Even though it is good news for General Motors (NYSE: GM) that the economy may not be forced all the way to it knees by the credit crisis, one by-product is that oil did bounce higher. Almost anything that helps GDP and consumer spending could put pressure back on commodities.
GM still hopes that the government will give it and the rest of the U.S. car industry $25 billion or more in loan guarantees. The companies say they can't afford to rebuild their plants to manufacture more fuel-efficient cars without the cash.
GM showed that it is drifting toward greater financial trouble when it drew down on its line of credit yesterday. According to The Wall Street Journal, GM "said it intends to draw down the remaining $3.5 billion of an existing $4.5 billion secured revolving credit facility to boost its liquidity amid uncertainty in the capital markets."
No one looking at the action would think that it is a sign that GM is doing better than it was earlier in the year. Due to falling car sales, it is doing worse. By exhausting one of its last life lines, GM is getting very close to a liquidity crisis of its own.
The government has, in theory, endless access to capital. It can print money and drive up inflation. It can increase tax bills and bring in more capital. Yesterday, GM sent out a loud signal that it needs cash. But, Congress may be sick of writing checks. GM is trying to get money at a time when the bank is closing.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
9-20-2008 @ 7:14PM
Henry Postigo said...
GM deserves to be where it is. They were so narrow minded to not see what the people have been asking: Fuel efficient cars. Toyota, Honda, some other have gotten a bite of that market. It's too late for GM to try to get in the bandwagon because there is no money to be giving around. For instance why they have waited until 2010 to bring the Ford Fiesta
http://www.edmunds.com/insideline/do/Drives/FirstDrives/articleId=131096
I would buy it in a heartbeat. It's a hatch ( which I love, I have Civic Si 2004 and a Civic EK9 hatch) and it gives 67.3 mpg.
For the sake of all GM working class, I hope they can pull it off.
9-20-2008 @ 3:18PM
gumbo koontz said...
What strikes me so interesting about Americans who are buying Toyotas, Hondas, Nissans and Hyundais, is that they are showing sheer indifference toward the plight of Ford Motors and General Motors. I would suppose that if I am an avid import car buyer, I would pause one moment and say to myself " I cant in good conscience buy another import car until GM and Ford come back on their feet and resume their competitions against the imports. I would say that Americans ought to take the time out and go back buying GM and Ford cars for a while . What do you think, Doug? I dont think that we are really aware that GM and Ford can disappear and never returning again for good. What good will our government bailout do for GM and Ford as long as more than one half of us are already made up in our minds that we will buy import cars? Giving money to GM and Ford to develop new and improved cars is not going to be a full solution to GM and Ford's financial issues. Maybe our government can split $25 billion in halves with $12.5 billion going to develop future models and antoher $12.5 billion going to buyers of available GM and Ford fuel efficient models to see if the carbuyers will bite.
9-20-2008 @ 3:19PM
gumbo koontz said...
What strikes me so interesting about Americans who are buying Toyotas, Hondas, Nissans and Hyundais, is that they are showing sheer indifference toward the plight of Ford Motors and General Motors. I would suppose that if I am an avid import car buyer, I would pause one moment and say to myself " I cant in good conscience buy another import car until GM and Ford come back on their feet and resume their competitions against the imports. I would say that Americans ought to take the time out and go back buying GM and Ford cars for a while . What do you think, Doug? I dont think that we are really aware that GM and Ford can disappear and never returning again for good. What good will our government bailout do for GM and Ford as long as more than one half of us are already made up in our minds that we will buy import cars? Giving money to GM and Ford to develop new and improved cars is not going to be a full solution to GM and Ford's financial issues. Maybe our government can split $25 billion in halves with $12.5 billion going to develop future models and antoher $12.5 billion going to buyers of available GM and Ford fuel efficient models to see if the carbuyers will bite.
9-20-2008 @ 3:25PM
gumbo koontz said...
What good will the $25 billion loan do if GM is not going to make money on Volts for years ?? The kind of solution we need now for GM and Ford is to start buying what is available in the dealerlots right now as the sun shines!! Go there and take a look and think that your purchase will contribute something to GM and Ford rebounding from the near dead.
9-20-2008 @ 3:29PM
gumbo koontz said...
The government doesnt care what will happen to GM and Ford shareholders as part of the $25 billion loan to GM and Ford. So why should we, shareholders, invest our much bigger purse of say $100 billion or upward, into GM and Ford stock and thereby improving GM and Ford financial health. Shareholders is a vital part of any company financial health as risktakers. Why should we take risks in GM and Ford stock as long as the leaders keep ignoring shareholders as well as bondholders. The government leaders think they are richer than Wall Street now with hats in hands??
9-20-2008 @ 3:38PM
gumbo koontz said...
Shareholders usually wait until GM and Ford get the big loan from the government before jumping back in stocks. GM and Ford is not going to be profitable for years and years. The government is more interested in saving UAW workers than shareholders. So why should we, shareholders, risk our money in GM and Ford stock now? It will not do GM and Ford much good to endure ultra low stock valuations because the costs of borrowings will be higher for a long time. The real solution for GM and Ford is the return of carbuyers right now, I mean RIGHT NOW!! GM and Ford need sales , SALES, S A L E S....not a government loan.... The more cars GM and Ford sell and the bigger their market shares will become. Shareholders will return to GM and Ford stocks in droves and driving up the stock prices. Banks will want to lend money to GM and Ford at lower rates. UAW will have to wait patiently until GM and Ford has enough money to become far more competitive with Toyotas and Hondas. A government loan of $25 billion cannot mask the great indifference of carbuyers toward GM and Ford as of now. The government may assume that shareholders will be wiped out sometimes down the road. I will not buy another GM or Ford car again if I am wiped out . There is a funny TV show called Wiped Out which is a sick gesture toward the shareholders!!
9-20-2008 @ 3:48PM
gumbo koontz said...
Americans is buying about 12 million new cars this year down from 17 million a couple years ago. GM and Ford can each build and sell about 3- 4 million cars a year but is selling less than that now. We can hold imports down to less than 4 million cars and help GM and Ford get back on their feet. Right now , we are buying about 6 milllion import cars and 6 million GM and Ford cars, more or less. Import cars are good cars but it is not the right time to buy them whiile GM and Ford is hurting by own fault or not. If you say that our government should not bail GM and Ford out with a loan of $25 billion, I will say to you , "Fine, why dont you buy a GM or Ford car for now and help them out yourselves?" Are you going to tell me that it is just TOO BAD FOR GM AND FORD or what? This will not help our economy for sure no matter whose fault it is, am I right? Am I talking sense to you or what? I just dont understand your rationale about that matter at all. I dont , simple as that..
9-20-2008 @ 5:31PM
rich said...
I work at a GM /toyota dealer,way to much warranty work,make it right the first time.Too many bs complaints by customers also.
GM bet on the big trucks etc.while imports made better small cars and lost,Why should they get help for wrong investments?
ps Toyota service dept.is full too.overated
9-20-2008 @ 5:59PM
Kent said...
I am still a strong believer in the evolutionary progress we are taking toward a post-industrialized economy, where we gravitate away from manufacturing toward know-how and IT's. If we can't compete in the automotive sector, leave it to emerging nations to do it and we continue our path in achieving greater returns in high-tech areas we are good at. Automotive industries as we know it today are fundamentally low-tech.
9-22-2008 @ 1:27AM
HarHar said...
Dumbo Koontz,
To say that "even though GM has made terrible cars with low quality, poor gas mileage, and archaic engineering, we're all supposed to go out and buy them" doesn't sound very "capitalist" to me. Sounds downright Communist, in fact.
What's really funny and ironic, is how quickly Republicans turn into socialist commies when the money runs out.
Now George W., GM, Ford, and all of Wall Street is begging for Socialized debt, big Socialized government handouts... and we're supposed to all goose-step down to GM lots and buy Nationalist autos as part of our Social duty? riiiight.
don't you think we should be more worried about taxpayers becoming "unpaid shareholders" in AIG? you'd think i'd be able to get some decent insurance coverage now, at least.
Why not "socialize" something nice instead? Public ice cream? Health Care! Nope, they just gave us more free debt.
Like Nissan pre-Ghosn, GM should either truly fix itself, or die in a proud Capitalist fashion.
9-29-2008 @ 9:30PM
Mjknighton said...
While a think GM and Ford deserve to be toast. We have to think of US Defense aspects . Are we going to manufacture HUMVEE's ,Trucks and Tanks in China by a potential enemy.
One of them will have to be retained
9-22-2008 @ 2:43AM
newtoyou said...
I coud care less for GM and Ford at this point . From the top of CEO to directors that make decisions of how to run company not ones any of the "FAT CATS "
came out and try to look in to future what kind of cars they will need to sell to make money not only for them self that for there companys. It's sad to see all this workers that stood by there product but not having any direction !!!!
For one's I will like to see that are government will come to senses and ask CEO and TOP Menagment to take a cut to there pay .No one of them shoud ever earn more then $ 350K per year on tap of that no more freebees and golden parashoots. It's time to see how middle class America is living Disneyland Dreem .It's time for them to taste there own madicine of cuts and leyoffs that we all have in are livetime .If the CEOs have any interest of fixing companys that they runing they will had start-- by STOP BLEEDING it first ---taking capital and giving them selfs ever biger every year stock options and extra bonuses
9-22-2008 @ 6:23AM
Mike Sanders said...
I think GM may have lost some of it's best talent (yes, myself included), during the nineties. Since then, I've owed two Honda Accords and I'm beginning to see where we went wrong... Service and attitude. Their cars are fine, but their dealships have changed, since the eighties... No wonder that so many dealers have diversified, or changed to Honda and others, who can keep time with the music.