Randomness (r_ness) wrote,
Randomness
r_ness

Two of the big three automakers are worthless...

...at least by some estimates. A couple of weeks ago, the Detroit Free Press reported that Daimler AG, Chrysler's former partner, is now valuing its 19.9% share of Chrysler at $0:
As Daimler AG sees it, Chrysler is worth nothing.

The German automaker has depreciated its stake in Chrysler to zero from $268 million at the end of June, the company said Thursday. A little over a year ago, the company valued its 19.9% stake in Chrysler at $2.2 billion.

Since Chrysler became privately held and no longer required to make public its finances, it has disputed Daimler's quarterly reports saying how much the German automaker was losing on Chrysler.

As Daimler sees things, its loss of $528 million on its stake of Chrysler would indicate that Chrysler as a whole lost $2.6 billion under Daimler's accounting. Similarly, Daimler's stake of Chrysler lost $585 million during the first quarter, implying Chrysler as a whole lost $2.9 billion.
Now, Deutsche Bank analyst Rod Lache has concluded GM stock will be worthless in a year:
Deutsche Bank said publicly today what many detractors of General Motors Inc. have been thinking for some time — the company is worthless.

In a note, Rod Lache of Deutsche reduced his rating on the shares to sell (helpful) and put a price target of $0 on the automaker, saying the company has few options at this point beyond “external government intervention.”

They believe the company does not have the cash to fund its operations past December, though Mr. Lache believes the government will be “compelled to participate” in some kind of loan package for the company, for without it, “it would precipitate systemic risk that would be difficult to overcome for automakers, suppliers, retailers and sectors of the U.S. economy.”

They cite a Center for Automotive Research study that projects about 2.5 million in lost jobs and a $125 billion decline in U.S. personal income, which would reduce GDP by a full percentage point. Still, even with a loan, the company is on a tightrope due to its efficiency in burning through cash.
Again from the Detroit Free Press:
After burning through $6.9 billion in the third quarter, GM said Friday its cash could run low by the end of this year; the company has said it needs between $11 billion and $14 billion to simply keep its operations running. It has also warned that its outside auditors could question its status as a going concern at the end of the year, which would trip several triggers in debt agreements causing at least $6 billion in loans to come due immediately.

GM, Ford Motor Co., Chrysler LLC and the UAW have asked for $50 billion in aid for the industry -- $25 billion for general business use and $25 billion to put toward the UAW's trust fund for retiree health care.
They seem almost certain to get it.
Tags: money
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