Reuters reports that Fitch Ratings has downgraded GM’s credit rating even deeper into junk territory, down to ‘CCC’, the eighth-lowest speculative grade in its corporate rating scale. Fitch based its downgrade on GM’s lack of liquidity. As TTAC predicted, The General’s cash flow– or lack thereof– is reaching a crisis point. “Fitch believes that GM would reach minimum required levels of available liquidity within the next 12 months without access to external capital,” analysts said in a note. “Contributing factors include weakening overseas results and the impact of the credit crisis on GM and GMAC’s ability to finance retail sales.” Fitch reckons GM will score its share of the $25b federal low-interest loans. To no avail. The wording of the agency’s note is as frightening as it is terse: “In all, Fitch believes that GM will be challenged to raise financing in an amount that exceeds $10 billion, and will therefore be unable to offset expected liquidity drains over the next 12 months.”
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CCC? How low can this go and the company still have a viable existence? Anyone?
As TTAC’s Deep Throat says, “it’s a race to the bottom” between GM and Chrysler.
Remember: GM needs a $10b pad to keep the lights on. Can they make it to ’09? Place your bets now. Oh wait: you can’t. The SEC has banned short selling…
In a lot of ways I do not know how TTAC got it (a conclusion), but cool. Congrats on being right and thank you. Although remember its probably a sad situation.
DearS:
Cassandra was cursed.
Magic 8-Ball or ouija board? File this one with the shocking Cindy McCain drives a Lexus story. This was an easy call.
What are the odds that a shotgun wedding will be arranged between GM and Toyota? It seems to be the modus operandi of the feds in trying to avert these serial catastrophes. Toyota might even gain some beneficial public relations credit for “saving” GM. And with GM stock edging into pink sheets territory, Toyota could pay for the entire company out of petty cash.
So when does the REAL fire sale start? Buy 1 get 1 free Aveos?
Mr. Farago..
I googled that. It does not matter what people think. What they think about one is meaningless.
I kept in touch with the editorials. What I wondered most was how does GM post such big loss after big loss and seemingly sees no negatives. Like you said, I am a little naive I guess. I really thought the reported losses were not true, it was some kind of accounting issue. Were the hell were they losing so much money? Is their market share so big that they can keep losing billions and billions and still have so much market share still left? How big is the market? How come no one was doing something? Its surreal. Again thank you.
How do they expect to lose so much money, then turn things around now? They will probably get a loan that will still leave them with less money than they had last year. Their market share is not going up either, at least not soon I do not think. They need to down size I think. That apparently is a mess. Yea now I see why they need to get rid of brands, too many brands are just not easy to establish as trustworthy, not in today’s America anyhow. That means less jobs or jobs being rescued by us taxpayers. They need to focus on less brands, they need to be willing to give up dealers. Americans are to simpleness oriented to shop for a 8 brands. I mean my mom will still not easily buy a Maxima after 10 years since our last one. Its sad of America but it is what it is..
Also I think Toyota has had a Volt competitor really for a while now, Toyota just does not feel its safe to say so now. The next Prius will likely be ready made to take on the Volt. Ditto for Honda. I dunno if the batteries will stretch this far either. Also the Prius has a market and is trusted. GM seems to be in need of luck.
All I think of when I think of GM is the 3 little monkeys, See no evil, hear no evil, speak no evil. Guess what, the landlord is coming and there’s no food for baby, no fuel for fire. I only hope some one will save Buick. I have a soft spot in my heart for them.
Cicero says:
What are the odds that a shotgun wedding will be arranged between GM and Toyota?
Please no! The culture at GM is so badly broken it can’t help but infect Toyota. It would be like giving the bride syphilis.
I see zero possibility that Toyota or Honda would be interested in, or could be coerced into, combining with any of the 2.8 in any way. Maybe Toyota might buy a building or two, before shutting them down in a couple of years, to avoid grief. Maybe Nissan, Hyundai or Tata might be interested in buying some assets but I can’t imagine anything more than that. What I can see is a merging of 2 or all of the 2.8 with a huge dowry from the Feds. This is just a big headache for many of the politicians in office and will be until things settle out. So there’ll be lots of political incentive to kick this thing down the road at whatever cost until the public accepts that it’s hopeless. Maybe the truck/SUV operations of Ford and GM combined can be profitable. At some point that might be politically acceptable as the best that can be done. As time passes, there will be fewer people with any hope of salvation or payout. Fewer workers for sure, fewer dealers but still a huge number of pensioners. The expectations of all these people will diminish over time and it’ll become increasingly old news and get less publicity, so the politicians will be able to afford to ignore the issue and people until some kind of final solution and it all fades away. So goes American manufacturing.
Finally today though some sense came to the currency markets though as the USD took a big hit with lots of talk of more of the same. So if this continues, it’ll be more likely that at least something will be made here even if the ownership is offshore.
Mel, there will probably be one survivor of the Detroit 3, just because Government fleets need to be bought from somebody.
This business is big enough to keep one car company on life support, especially if competition laws are waived to keep the single carmaker alive.
An hour ago I was afraid Congress was being too hasty in passing this bailout, since the unchecked power of Paulson et al. seemed dangerous. Not to mention the repulsive idea of forking over $7 x 10(12); did I get that right? Anyway, I now think the kids on the Hill should work late tonight and wrap this thing up. An article is the WSJ is even scarier than Paulson unchecked:]
—
Other businesses, such as student and credit-card lenders, also could eventually access the program. To permit that, House and Senate versions of the bill written overnight — with lobbyist input — now include language broadening the types of assets eligible for sale under the plan, from “mortgage-related” to “troubled assets.” The bill now goes by the acronym TARP, for Troubled Asset Relief Program.
“I think it’s wise that if we’re going to do this, to give Treasury maximum flexibility on the question of how they want to intervene on illiquid assets,” said Michael Paese, global head of advocacy at the Securities Industry and Financial Markets Association.
—
Oh hell yes. Last night it was worrysome that Paulson’s actions were to be beyond review by any other authority or court, so now let’s broaden his mandate. While we’re at it, lets at least double the size of the kitty he has to work with.
Remember: GM needs a $10b pad to keep the lights on. Can they make it to ‘09? Place your bets now. Oh wait: you can’t. The SEC has banned short selling…
Careful, your glee is showing.
To DearS, welcome into the soup pot. You’ve caught up fast. Yes, the whole thing stinks; and those who caused it, have get-out-of-jail free cards.
So even the bailout won’t save them for long enough? Maybe I should wait another year before re-entering the stock market…
I keep hearing that Volt thing like the second coming. When will the car editors read the tea leaves? A $40,000+ car will not save GM. It would take many $20-$30,000 cars all making profit to do this job. This Volt will be the price of a caddy and many other entry level luxury cars. Yes, money can be made in this segement, but all of the successful mass producers selling here have a profitable and solid line of bread and butter cars. Toyota, Honda, & Nissan can all sell cars from about $12,000 to $40,000 for their volume sales and then sell cars above that price point to compete with the Germans: Audi, BMW & Mercedes. None of these companies would be where they were if the bread and butter stuff didn’t sell well and at a profit. GM needs many malibus in this low to moderate segement to succeed. Even Huyndai, has come up with a $40,000 car but it will not make the company, it will compliment the more mundane stuff. When the volt gets here, the Japanese will have at least 6 to 10 hybrids (some plug in) all selling for less than the Volt. Again, for GM too little too late.
Regarding federal loans, Genesis Motors has just released a statement…
“I’m coming down, coming down like a monkey, but it’s alright
Like a load on your back that you can’t see, ooh but it’s alright
Try to shake it loose, cut it free, just let it go, get it away from me.
“‘Cause tonight, tonight, tonight – oh, I’m gonna make it right
Tonight, tonight, tonight – oh.
“I’m going down, going down, like a monkey, ooh but its alright
Try to pick yourself up, carry that weight that you can’t see,
Don’t you know its alright
It’s like a helter-skelter, going down and down, round and round
But just get it away from me – oh.
“Because tonight, tonight, tonight – oh
We’re gonna make it right
Tonight, tonight, tonight – oh.
“I got some money in my pocket, about ready to burn
I don’t remember where I got it, I gotta get it to you
So please answer the phone, ’cause I keep calling, but you’re never home
What am I gonna do
Tonight, tonight, tonight – oh
I’m gonna make it right
Tonight, tonight, tonight – oh.
“You keep telling me I’ve got everything, you say I’ve got everything I want
You keep telling me you’re gonna help me, you’re gonna help me, but you don’t
But now I’m in too deep
You see it’s got me so that I just can’t sleep
Oh get me out of here, please get me out of here
Just help me I’ll do anything, anything
If you’ll just help me get out of here.
“I’m coming down, coming down like a monkey, ooh but it’s alright
It’s like a load on your back that you can’t see,
Ooh don’t you know that it’s alright
Just try to shake it loose, cut it free, let it go
But just get it away from me
‘Cause tonight, tonight, tonight – oh
Maybe we’ll make it right
Tonight, tonight, tonight – oh.
“Please get me out of here
Someone get me out of here
Just help me I’ll do anything, anything
If you’ll just help get me out of here
Tonight – oh, I’m gonna make it right
Tonight, tonight, tonight – oh.
“Yes tonight, tonight, tonight – oh,
Yes I’m gonna make it right, tonight, tonight, tonight – oh…”
The statement was released on Youtube:
I dunno. Their arguments sound reasoned. Whaddaya think? I think we should give ’em the $25 bil. They say maybe tonight they’ll get it right, right?
Cicero says:
What are the odds that a shotgun wedding will be arranged between GM and Toyota?
That will never happen for one reason: Can you say UAW?
I posted last night that there would have to be a chapter 11 filing to rid Detroit automakers of their UAW berden before any type of merger could take place. Not to mention the burden of too many dealers too many brands, etc.
Ch 11 to rid themselves of the cost of the retirees. Then that will be placed at the foot of the government. This isn’t just about GM. The middle of the biggest financial crisis in many decades and you called it? Not exactly crystal ball stuff.
@ bluecon
I sure hope you’re wrong on the taxpayer shouldering the obscene retirement benefits of ex-GM’ers. Labor unions lost their usefulness of protecting employees decades ago. They now do more to damage public safety, product quality and education than any other variable where unions take root.
FWIW, the pension at GM is fully funded if not overfunded – although I can’t say that remains factual after the absorption of the Delphi pensioners. Still, its not problematic and hence will not become a burden of the PBGC.
GM’s OPEB liabilities, mostly the future health care costs for the union retirees, still remain on the books through 2009 until the new UAW VEBA fund takes over – which requires some significant funding from GM measured in multi-billion dollars. I see the chances of this happening as slim to none given the likelihood of a GM bankruptcy.
Here’s a brilliant idea (know, you KNOW I’m sticking my tongue right into my cheek, right?)
Since the gummint, in their “infinite wisdom”, are going to socialize (i.e. print monopoly money) to “save” everything in sight, why not “do a British Leyland” and simply let the idjits in Washington DC nationalize GM, Ford and Chrysler and merge them – into AMERICAN MOTORS, natch?!
We could have Firestone tires, Ford cruise control (“flamin\'”), Chrysler interiors, GM diesels (for great efficiency – they wouldn’t use any fuel while broken down, right?) and what a plethora of names we’d have for the new venture.
How about GREMLIN (that’d be very appropriate) for the new subcompact, for a start. May as well not only use PACER for the futuristic diesel plug in hybrid (only $90,000) but reach “way back” and add EDSEL to that monicker, as well, since there was a 1958 Edsel Pacer…
Now for the all wheel drive CUV, we’ve GOT to bring back EAGLE, complete with rust, bizzaro drivetrain and – hm, let’s use the ex-GM straight six. May as well go retro, eh?
As for the larger car, may as well call it a MATADOR, and naturally enough, the luxury car would be an AMBASSADOR.
The combination Camaro/Challenger could be renamed the JAVELIN and of course, the ex-Corvette would become the AMX.
As for trucks, well, just slap the JEEP GLADIATOR name on those puppies. Sounds nice and macho, eh?
“FWIW, the pension at GM is fully funded if not overfunded”
More of a Ponzi scheme like Social Security.
Example
500,000 retirees at $50,000 per year.
equals $25 billion per year.
They don’t have the money to cover that.
The government took over the pensions for the unionized steel companies when they went broke, so there is a precedence.
The pension assets at GM are only overfunded based on their actuarial tables and assumptions about future earnings in the market.
If those assumptions about earnings don’t hold up (have you looked at the S&P 500 lately?), the whole house of cards falls.
Then the PBGC (read: Taxpayers) will have to step in and take over their pension assets and payouts.
Believe me, the pencil jockeys at GM and Delphi KNOW this, and are planning accordingly. GM agreed to the VEBA to keep the workers on the lines; they had no intention of ever actually funding it. They have bought themselves some time to set up their C11, and when they do, the pensions will go over the side. And we’ll be holding the bag.
Once it goes, we (the taxpayers) will be stuck with the pension funds – which are pretty much – unfunded. Last time this happened, it was the steel industry. There are a LOT more UAW retirees than there were steel plant employees, and they had been “promised” a LOT more than the steel workers. Ain’t gonna get ½ of it but the ½ they DO get – we get to pay with printing-press monopoly money known as Fed Dollars.
“Warm up the printing presses, boys.”