I'll admit, I hadn't reviewed the GM situation for a couple of months now. Obviously the company is talking up their liquid reserves (19 billion +-).
The biggest near term threat is Delphi's bankruptcy proceedings. Should the workers at Delphi go on strike, GM would very quickly run out of parts to build new cars. Amazingly, many of the analysts are suggesting that GM would burn through their liquid reserves in TEN weeks.
Assuming business as usual, with GM maintaining current marketshare, no strikes, and no downturn in the economy, they should be good for another 3-4 years before Chapter 11 becomes a reality.
Blatantly stolen from Forbes.
Quote:
Reason No. 1: You have to be eligible to declare bankruptcy; you can’t just decide it would be strategically beneficial to do so. General Motors (nyse: GM - news - people ), with $19 billion in cash and a book value of $40 billion, hardly meets that test now or for a number of years.
Reason No. 2: GM doesn’t need a bankruptcy threat to win concessions from its unions. It has Delphi (nyse: DPH - news - people ) to do that for them. When the Delphi bankruptcy is concluded, the unions will know what they can expect to win from GM if they force it to use the bankruptcy route. Chances are, they will settle for something close to the Delphi concessions because they have even more to lose with GM.
Reason No. 3: GM as a business is a very valuable franchise. Before it goes into bankruptcy, it would likely reach a merger agreement with a foreign car manufacturer much as Chrysler did seven years ago when it “merged” with Daimler to form DaimlerChrysler (nyse: DCX - news - people ).
Reason No. 4: Unlike the airlines, GM and its unions have it within their power to fix the problems. There are a variety of ways this can be done short of bankruptcy. The main battle may well be within the United Auto Workers, pitting young workers against those who are either retired or about to retire.
Reason No. 5: A bankruptcy filing would be most devastating to GM shareholders. It is the duty of the board of directors and management to do everything to prevent that from happening. While this principal seems to have been ignored in several recent bankruptcies, it seems less likely to happen here. Besides, we have Kirk Kerkorian watching to make sure this doesn’t happen. I’d be more worried if he had bought GM debt instead of stock.
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Suffice to say, what happens with the current Delphi negotiations are going to go along way in knowing what is going to happen with the next round of GM negotiations.