Airlines have taught companies a great lesson about Chapter 11. When a firm decides to seek court protection, it wants money on its balance sheet. If its contracts, debts, and labor obligations are eliminated, a little cash can go a long way. Don't wait. Go bankrupt with some dry powder.
GM (NYSE:GM) says it is low on funds, and it is. But as of September 30, according to its 10-Q, the car company has $16 billion in cash and over $9 billion in receivables. GM had payables of almost $28 billion, but it may not be paying suppliers so it can save capital.
The important question is whether GM still has $10 billion in cash and receivables. It says it is losing over $1 billion a month. If it has a cushion of half a year, a bankruptcy might give it time to wipe out enough in obligations to survive.
GM has said very little about whether it has been paying parts companies and other firms that supply its plants. If its CFO has any brains, he has not taking the calls from angry firms that GM owes big chunks of cash.
Did GM play its cards right? If so, it may not need a bailout. But, a lot of suppliers are going to get killed.
Douglas A. McIntyre is an editor at 247wallst.com.











Reader Comments (Page 1 of 2)
12-12-2008 @ 6:53AM
samuel said...
Things look real bad for GM. They look like there not going to get any money.
blogging-stocks.com
Has more info
12-12-2008 @ 8:26AM
widollar said...
GM can delcare bankruptcy and restructure as a smaller company. Eliminate Pontiac and many other models and focus on a few that people want to buy. Chrysler is of course TOAST!
12-12-2008 @ 8:32AM
Mike said...
The UAW should be proud of themselves. Since when is a half a glass worth more than an empty glass? If GM or any of the other automakers goes bankrupt, thousands of jobs will be lost. The unions need to wake up. The country can no longer compete with other non union countries or companies that pay reasonable wages. Government has a stake in this also. We need to have equitable tariffs if we are going to have a world economy. Its time to level the playing field and we as consumers need to buy American while there is still something left to buy.
12-12-2008 @ 9:22AM
PAUL said...
THE UAW AND GM DIDNT CAUSE THIS MESS IN THIS COUNTRY.ITS THE ECONOMY AND YOU CAN THANK YOU BUDDY GEORGE BUSH FOR THAT.
12-12-2008 @ 9:22AM
Paul said...
FOR EVERYTHING GM AND THE UAW HAS DONE FOR THIS COUNTRY.TIME TO START IMPEACHING SENATORS AND CONGRESSPERSONS.
12-12-2008 @ 9:35AM
Sonny said...
GM and UAW didn't cause our current economis mess, but thet are responsible for this bailout not going through. All they had to do is agree to a date certain when competitive changes were to be implemented. I guess everyone knows now that it was just a gimic to extort money from the US taxpayer.
12-12-2008 @ 9:36AM
j c poole said...
Auto makers need to go chapter 11 if that is what it takes.REORGANIZE LIKE THE AIRLINES.TAXPAYERS ARE TIRED OF BAILING OUT COMPANIES.Stop the bail out frenzy.. THERE IS NO MONEY FOR IT.They make it or they don't. If the unions don't care why should we?? The government did not bail out the airlines.
12-12-2008 @ 9:53AM
Tumblebug said...
Who cares about the American worker?! Let them eat cake! Remember, in our first person socity it's how rich can one get forsaking fellow man and country!
12-12-2008 @ 9:55AM
carmen said...
Since when the HELL is it the Governments responsibility to make sure companies stay afloat? The $700 billion to the finance industry is a joke, BUT that actually had some merit, although I like the rest of America don't agree with it. But this Auto bailout? Yes, tens of thousands of people are employed, BUT the same is true in the Airline industry. No gov't bailouts there. Retail companies employ way more than the big 3 combined and they are dropping like flies. We as Americans do not like to experience pain in any way. Well, we better get ready for a huge dose of it, because it is coming like a freight train down a hill.
12-12-2008 @ 9:58AM
GAYNELL MCMONIGAL said...
GM AND THE UAW DIDN'T CAUSE THIS MESS.8YRS OF BUSH DID,NOW THE BEST THING HE COULD DO FOR OUR COUNTRY BEFORE LEAVING OFFICE IS HELP THE AUTO INDUSTRY.
12-12-2008 @ 10:55AM
Trixie said...
The UAW is partially to blame. Wake up!
Also the balance of trade needs fixing big time.
12-12-2008 @ 11:12AM
Roy Trainman said...
Why does a car laborer deserve $71/hour? Just because that is what he is used to? Why not pay everyone $71/hour? Then the car laborer would demand $710/hour?
Then what would the car price be?
12-12-2008 @ 11:36AM
Dennis said...
I wonderhow much of those receiveables at DiTech home loans? Hummmmm
12-12-2008 @ 11:52AM
maddie said...
What a terrible tradegy for the retired workers who went on strike every time some scumbag union leader told them to. Hope they saved up osme of the earlier cash because if your 70 years old and "living" off the system your dead!
12-12-2008 @ 11:58AM
Steve said...
Doesnt' ANYONE get it? The only "bail-out" that will work is one that get's middle class Americans spending again. What will do that?... mortgage modification for all that are in, or near foreclosure. That's the fire that's burning up this country HELLOOOO!! Stabilize that market and you've got the monster slain!
12-12-2008 @ 1:58PM
sandy said...
stabilize the mortgage markert. get people spending again, get the crooks out of politics( that will bring our national debt down considerably and stop having union laborers making $71 bucks an hour so we can charge a decent price for a car , make it decent and sell it. Bailing out is the easier, softer path.
12-12-2008 @ 2:42PM
BigAl said...
The fault--GM, Chrysler and Ford turned out crap for many and many a year. I was a major user of GM vehicles throughout the US (250 units per year) and had nothing but heartache. The the foreign auto makers came in and got a free pass through zero taxes for 10-20-30 years from southern locations with many having been provided with free land, free plants, and major zong changes. So they paid their workers $15 per hour while Detroit paid up to $70 (with fringes). We're the dummies for allowing this pork barreling in Congress to exist.
The Japs, Koreans and Germans pay their senior officers $100,000 for every million Detroit pays themselves.
Nothing will be solved by a money bailout. They need an arranged chapter 11 to get all contracts voided and a fresh start and specified brands and models that they can make with labor contracts at realistic wages including the bosses.
12-12-2008 @ 3:20PM
h.Meister said...
The CEO, President and the Board of Directors for GM need to take a hike!!! As my stock brokers reminds me...never throw good money after bad. GM needs to file Chapter 11, be forced to downsize, keep the company moving forward, eliminate brands and move the corporation to a profit one...Unions NEED to give up their hold if they want their employees to remain employed. Both sides NEED to do their part.
12-12-2008 @ 3:44PM
Bob said...
Doesn't anyone understand this simple thing. If, the car manufactures die, they will no longer have to pay the medical and big wages, to either the retirees or current workers. They can negotiate new contracts, lower wages, health and pensions.
If, we are going to have the businnesses get fiscally sound, isn't about time we had the Congress get rid of their large medical, and pension benefits, for all past and present Legislatures, stop all of their perks. (Bet that will happen, right)
12-12-2008 @ 4:20PM
HARRY said...
1. I have been to china several times several times and have seen how they work in a factory, they work they do quality control with the lights off, and we buy their mistakes here.
2. Ten years ago when I employed eighty two people (after twenty years of work they would be able to collect one hundred dollors a month towards retirement.) I was able to disertify my company from a union that was asking four 24% of my gross payroll.(thats sick)
3. in 1998 I filled for chapter 11 in 1999 my company came out only to face Clintons Fast Track, NAFTA, and the Chinese.
4. This country did its self in and shot its self in both feet. thanks,in many ways to the polititions getting fat on there own pork, Clinton who was impeached and now makes $300.000. a speach, Bush, who can't speak english to well, and admits to wrong doing years after he does it.
5. obama said be for the election we need change
two days after the election he basicly said this country was in serious economic trouble, and would take at least three years maybe to turn around (I agree) Sen.Dodd, and Sen.Harry Reed the
two of them both talk out of the two sides of their
mouth's. Senitor Stevens built a bridge to knowwear. Where have we gone wrong? when we decided to compete against other countries who are paying .35cents an hour while we pay our laid off auto workers 95% of their salaries and give to our top executivies Million Dollar Bonuses for failing.
This is still the best Country in the World
l