GM headed toward bankruptcy
And if its cash is depleted, GM might be forced to declare bankruptcy, which would have grim implications for the U.S. auto industry, the Michigan economy and hundreds of thousands of workers and investors. But GM's chief reiterated Wednesday that bankruptcy is not an option.
Industry observer David Cole, chairman of the Center for Automotive Research in Ann Arbor, says GM, which uses Delphi components on all its vehicles, would see plant disruptions within two days of a strike by unions representing the nation's largest auto-parts supplier.
And if a strike drags out more than three months, GM could burn through most of its $19 billion in cash, increasing the risk the automaker would go bankrupt, says Rod Lache, who studies GM for investors at Deutsche Bank Securities Inc.
GM Chief Executive Officer Rick Wagoner, fed up with such dire predictions, sent an e-mail to employees Wednesday vehemently denying that a bankruptcy filing is on the table.
"We're going through a rough patch of road these days, and it's attracting a lot of opinions about our company and its future. … I'd like to just set the record straight here and now: there is absolutely no plan, strategy or intention for GM to file for bankruptcy," he wrote.
But such a scenario, however unlikely, would be a major blow. GM employs 142,000 people in the United States and spends $85 billion annually on parts and services from more than 3,000 suppliers. Nearly 80,000 workers are in Michigan. More at Detroit Free Press
11/11/05 General Motors Corp. is unraveling — fast. Its stock price plunged to a 13-year low Thursday after the latest in a string of financial problems dismayed shareholders once again.
Wall Street experts say the unthinkable is more likely than ever before: Michigan's largest company could be bought by a corporate raider like Las Vegas billionaire Kirk Kerkorian, forced to file for bankruptcy, or both.
Getting GM out of bankruptcy could require the same drastic cost-cutting that is racking Delphi, its largest parts supplier. Lower wages, less generous benefits and fewer jobs would not only be devastating for the automaker's 142,000 U.S. employees. It would hurt everyone who makes parts for GM cars and trucks, sells furniture and homes to GM workers, or treats their children for the flu.
Almost everyone in Michigan has a stake in GM's future. But the facts are unavoidable: You can now buy every single share of GM stock for a mere $13.5 billion, or about $3.5 billion less than last spring.
Experts say a buyer like Kerkorian could sell GMAC (the division that lends money for everything from cars and homes to Manhattan skyscrapers) for $10 billion to $15 billion, take GM's $15 billion in cash and stock, put GM's automaking business into bankruptcy, and walk away with a huge profit.
There is a growing sense that GM Chairman and Chief Executive Officer Rick Wagoner, as well as the company, is running out of time. More at Detroit Free Press