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Deutsche Bank: GM Is Worth Nothing



November 10, 2008 – Comments (6) | RELATED TICKERS: GM


I've known that General Motors is one of the world's worst-run companies for a while now and I have been bearish on it for a long time.  However, I didn't used to think that it would go belly-up.  After an initial bout of denial, I finally realized a while ago that The General is definitely doomed without major government intervention. 

Today, the auto industry analyst at Deutsche Bank, Rod Lache (who actually is pretty good) agreed.  He published a note this morning calling GM a "sell" (no kidding), but here's the great part...his price target for the company is $0.  It's refreshing to see an analyst actually say that a terrible company is doomed. 

On GM, Lache said that it has few options to save itself other than “external government intervention.”  Lache believes that the government will be “compelled to participate” in some sort of loan to GM because without it “it would precipitate systemic risk that would be difficult to overcome for automakers, suppliers, retailers and sectors of the U.S. economy.”  A loan however, does not mean that shareholders won't be wiped out.

If I was the government and I was handing out free money to everyone, I would at least require General Motors to fire Rick Wagoner to get the loans that it desperately needs.  I realize that he was saddled with terrible labor contracts and that he was in a tough situation, but few CEOs have done a better job at running the company that they are in charge of into the ground than Wagoner has over the past decade.  How he has survived is mind-boggling.

Deutsche Bank: GM Is Worth Nothing.


6 Comments – Post Your Own

#1) On November 10, 2008 at 12:23 PM, Imperial1964 (94.60) wrote:

Actually, if you check their balance sheet they are worth $-56,970,000.00, or $-100.63/share

I don't know how even the government can save that without handing them free money.

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#2) On November 10, 2008 at 12:52 PM, kimonye (50.10) wrote:

It far better to give GM free money than  AIG or other financials.

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#3) On November 10, 2008 at 1:02 PM, degaston (< 20) wrote:

If the October trend of -45% yoy sales continues into the rest of the quarter their 4th quarter ought to show a loss of over 6B. This means that by year end their balance sheet net worth will be more than double their total outstanding long-term debt. Not only is GM stock a zero but so are their bonds. The only role for the federal government right now is to make sure that the systemic risks of a GM default don't cause uncontainable havok in the credit derivative markets.

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#4) On November 10, 2008 at 1:41 PM, TDRH (97.04) wrote:

When GM goes under who do you think will benefit?   If we invest now, where can we see a return?

 As a tax payer I have lost my appetite for bailouts.    

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#5) On November 10, 2008 at 4:20 PM, TMFDeej (97.71) wrote:

Good question, TRDH.  Theoretically, the cash problems that are preventing GM from developing much in the way of new models are good for its competitors.  Similarly, if The General had to file for bankruptcy the fear that its models would not be covered under warranty, combined with the ill will generated by its thousands of layoffs would be good for its competitors as well.

Unfortunately, the auto sector is so bad right now that the competition will probably still fall, just less than they would have if GM was healthy.  Perhaps Ford would benefit the most, but it has the same problems that GM does, just more cash for estimated $30 billion after burning through 7.something billion last quarter.


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#6) On March 30, 2009 at 7:06 PM, zzlangerhans (99.80) wrote:

Someone should just tack a belated note of appreciation here for a very prescient post. Wagoner is now gone. On the day the stock hits 0, Deej should be awarded some form of prize. Deej, guys like you and Bent keep me thinking those TMF initials relally mean something.

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