Tuesday, June 2, 2009


I read a short piece from Zerohedge that shows a summary cash flow projection for GM that projects it will lose $20 billion of cash over the next nine weeks. There is no detail and no way to test the projection as presented. So for our purposes let's assume it is directionally correct. Here are a few observations and questions. (Thanks to bankruptcylitigationblog for the picture)

You can only lose $20 billion in nine weeks if you have $20 billion to lose. As simple as this sounds, read it again. If the Treasury only gives GM $10 billion for the next nine weeks, it would only lose $10 billion. GM is clearly not cutting enough.

Look in all the press for the treatment the unsecured creditors are getting. You know, all those vendors, suppliers and other unsecured creditors. You don't see it, do you? The silence on the topic can only mean that all these creditors are being paid in full in the ordinary course of business. Can you say, 'thank you U.S. taxpayers?'

Are expenses being cut deep enough and quick enough? Obviously not. The Treasury has already put in $20 billion before the filing. The projection shows another $20 billion in the next nine weeks. That leaves only $10 billion in a rumored $50 billion of Treasury support. I have no other facts, but if the $20 billion in nine weeks is true, another $10 billion is unlikey to provide enough time for GM to turn cash flow positive.

Various stakeholders are getting too much on the backs of the taxpayers. This will become more clear as time passes. Unfortunately, the cash will already be out the door.

Cheers, Mike

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