By Chris Haak

11.07.2008

This morning, both GM and Ford released their third quarter 2008 earnings, and the news was unsurprisingly about as bad as it could have possibly been for both companies.  Ford is in a better liquidity position than is GM, but both companies saw their cash positions drop precipitously, with Ford burning through $7.7 billion of its cash pile during the third quarter ($2.57 billion per month on average) and GM burning through $6.9 billion in [operating] cash during the third quarter ($2.3 billion per month on average).

The cash conflagration at both companies (remember, Chrysler is no longer publicly traded, so we don’t know its situation, but it’s likely similar, if not worse) in the third quarter meant that Ford was left with $18.9 billion in cash and marketable securities, with another $10.7 billion in readily accessible credit (thanks to Alan Mulally’s foresight in mortgaging most of the company right before credit markets froze), for a total liquidity cushion of $29.6 billion.  GM does not have any more credit available to tap, so it’s on its own, down to its last $15 billion.  The company needs $10-12 billion in cash just to keep the lights on, pay suppliers, etc., so bankruptcy could come long before the cash number gets to $0.  Most telling – and alarming – of all the news today was this statement in the body of GM’s earnings release, which we are duplicating here unedited (emphasis added): Continue Reading →