GM and the auto industry. Who would of believed it ? At one point several years ago in a published interview a Japanese auto exec after explaining Toyota’s drive to be the number one car producer in the world answer and retort after being asked “What of G.M. ? What of General Motors ?” , answered very simply and succinctly that “One day you will wake up and G.M. will not matter anymore.”
At the time Toyota and the Japanese auto industry was seen as a relentless juggernaut – moving towards its goals while GM auto execs struggled with day to day demands of the stock market and results , missing the forest for the trees , all while taking huge bonuses , and whittling down the company. One can say you get what you deserve , you sow what you reap.
Here’s a shocker: The U.S. government probably won’t get a full return on the billions of dollars it’s pumping into General Motors (GM). The company is expected to file for bankruptcy next week.
Financial commentary site Breakingviews crunches the numbers and says that in order for the government to get back what it’s put into GM, the restructured company would have to produce earnings to support an enterprise value of at least $95 billion, according to The New York Times. That’s the total of a $69 billion market cap and $26 billion of debt and preferred stock.
To get there, GM would need around $19 billion in annual operating cash flow. It would need to hit the same cash flow benchmark that Toyota had in its best year ever, the Times writes. And GM would have to boost annual sales by 50% to $150 billion.
Keep in mind that this restructured GM will have probably lost the Saturn, Pontiac, Saab and Hummer lines. And its European business. And probably its Latin American business as well, the Times writes.
The government bill is up to $50 billion or more, a NYU business professor tells Bloomberg. And the government will own 72.5% of the new company.
So will the government be first in line for repayment? And how many cents on the dollar will it get back?
Anderson Cooper 360: Blog Archive – Financial Dispatch: GM strikes … – CNN Financial News Producer. The Treasury Department and a committee of major bondholders at General Motors have reached a deal that could give creditors a larger stake in GM than previously offered — as long as they agree not to fight …
GM bondholders unite for expected battle – Average Americans holding billions of General Motors Corp. debt are vowing to fight to the bitter end.
General Motors Bankruptcy Expected On Monday | Stock Market … – The Obama administration plans to usher General Motors Corp. into bankruptcy court Monday and push through a restructuring that will cost taxpayers billions of dollars more than previously envisioned, turning what once was one of the …
GM’s Second Great Crisis – HBR Now – Harvard Business Review – GM’s management effectively participated in the incentives of a leveraged buyout of the firm, but without imposing a like financial risk on the company itself. As for the bonuses, they were based on simply allocating a sizable portion …
Steeped in GM: My Fascination with a Fallen Icon – CBS MoneyWatch.com – Jill Schlesinger, a veteran certified financial planner, offers clear, unconventional, and characteristically uninhibited analysis of the economic and financial news of the day.
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