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GM shares rose 33% today !


U.S. auto sales for September sank to a 15-year low, with automakers reporting that the financial crisis had made consumers less willing to make big purchases and left many remaining car shoppers unable to secure financing.

GMAC, the finance company affiliated with General Motors Corp said on Monday it would pull back from riskier and longer-term auto lending in response to tight credit conditions that has limited its access to funds.

GMAC also said it has increased the rate it charges car dealers for providing standard auto financing by 75 basis points.

GM alone will burn through about $10 billion next year. GM needs minimum cash balances of $14 billion just to keep creditors away, so if it burns through money that quickly, the car maker will need to find more money just as many doors are closing. Part of the problem is the cost of credit for the automakers. GM, for instance, has a heavy debt balance of $45 billion, and servicing that debt costs a fortune.

GM has 266,000 employees worldwide, including about 139,000 in North America. GM provides health-care benefits to more than a million Americans.

GM shares are down 90 percent from their 52-week high.

It seems this stock is cheap!
Laughing
By pelcmarek at 2008-10-13 18:24 | Stocks | pelcmarek's blog


$1 billion a month !


Ford, GM and Chrysler LLC all issued statements Friday denying they were considering filing for bankruptcy. They know consumers won't buy cars and trucks from bankrupt automakers.

Collapsing auto stock prices are frightening news for Michigan, which has been losing jobs for the past eight years and has the highest unemployment in the nation at 8.9 percent.

Analysts say GM is burning through a worrisome $1 billion a month in cash.

What if falling sales and a continued seizing of the credit markets throw one or more of the Detroit Three in bankruptcy?

Analysts say other employers - suppliers, dealerships and other businesses that depend on the automakers' spending - would fall like dominoes.

"There would be a massive shedding of jobs," Merkle said. "Lots of suppliers would go out of business. It would be a very ugly situation."




By pelcmarek at Mon, 2008-10-13 18:35 | login or register to post comments

PUTS!!

I just recently bought GM Puts today on the rally and is currently my only position.  I have sold off all of my equity holdings and sitting on cash and a loaded shotgun to buy solid companies on the cheap (JNJ at 10-13 times earnings etc...) I have read about the depression in 1929 and the wild swings during those turbulent times.  I believe this rally today is just the market flirting with us and will come down to its senses.

I was going to buy puts on Morgan Stanley but I felt that with the cash infusion and a bank status that seemed to be a higher risk than GM.
By MPatel at Mon, 2008-10-13 21:08 | login or register to post comments