GM has "less than 60 days"

Discussion in 'Current Events' started by DavidS, Nov 17, 2008.

  1. DavidS
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    DavidS Anti-Tea Party Member

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    GM delays payments to dealers to conserve cash - Yahoo! Finance

    GM delays payments to dealers to conserve cash

    DETROIT (AP) -- Cash-strapped General Motors Corp. said Monday it will delay reimbursing its dealers for rebates and other sales incentives, an indication that the company is starting to have cash-flow problems.

    Company spokesman John McDonald said payments due Nov. 28 will be delayed for two weeks until Dec. 11, while those due Dec. 4 will be paid Dec. 18. The normal weekly schedule will resume after that. He would not say how much money the company will save from the delays.

    GM said Nov. 7 that its cash situation was so dire that it may reach the minimum required to run the company by the end of the year. Executives from GM and its Detroit-area counterparts are scheduled to appear at congressional hearings this week to seek $25 billion in loans from the federal government.

    Van Conway, a mergers and acquisitions expert and partner with Birmingham, Mich.-based Conway & MacKenzie, said the delay is a sign that the company knows it will run low on cash, and dealers may be most able to take the hit without hurting the company.

    "They must have weekly projections here that show them bumping on their minimums," Conway said. "I think they're scraping the bottom of the barrel here."

    Erich Merkle, lead auto analyst at the consulting firm Crowe Horwath LLP, said GM wouldn't delay payments if it had enough cash.

    "I don't even think they've got 60 days," Merkle said. "Their cash position is probably getting pretty weak right now, and it's cutting into those minimum reserves that they need on hand."

    McDonald would not say whether GM was having a short-term liquidity problem during the period that the payments have been delayed, nor would he say if the company would reach its minimum cash requirements.

    "I wouldn't take it to that level of detail," he said. "It's one of a number of efforts that were doing to bolster our liquidity."

    McDonald declined to say how much GM would save during the month it delays the payments. He said he assumed that the company's legal department approved the move as legal.

    "Clearly it's painful for everybody," he said. "This is something that you don't want to do if you don't have to do it. I think our dealers are keenly aware of what's going on from our standpoint. It doesn't help anybody if we go out of business."

    Conway said he counsels clients in situations where they're running low on money to generate short-term cash where it won't hurt them. Parts suppliers, if not paid, might stop shipping parts to GM, he said.

    "If you don't give the dealer an incentive. what's he going to do to you?" Conway asked.

    GM makes millions in payments to dealers to reimburse them for customer rebates and dealer incentive cash.

    Dealers, though, may not be upset about the delay because it's helping the company make it through a tough time.

    "If that's a small piece that I can do to keep things going, I'd be OK with that," said Jeff Crippen, owner of Crippen Buick-Pontiac-GMC in suburban Lansing, Mich. "Two weeks doesn't bother me."

    GM, Ford Motor Co. and Chrysler LLC are lobbying Congress for $25 billion in loans from the Wall Street bailout program. But many Republican senators are against the loan and could thwart the request in a special session this week. That would force GM, which may be in the most critical condition, to wait for government aid until after a new Congress convenes and Barack Obama is sworn in as president on Jan. 20.

    The nation's largest automaker said Nov. 7 that it had $16.2 billion in cash at the end of September, raising the possibility that GM will fall below the minimum of $11 billion to $14 billion needed for day-to-day operations by the end of the year.

    If that happens, GM will be unable to pay some creditors, which could seize assets that were pledged as collateral or even try to force the company into bankruptcy, experts say.
     
  2. editec
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    editec Mr. Forgot-it-All

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    Shit, meet fan.
     
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  3. RoadVirus
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    RoadVirus <insert pithy title here>

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    I have an idea:

    1st: Pay the dealers
    2nd: Pay the suppliers
    3rd: Declare Chapter 11

    That way, the Dealers and the Suppliers survive short-term while GM goes about cleaning up the mountain of shit that has piled up over the last few decades
     
  4. DavidS
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    DavidS Anti-Tea Party Member

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    GM is down 26 cents today so far.

    [​IMG]
     
  5. Angel Heart
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    Angel Heart Conservative Hippie

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    What do you expect when you pay all of your workers $27+ an hour? Expect them to be competitive?
     
  6. WillowTree
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    WillowTree Diamond Member

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  7. NOBama
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    NOBama Senior Member

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    Damn, I couldn't even get past: "GM delays payments to dealers to conserve cash" before responding.

    So now their willing to let small businesses die in order to save their own butts? This company HAS to go to the junkyard.

    I hope every GM Dealer bans together to sues their asses. Not only for late payment but, for consequential damages, as well.
     
    Last edited: Nov 18, 2008
  8. DavidS
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    DavidS Anti-Tea Party Member

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    Hate to say it but a payment from GM isn't exactly what keeps a dealership in business.

    Dealer orders cars from GM.
    Dealer receives car from GM.
    Dealer receives invoice with "invoice amount" and "holdback." Invoice is the amount of money dealership buys car for. Holdback is the amount of money a dealership receives from GM. This is usually a few hundred dollars, if that. Depends on the make/model/options.

    A dealership only sells about 100-200 cars a month. So a dealer would probably receive about $50,000 in holdback from GM. Now, mutliply that by 7,000 dealers and GM is saving about $350 million.

    I'm not sure how rebates work. I think the process is that a delaership orders a car from GM, but the dealership never pays GM for the car. I think
    GM's cash flow comes in from banks. Dealers work with the banks to get GM the money. When the credit market is frozen, no one buys cars and GM has cars that it's given to dealers who can't sell them. So GM has no way of making up the manufacturing cost of that car.

    I could be wrong about this.
     
  9. NOBama
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    NOBama Senior Member

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  10. doeton
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    doeton Senior Member

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    What do you expect when you make a shitty car that nobody wants? Expect them to be competitive?
     

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