Even with the government throwing money at it in multi-billion dollar chunks, GM seems to be sinking too fast for even the Treasury department to keep it afloat:
The target date for General Motors Corp. to get its second installment of government loans passed last week, but a top company executive says he expects the money to arrive in the next several days.
Fritz Henderson, GM's president and chief operating officer, said without the second installment of $5.4 billion, the company would run out of cash long before March 31.
In December, the Treasury Department authorized $13.4 billion in loans for GM and another $4 billion for Chrysler to keep both automakers out of bankruptcy. GM received $4 billion late last year and was to get $5.4 billion Jan. 16 and another $4 billion on Feb. 17, the day it is to submit its plan to show the government how it will become viable.
Henderson told the Automotive News World Congress in Detroit that the money is critically needed to pay its bills. He attributed the delay in receiving the second installment to the Treasury Department's workload and the change in administrations.
"If we don't get our second installment of the funding we'll run out of cash, it's that's simple," he said. "We've been finalizing what we need to do. We anticipate receiving it. But it's critical that we receive it."
The AP article above actually softpedals GM's money burn rate by saying GM received the first $4 billion "last year." While technically correct, the fact is that GM received the money "last month." So it appears that GM's burn rate may be as high as $4 billion a month, and that is before we necessarily even hit bottom in the recession. This should be absolutely unsurprising, as GM was burning through about $2.5 billion a month of cash pre-recession, when times were good.
It is just incredible that Congress and the Administration (old and new) are spending this much money to help GM management hang on to their jobs and to protect GM bondholders. GM assets are not going to go away in a bankruptcy, but they may end up in hands that are more capable of using them productively. Just to get one tiny glimpse of the incompetence at work here, note this:
Henderson also disagreed with United Auto Workers President Ron Gettelfinger who said on Monday that that a mid-February deadline for General Motors and Chrysler to complete their restructuring plans may be "almost unattainable" and that the automakers may have been set up to fail.
So, through the fairly strong economy of the last several years, GM has been burning through cash but did not see the need to have a restructuring plan (for most companies, having an operating cash flow deficit at the top of the business cycle is a pretty big red flag, but apparently not so at GM). GM managers showed up in Washington to demand taxpayer money, and still didn't have a plan. Chagrined, they showed up again to beg humbly for money, and they still didn't have a plan (and frankly lie about their likely cash burn rate). Three months later, in February, they may still not have a restructuring plan.