According to Megan McCardle at The Atlantic it’s only a matter of time before the Detroit automaker goes asunder.
After today’s annual report, I don’t think there’s any question of GM’s staying out of bankruptcy. The company’s revenue fell from $180 billion in 2007 to $149 billion in 2008, with the worst crash in the fourth quarter. Car sales have continued to plunge into the new year. The company’s current asset position continues to deteriorate by about $2 billion a quarter even with massive Federal injections of cash. With cash & equivalents now down to just over $14 billion, they can’t go on this way for much longer. Though no one knows exactly how much working capital the company needs on hand at any time, the estimates tend to fall around $10 billion. Dip below that, and they’ll rapidly be catapulted into insolvency.