Oracle of Delphi

Merrill Lynch downgrades GM

35 posts in this topic

July 2, 2008 - 11:00 am ET

DETROIT (Reuters) -- General Motors will need to raise about $15 billion in cash to shore up liquidity and bankruptcy is "not impossible" if the U.S. auto market continues to slump, Merrill Lynch said on Wednesday.

Merrill Lynch analyst John Murphy said in a research note he cut GM to "underperform" from "buy" and lowered his price target for the largest U.S. automaker to $7.

GM shares fell Wednesday to as low as 10.80 on the report. As of 10:50 a.m. EDT, shares of GM were trading at 11.04, down 71 cents, or 6.0 percent.

The downgrade comes one day after GM said that June sales fell 18.5 percent from the same month a year ago. Despite the decline, GM shares closed up on Tuesday. Investors and analysts expected worse, with some predicting Toyota would pass GM in sales for the month.

For the first half of 2008, GM's U.S. sales totaled 1,604,942, down 16.5 percent from last year's 1,922,762.

Murphy also lowered his forecast for 2008 U.S. industry-wide light vehicle sales for the third time this year and said the recent drastic decline in sales would likely to continue through 2009.

He expects 14.3 million U.S. auto sales this year and 14 million units for next year. That compares with 16.15 million units in 2007.

Although analysts have said GM will need to raise capital to cover continued losses before 2010, $15 billion is a higher estimate than any other analysts have suggested.

"The recent extreme deterioration in volume and mix is driving much higher cash burn and eroding GM's cash position," Murphy said. "We believe $15 billion is necessary because there is downside risk to our current estimates and a greater cushion is essential."

Murphy said a decline of 1 million vehicles in annual U.S. auto sales equates to about $3 billion in cash burn.

Any capital GM raises has the potential to dilute equity if it's done through convertible offering, one of the possibilities for the automaker.

Link: http://www.autonews.com/apps/pbcs.dll/arti...p;rssfeed=RSS33

Edited by Pontiac Custom-S
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Indeed it is. See how those armchair analysts like Jim Jubak and cohorts talk about GM. GM's situation seems less worse than it is made to be perceived by these people. They argue that sales increased because of rebates and that rebates WILL hurt GM. Yeah? What is worse - a $50,000k SUV sitting on the lot or a SUV that moved out for $45,000? At least GM is not offering rebates on Malibus and Lambdas, which says something. Three years ago almost everything used to be on bumper sale.

Edited by michaelv13
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Indeed it is. See how those armchair analysts like Jim Jubak and cohorts talk about GM. GM's situation seems less worse than it is made to be perceived by these people. They argue that sales increased because of rebates and that rebates WILL hurt GM. Yeah? What is worse - a $50,000k SUV sitting on the lot or a SUV that moved out for $45,000? At least GM is not offering rebates on Malibus and Lambdas, which says something. Three years ago almost everything used to be on bumper sale.

Heaven deliver us from learned people. Any time after Friday is fine.

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Heaven deliver us from learned people. Any time after Friday is fine.

what is of friday?

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what is of friday?

It is the day we sacrifice fingers to small personal explosives here in the USA.

I'm just being goofy in the face of adversity.

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This can't be good......

Remind myself again why I became a business major again? :duh:

Well, at least it is a good time to buy stock....

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This can't be good......

Remind myself again why I became a business major again? :duh:

Well, at least it is a good time to buy stock....

Seriously, fess up. What was your motivation? Don't say world peace please. Mercy no.

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It is the day we sacrifice fingers to small personal explosives here in the USA.

I'm just being goofy in the face of adversity.

ohh yea, you guys blow things up, because you are proud of people like me who get blown up on a daily basis... ahh i understand the tradition now...

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ohh yea, you guys blow things up, because you are proud of people like me who get blown up on a daily basis... ahh i understand the tradition now...

By the rocket's or the bandage's red glare. The IEDs exploding at ground level. A celebration and reaffirmation of life. Got Oil? Violence and death are what we export best.

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I'll be the black sheep here and say that the guy is probably at least partially right. I base that on what the economy looks like as a whole rather than just what GM is doing. There are going to be a LOT of downgradings forthcoming. The national financial picture is much bleaker than most people realize. The next 12 - 18 months is going to be very very bumpy. A substantial part of the blame will fall on the major banks who have been playing a shell game with their massive amounts of bad debt and it's only prolonging the problem while simultaneously making it worse. I'm hearing numerous reports of banks being so far behind in foreclosures that they have started ignoring missed payments in certain parts of the country. Banks are losing the ability to lend money even if they wanted to and this is causing deflationary pressures on the market at the same time prices are rising.

In summary, we're in as identical situation as we can be to June 1929.

Hold on to your butts!

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I'll be the black sheep here and say that the guy is probably at least partially right. I base that on what the economy looks like as a whole rather than just what GM is doing. There are going to be a LOT of downgradings forthcoming. The national financial picture is much bleaker than most people realize. The next 12 - 18 months is going to be very very bumpy. A substantial part of the blame will fall on the major banks who have been playing a shell game with their massive amounts of bad debt and it's only prolonging the problem while simultaneously making it worse. I'm hearing numerous reports of banks being so far behind in foreclosures that they have started ignoring missed payments in certain parts of the country. Banks are losing the ability to lend money even if they wanted to and this is causing deflationary pressures on the market at the same time prices are rising.

In summary, we're in as identical situation as we can be to June 1929.

Hold on to your butts!

Allow air to hit the wound. This must be spoken of more often.

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Allow air to hit the wound. This must be spoken of more often.

I'm afraid I don't follow.

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I'm afraid I don't follow.

With regard to the unseemly nature of our finances. Our corrupt system. (imo)

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Looks like this country is falling faster than even I predicted.

As for GM... This country WILL destroy GM, one way or another. People are itching to see the company get a big punch in the face BEFORE the 100th anniversary. (The same thing happened to Ford when they hit 100-- The celebration was overshadowed BIG TIME by every hack in the market/media trying his/her best to kick the company) They've tried it through media, they've tried it through environmental issues and 'fashion', they've tried it through regulation and now they'll try it through finances.

It used to just be the media that attacked Detroit. Now it's the media, which won over the government, which now affects the finance opinion and ultimately will turn the majority against the company (Not the 60% of the population that hates GM now, try 80-85%)

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Looks like this country is falling faster than even I predicted.

As for GM... This country WILL destroy GM, one way or another. People are itching to see the company get a big punch in the face BEFORE the 100th anniversary. (The same thing happened to Ford when they hit 100-- The celebration was overshadowed BIG TIME by every hack in the market/media trying his/her best to kick the company) They've tried it through media, they've tried it through environmental issues and 'fashion', they've tried it through regulation and now they'll try it through finances.

It used to just be the media that attacked Detroit. Now it's the media, which won over the government, which now affects the finance opinion and ultimately will turn the majority against the company (Not the 60% of the population that hates GM now, try 80-85%)

I am sorry for any time where I've offered an over-inflated opinion here or there. But when Millions are listening and reacting to what these so-called experts are saying, it is unconscionable and reflects an inherent evil in our system. One of many. (imo)

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Looks like this country is falling faster than even I predicted.

As for GM... This country WILL destroy GM, one way or another. People are itching to see the company get a big punch in the face BEFORE the 100th anniversary. (The same thing happened to Ford when they hit 100-- The celebration was overshadowed BIG TIME by every hack in the market/media trying his/her best to kick the company) They've tried it through media, they've tried it through environmental issues and 'fashion', they've tried it through regulation and now they'll try it through finances.

It used to just be the media that attacked Detroit. Now it's the media, which won over the government, which now affects the finance opinion and ultimately will turn the majority against the company (Not the 60% of the population that hates GM now, try 80-85%)

The country isn't going to fall apart just to spite GM/Ford/Chrysler, but all three, amongst many many others, will be suffering from this country's financial problems.

I'm afraid that something I said was missed by the readers of this forum. Banks are losing the ability to lend money even if they wanted to. This is a very very very big deal and applies to everyone, individuals and corporations alike.

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The U.S. current account drain of the past several years has finally come home to roost.

For example: if I don't have a job, but max all my credit cards to keep buying groceries and paying my mortgage, all is well as long as the banks keep extending me credit. Sooner or later, my debt equity ratio becomes intolerable and the banks will balk at giving me any more loans.

This is the essential position the U.S. has been in for several years: borrowing money (ironically) from Asia and the middle East to finance your positions on buying imported goods from those same countries. This closed loop works until there are no more savings left in America to back the loans, or collateral (property values) start to sag. Both have occurred recently.

This had to happen sooner or later. Wall Street has been shuffling the papers for a couple years now to hide the losses and now they can no longer hide them.

This mess is going to get very ugly. Can you say twelve million annual car sales?

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The U.S. current account drain of the past several years has finally come home to roost.

For example: if I don't have a job, but max all my credit cards to keep buying groceries and paying my mortgage, all is well as long as the banks keep extending me credit. Sooner or later, my debt equity ratio becomes intolerable and the banks will balk at giving me any more loans.

This is the essential position the U.S. has been in for several years: borrowing money (ironically) from Asia and the middle East to finance your positions on buying imported goods from those same countries. This closed loop works until there are no more savings left in America to back the loans, or collateral (property values) start to sag. Both have occurred recently.

This had to happen sooner or later. Wall Street has been shuffling the papers for a couple years now to hide the losses and now they can no longer hide them.

This mess is going to get very ugly. Can you say twelve million annual car sales?

GM chief Elliot 'Pete' Estes would have thought this number 'swell' in 1978 of course knowing that GM would've taken home 5.8 or 6 million sales for it's troubles.

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-GM is burning Money

-One day they will run out of Money to burn

-They will need to borrow Money to operate

-Credit markets are seized, so there is no money to Borrow

-BK or Stock Offer

Not a conspiracy, just reality

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July 2, 2008 - 11:00 am ET

DETROIT (Reuters) -- General Motors will need to raise about $15 billion in cash to shore up liquidity and bankruptcy is "not impossible" if the U.S. auto market continues to slump, Merrill Lynch said on Wednesday.

Strange, VenSeattle is in the Chrysler forum chewing popcorn while contributing to the SPECULATION of Chrysler bankruptcy, I wonder when he will come in here and do the same...?

:AH-HA_wink:

I'm sure there won't be excuses here and self glee over there....

The domestics had better tighten their belts and ride out this time of trouble, GM, Ford and Chrysler are the only vehicles I usually care about.....?

:scratchchin:

Too much image perception is giving the imports an unfair advantage IMO. Domestics bashing domestics AIN'T helping.

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The country isn't going to fall apart just to spite GM/Ford/Chrysler, but all three, amongst many many others, will be suffering from this country's financial problems.

Nah... The country falling apart is an entirely different, but related issue.

The problem runs much, much, MUCH deeper than Detroit and what's left of our domestic auto industry. But alas, it was one of the last few pillars (Both economically AND confidence-wise) that this country had Subconsciously, every american could always fall back on the auto industry as a powerhouse of economics, like the industry or not. Now that it is (will be) gone, what takes it's place in the mind of the consumer to increase confidence levels? Nothing...

I'm afraid that something I said was missed by the readers of this forum.Banks are losing the ability to lend money even if they wanted to. This is a very very very big deal and applies to everyone, individuals and corporations alike.

Bingo... Which is one thing that prompted me to make the statement about the country falling faster. Sooner, rather than later, what last little bit of american industry and ingenuity we have left will be financed, and OWNED by other countries. I'd be willing to bet that Asia will control more of what this country does than our own government in, say, 10 years...

Edited by FUTURE_OF_GM
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The U.S. current account drain of the past several years has finally come home to roost.

For example: if I don't have a job, but max all my credit cards to keep buying groceries and paying my mortgage, all is well as long as the banks keep extending me credit. Sooner or later, my debt equity ratio becomes intolerable and the banks will balk at giving me any more loans.

This is the essential position the U.S. has been in for several years: borrowing money (ironically) from Asia and the middle East to finance your positions on buying imported goods from those same countries. This closed loop works until there are no more savings left in America to back the loans, or collateral (property values) start to sag. Both have occurred recently.

Exactly...

Just like you and I have always said.

The industry that CREATED the savings left (or was sold out and stolen, rather) and for the past 10-15 years the 'global economy' has been BLEEDING america dry of wealth, technology, industry and talent. Now it looks like the blood is all gone an there's nothing left but for the organism to die.

This had to happen sooner or later. Wall Street has been shuffling the papers for a couple years now to hide the losses and now they can no longer hide them.

This mess is going to get very ugly. Can you say twelve million annual car sales?

Agreed and agreed...

I worked in investments and I saw it first hand. You can make any pile of sh*t look like gold as long as you mess with the stats a bit and fix the wording. Looks like the polishing cloths have lost their magical touch.

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Seriously, fess up. What was your motivation? Don't say world peace please. Mercy no.

World peace. :P

I always wanted to do ads for companies like GM....I think I have some good ideas.....

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I'll be the black sheep here and say that the guy is probably at least partially right. I base that on what the economy looks like as a whole rather than just what GM is doing. There are going to be a LOT of downgradings forthcoming. The national financial picture is much bleaker than most people realize. The next 12 - 18 months is going to be very very bumpy. A substantial part of the blame will fall on the major banks who have been playing a shell game with their massive amounts of bad debt and it's only prolonging the problem while simultaneously making it worse. I'm hearing numerous reports of banks being so far behind in foreclosures that they have started ignoring missed payments in certain parts of the country. Banks are losing the ability to lend money even if they wanted to and this is causing deflationary pressures on the market at the same time prices are rising.

In summary, we're in as identical situation as we can be to June 1929.

Hold on to your butts!

Yep, agree there....

I was preaching this a while back....along with people's "image" issues- to keep them spending beyond what they can afford....

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I'm afraid that something I said was missed by the readers of this forum. Banks are losing the ability to lend money even if they wanted to. This is a very very very big deal and applies to everyone, individuals and corporations alike.

I read(MSN money?) that the European banks are just starting to go through what US banks have been dealing with and that they will be less able to adapt.

Comments?

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