Who is going to want the assets GM is trying to sell?

Posted Jul 15th 2008 11:03AM by Jonathan Berr
Filed under: Major Movement, Management, General Motors (GM)

General Motors Corp. (NYSE: GM) shares fell in early trading as Wall Street viewed the company's announcement that it plans to raise as much as $15 billion through the end of next year by suspending its dividend, cutting its salaried workforce and selling assets with skepticism.

For one thing, who is going to want to buy the assets GE is trying to sell? For instance, sales of Hummer were down about 60% in June. What private equity player will take a chance on buying a brand synonymous with gas guzzling as gas sells for more than $4 a gallon at the pump? Who is going to want other lackluster GM brands like Saturn? Any new owners of the business will face the same problems as GM.

Also, let's not forget the rising prices of commodities used to make cars, such as steel. Hyundai Motor Co. announced today that it was raising prices on its cars because of increased costs for raw materials, according to Reuters. Soaring oil prices also is making the costs of plastics needed for car parts rise.

The next year or two for GM will be ugly. Bankruptcy still is not out of the question, though GM continues to argue to investors that is not going to happen.

"GM is highly confident that the initiatives announced today, in conjunction with the current cash position and its $4-5 billion of committed U.S. credit lines, will provide the company with ample liquidity to meet its operational needs through 2009," the company said today in a press release.

The automaker is taking steps to right itself that it should have taken during the 1980s or 1990s. Suspending the dividend was long overdue. It will improve liquidity by about $800 million through 2010. But the turnaround plan is filled with many "ifs" and "woulds."

Chief Executive Rick Wagoner said today that the actions were "difficult decisions, but necessary to respond to the current auto market conditions. Even under conservative planning scenarios, GM is well-positioned to withstand the U.S. market downturn and emerge a stronger company."

Investors, though, are not so optimistic.

Tags: featured, GM, gm bankruptcy, gm turnaround, GmBankruptcy, GmTurnaround, rick wagoner, RickWagoner

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Reader Comments (Page 1 of 1)

7-15-2008 @ 12:10PM

gumbo koontz said...

UAW controls $200 bilion in cash in both GM and Ford for pension expenditures. Cant UAW help GM and Ford back after all the decades of swindling shareholders of dividends ? UAW can buy GM and Ford from shareholders so to get us out of UAW's hair. UAW knew that it cant keep on bankrupting GM and Ford unless they has a secret plan of bailing GM and Ford after bankruptcies so to get shareholders out of UAW's hair? Is UAW cheating shareholders ??

7-15-2008 @ 12:45PM

Gumby said...

7-15-2008 @ 12:11PM

gumbo koontz said...

7-15-2008 @ 12:12PM

gumbo koontz said...

The only winners out of GM and Ford is UAW!!!!!

7-15-2008 @ 12:14PM

gumbo koontz said...

UAW will still have $200 billion in pension coffers and they is getting away with it while GM and Ford is reeling into bankruptcy just because they spent too much on UAW wages and benefits... This is a organized crime ongoing for lack of a better word of calling this...

7-15-2008 @ 12:17PM

gumbo koontz said...

Unions everywhere is draining our budgets. It will end one day with a calamatious event hitting America as it will be unable to pay back debts to overseas investors. Our dollar will be devalued and gold prices will hit $10000 an ounce or higher. Just own a few gold shares and it may save your entire portfolio of investments. Gold is an insurance ...

7-17-2008 @ 12:07AM

MrWoody said...

GM needs to get those natural gas cars on their USA lots just like they have in the UK. Stop playing with us, and why would you never sale them to us in the first place? Are the oil companies leaving you high and dry? You've stuck with them long enough. Give us the option to buy those cars. Now!!! not in over a 10 year period NOW!!!!!