Thursday, May 24, 2007

Oops There Goes Another Billion

GM announced in an SEC filing that they're going to have to take a billion dollar charge because they didn't set aside enough money to cover pension and other labor related costs at Delphi. This Marketwatch article covers a few interesting aspects of the GM story:

"General Motors Corp., sizing up the financial strains it faces over the next few months, said Thursday that costs related to bankrupt parts-supplier Delphi Corp. will amount to $7 billion, $1 billion more than the auto maker had put aside."

Kind of ironic how the workers at the bankrupt Delphi are turning to the soon-to-be-bankrupt GM to cover their pension liabilities. Seems like they're just puttin off the inevitable (a big benefit cut in the hands of the PBGC).

"GM also said it has raised a $4.1 billion credit facility,"

How much cash are they burning these days?

"In the same filing, GM warned investors that the SEC has requested documents detailing how the company accounted for its derivatives trading activities in 2006. The company said it is complying with the request."

GM's past profitability depended on creative accounting at GMAC. Now that the mortgage mess is exposing that fraud with big losses at ResCap, it's no surprise that other portions of GM's past accounting are under question.

"GM said it also was looking into the sale of its Allison Transmission business to expand its financial safety net. Analysts said the move was warranted, given the host of uncertainties the company faces if current talks with Delphi and the UAW sour or if GM's own labor talks this fall break down."

With each sale of a proftable entity, the GM that remains becomes more and more a hopeless case. The "analysts" applaud the moves because their firms score large fees on the deals, but you won't see them telling the truth about GM's future because there's still too much profit to be milked from the company before the game finally ends.

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