Thursday, March 24, 2005

GM : Dead Man Walking?

One of the largest mortgage corporations in the US may already be bankrupt, only held together with accounting entries. This article brought out some details regarding GM's pension obligations that hint its lending days may be over soon.

"The total future cost to cover its workers and retirees is $77 billion..But it has only $20 billion set aside for this purpose..a funding shortfall of $57 billion. Roughly half of this shortfall finds its way onto the balance sheet as a liability.. GM is allowed to amortize actuarial losses that make up the other half of the unfunded portion. If the whole $57 billion were booked as a liability, GM's shareholder equity would vanish."

"Sean Egan, considers GM junk quality already. "It is highly likely that the company is going to be faced with a major restructuring in the next two years," he says. "Any levers the company has to pull to improve operations are not available, and management is delusional about what the levels of the problems are."


Post a Comment

<< Home