Thursday, June 26, 2008

Is GM Going Bankrupt?

It's almost unfathomable that General Motors could go under. After all, they've been one of America's bedrock companies for generations.

Yet, that's exactly what I am hearing and reading from a variety of sources today. Indeed, predictions are ramping up that GM may be bankrupt by the end of this year.

Maybe this is why Goldman Sachs is placing GM on its "Sell" list--an unprecedented move for Detroit's largest car maker:
Shares of General Motors Corp hit their lowest level since 1955 and dragged down the auto sector on Thursday after Goldman Sachs cut the struggling U.S. industry's largest manufacturer to a "sell" rating and warned it would have to raise capital.

The panicky slide in GM (NYSE:GM - News) shares capped a period of growing concern about liquidity risks to U.S. automakers and suppliers from a domestic auto market reeling from record gas prices and the impact of a housing slump and tighter credit.

The Goldman Sachs warning, including the unusual "sell" call on the U.S. auto industry's largest player after a period of sharp stock price declines just ahead of the close of the second quarter, prompted selling across the sector.
Then again, should we really be surprised that a company that based most of its business model on cheap oil could fade away into the abyss of those who lost the big bets on sprawl...