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US Big 3 in Deep Trouble...

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GM: "bankruptcy protection is not an option"

Posted Oct 10th 2008 11:31AM by John Neff

large-bankruptcy-sign-2_opt.jpgThe beating General Motors and Ford took on Wall St. yesterday has people loosely throwing around the word "bankruptcy" this morning. GM made its position clear in a statement just released (read in full after the jump) that "bankruptcy protection is not an option." It's true that both automakers are in a bad way after yesterday's sell off. Shares of GM ended the day at 4.76, which gave the giant U.S. automaker a market capitalization (cost of a single share times the number of shares outstanding) of less than $3 billion, while Ford shares closed at just 2.08 to give the Blue Oval a market cap of $4.7 billion. Further adding fuel to the fire is speculation that the debt rating of each automaker may slip further into junk status.

But how real a prospect is bankruptcy for these two iconic automakers? Though some consider the prospect a real, if almost inevitable, possibility, the reality is that neither GM nor Ford is likely to voluntarily enter Chapter 11 anytime soon. For one, both companies still have billions of dollars of cash on hand that should last them well into 2009, despite the fact they're burning through their reserves at an increasingly quicker pace. They also have still have untapped lines of credit and assets to unload. Ford has sold off a number of its brands like Aston Martin, Jaguar and Land Rover, while GM is seeking buyers for HUMMER and its medium-duty truck business.

But the real obstacle to bankruptcy is the position that these two companies hold in the fabric of American life, which is both material and emotional. Combined they employ hundreds of thousands of people and indirectly are responsible for many times more. They're also more near and dear to our hearts than big investment banks on Wall St., so politicians would likely step in before it was too late. No one can predict the future, and the markets seem to be stuck in a self-perpetuating downward spiral at the moment, but that doesn't mean we should listen to alarmists on TV looking for higher ratings.

[source: LA Times, General Motors]

BREAKING: GM and Chrysler talking about merger

Posted Oct 10th 2008 11:04PM by Damon Lavrinc
Filed under: Etc., Government/Legal, Hirings/Firings/Layoffs, Plants/Manufacturing, Chrysler, LLC., GM


Our heads are still reeling from one of the most tumultuous financial weeks on record, and the auto industry was far from immune. But despite our best efforts to drown our concerns in Racer5 IPA, the hits keep coming, and this time it's courtesy of the New York Times.

The Gray Lady is reporting that General Motors and Chrysler have been in talks about a possible merger for the past month, that "negotiations are not certain to produce a deal," "would most likely still take weeks to work out" and that two unnamed sources say that the chances of the merger going through are "50-50." Obfuscate much?

With GM's stock prices ending the week below $5 a share and Cerberus

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GM is a well settled company it can cope up its loss in US and eye other important markets so I don't think that they are going on to become bankrupt.


On a scale from 1 to 10 the US is the biggest market in the world. Tell me one other market sells millions of vehicles each month. Next biggest is the EU and Japan which is closely linked to the US. Asian markets barring Japan are just peanuts compared to the US, mainly caters to low cost vehicle's. Unless, you consider selling car's to the man on the moon. Big 3's core strength is the US market, rest is just 'nimbu achar' for them. At present there is no other market as big as the US, that's why it's got pampered like a spoilt child and it's sinking under the burden of it's internal debt which is something like 10 trillion dollars!!! One trillion is one million million dollars.

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