General Motors Seeks Bailout Funds…
GM has been pleading for bailout help and claims that without one, they may not make it to the Obama’ Administration. But will government cash just prolong the inevitable?
As Treasury Secretary Henry Paulson tries to explain why he should be bailing out non-financial companies, Washington is scrambling to prevent the auto industry – one of our nations biggest employers – from slipping into bankruptcy.
The latest employment numbers show that the amount of Americans collecting unemployment benefits is at an all time high of almost 4 million people – And that list just keeps growing. A collapse of General Motors (NYSE: GM) could be devastating.
While some suggest bankruptcy would destroy GM others say it’s their only option. The company has publicly declared it’s not an option. The truth is, GM must consider bankruptcy to protect its hard assets and remaining capital pile. If their cash ‘burn rate’ continues as is, at almost $2 billion a month, they won’t make it past January.
General Motors, Chrysler (privately owned by Cerberus Capital) and Ford have all lined up for a piece of the government hand out pie. But unlike the many of the banks and finance companies who were suffering from liquidity issues, the automakers are asking for money for failing enterprises and bad business models.
General Motors has been losing market share to competitors like Toyota, Nissan and Honda for years. GM has been producing expensive vehicles – that are costly to make -no one is buying. On a long enough time line, that formula will bankrupt anyone.
Companies mentioned in this article: GM, TM, NSANY, HMC, and Cerberus Capital
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