The Bankwatch

Tracking the consumer evolution of financial services

GM financial analysis 2004 to 2008 | conclusion – bankrupt

As the on, off, on again fiasco continues in the US it is disturbing that few are looking at the facts of the matter relative to GM.  First of all, this is from their web site.  They have 16 separate brands, each with their own web site – and each with their own business unit, in effect competing with each other.  This is not a good sign but lets dissect the financials.

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The financial results of this company follow and lead to only one responsible conclusion.  They are bankrupt.  Their liabilities exceed assets by $60 bn as of Sept 2008.  Even in 2006 their liabilities exceeded assets by $6bn.

Year ($ billions) Revenue Gross Margin Net Income
2004 194 na 3
2005 193 na (9)
2006 206 19 (2)
2007 181 15 (39)
2008 YTD 38 3 (3)

Sourrce:  google finance & GM site

If we look at this table, it is clear the issue with GM is unrelated to the current economic crisis.  Their issue is that even in the supposed boom times of 2004 and 2005 their business was in trouble and sales were dropping between 2005 and 2004.  They have lost an astonishing $51 bn since 2005.

Providing them aid now will simply fund their losses and postpone the inevitable.  Nothing else will change.

I predict that the money which it appears is going to be paid to GM will simply defer their Chapter 11 filing by a few months.  Chapter 11 with a complete business breakup, and restructuring with all new management is the only solution here.  Chapter 11 would allow this to occur in a methodical and managed way.

Written by Colin Henderson

December 14, 2008 at 15:05

6 Responses

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  1. […] Erfolg von GM Es ist etwas merkwürdig, gerade jetzt ein Buch zu lesen, dass die erfolgreiche kundenorientierte Prozesse bei GM […]

  2. “Providing them aid now will simply fund their losses and postpone the inevitable. Nothing else will change.”

    Completely agree. This is a classic example of throwing good money after bad.

    Dan Dickinson

    December 15, 2008 at 10:39

  3. […] Link to the original site […]

  4. […] for achieving inefficiency. I’d call this throwing good money after bad; my friend Colin at The Bankwatch put it more eloquently: “Providing [GM] aid now will simply fund their losses and postpone […]

  5. […] the US auto sector was insolvent (Liabilities exceeded assets) for several years prior to this […]

  6. […] a comment » The prediction from December is unfortunately coming true.  It is time for the politicians to open their eyes – GM was losing […]


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