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General Motors posts an unprecedented loss

Today's Financial News - Posted November 7, 2008

The news from General Motors (NYSE:GE) is downright horrific. The company is just about out of options and is bleeding cash like crazy. The only hope is government intervention.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): If you thought the earnings report released this morning by Ford (NYSE:F) was scary, you had better be sitting near a trashcan to hear the news from its cross-town rival, General Motors (NYSE:GM). These figures will make you nauseous.

Really, just one quote from the company says it all.

“Even if GM implements the planned operating actions that are substantially within its control,” the report says, “GM’s estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business.”

The company goes on to say it will take a significant economic turnaround, strong proceeds from an asset sale, and/or government intervention for even a chance at having the cash flow it needs to survive through next year.

It does not look good for the nation’s manufacturing gem.

The Big Three ain’t so big

Just take a look at some of the numbers from the automaker. During the last three months, the GM managed to lose $2.54 billion with revenues of $22.5 billion. GM burnt $6.9 billion in cash just to maintain operations.

On a per share basis, the situation is even worse. Analysts expected earnings per share to come in somewhere around $3.54. Instead, the company tells us it lost $4.45 per share. And without a $4.9 billion accounting gain from some one-time union savings, that figure would have been an unsavory $7.35 per share.

Is your stomach turning yet?

If so, do not even think about looking at the company’s share price… or what is left of it.

As if Wall Street had not discounted the company’s stock enough over the last year (shares were down more than 85% from last October’s highs at this morning’s bell), investors have slashed another 15% in the minutes after the report hit the wires.

It is easy to believe all hopes of the company’s success have been lost, but there is a sliver of a chance of success. Remember, Nancy Pelosi met with Big Three executives yesterday afternoon and Cerberus is still interested in unloading its cash-heavy stake in Chrysler on GM.

If any deals are made, GM may be able to pull through. Right now, however, it looks like it may take a modern-day miracle to make it happen.

Hidden investment potential?

What does this mean for the nation’s investors? One thing is for sure; it means even more economic uncertainty is ahead.

If GM closes additional plants or even closes its doors, not only will consumer confidence plunge, but tens of thousands of folks will be added to the nation’s unemployment rosters. What is left of the nation’s consumer-based spending will drop even further.

For Ford (NYSE:F) investors that can afford to hang on for the wild ride, it may spell long-term profitability. Remember what I said earlier today: Ford has enough cash to get it through 2010 and into a time when automotive experts believe the industry will rebound.

Invest in Ford like I have been telling anybody that would listen and you will have a very good shot at long-term profits.

Remember, GM still has a huge share of the market. As that share drops, somebody will pick up the slack. Over the next few years, Ford will be glad to see its competitor’s power diminish.

It is a sad day for Detroit, but the news is certainly no big surprise.


Next Article: The TARP: Just another government fiasco

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Posted by Andrew Snyder · Filed Under US Stocks and Markets 

One Response to “General Motors posts an unprecedented loss”

  • obbop Says:
    November 10th, 2008 at 12:28 am

    Government intervention is another phrase for corporate welfare.

    How about stripping the HIGHLY-paid uppercrust of GM of their wealth, except for, perhaps, 50K bucks per year worked, and use THOSE funds to keep GM going until it collapses?

    Of course, political elites do cater to the corporate elites since the politicos depend upon those awaiting jobs when they depart politics and enter the realm of corporate elitism.

    A growing number of the working-poor class is aware that the USA is in the throes of class warfare.

    A day of reckoning is coming.

    I wonder if the elite class of the USA will be taken by surprise or if they have already made plans to depart the USA with their ill-gotten financial gains and attain safe harbor with their elite-class brethren in foreign lands?

Your comments are welcome