistic (but still overly optimistic) expectation of $5 billion in profits would result in a positive balance sheet in 17 years.
  2. If you, and each of the 300 million residents of the USA, were to give GM a check for $283, this would just barely wipe out the $85 billion in negative equity.

I’d love to see GM turn things around, but they are quickly running out of time (and money).  If GM still exists at the end of 2010, I think it will either being a division of a Japanese manufacturer or it will be a much smaller GM.

2 Comments (+add yours?)

  1. Baker @ ManVsDebt
    Apr 23, 2009 @ 06:40:27

    I thought this exact same thing. I’d bet you anything that at the end of the 9 weeks all the factories don’t open back up. Sort of a way to ease in the impact of a full on closure.

    I wish them the best, but aren’t getting my hopes up!

    Baker @ ManVsDebt’s last blog post..E-Book Review: Reclaim Your Dreams By Jonathan Mead


  2. The Casual Observer
    Apr 23, 2009 @ 14:58:43

    Yeah – I think first we’ll see an extension of the shutdown, and then news that the plants will reopen in a staggered fashion, and then at some point GM will simply cease having the capital necessary to operate.

    Ford could be waiting in the wings. If GM and Chrysler go under, there is going to be 1 choice for people who want to buy an “American” car – a boost for Ford’s market share.

    From a sports perspective, NASCAR fans should take notice. Ford and Toyota might be the only companies able to provide financial support to teams in 2010.


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