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Re: True Posted by Bill Homer [Email] (#3427) [Profile/Gallery] (more from Bill Homer) on Wed, 25 Jun 2008 16:02:15 In Reply to: True, Caarma [Profile/Gallery] , Wed, 25 Jun 2008 13:11:33 Members do not see ads below this line. - Help Keep This Site Online - Signup |
From Reuters, Tue Jun 24, 10:58 AM ET :
"DETROIT (Reuters) - General Motors Corp(GM.N) is expected to burn $13.9 billion in cash over the next 2-1/2 years amid a sharp drop in truck sales and may be forced to raise additional capital, Bank of America said in a report.
The No. 1 U.S.-based automaker may raise about $6 billion to $8 billion through a secured loan and possibly a convertible securities issue, as the collapse in demand for large vehicles and restructuring charges will leave GM in a 'precarious" cash position, the bank said in the report released late on Monday.
The embattled automaker, which ended the first quarter of 2008 with $23.9 billion in cash, is likely to end this year with $17.4 billion and the cash on hand is expected to fall further to $10 billion by the end of 2010, the report said."
My comment: Since GM is a public corporation, they have to make a certain amount of information known, they can not conceal major issues like this (which are all over the press today) - yes, we don't know all the high-level decisions at GM, but we do know this. As they have $23.9 Billion in cash, they might continue to pay some dividends, but their cost of borrowing operating cash will grow substantially, particularly as this reserve gets used up, further depressing profitability. Etc., etc.
Bondholders are required to be paid regularly and have first shot at any payouts by the corporation; stockholders are not. I would not be surprised to see GM's dividend cut.
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