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GM may still have the cash to make it

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.

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Last updated: July 06, 2009: 09:18 PM

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