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Livernoisyard
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Username: Livernoisyard

Post Number: 949
Registered: 10-2004
Posted From: 69.242.223.42
Posted on Monday, June 26, 2006 - 6:16 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Is GM really only worth $10/share?

GM Still Looks Weak, Says Analyst

Market Scan
Mary Crane, 06.26.06, 2:51 PM ET
Banc of America analyst Ronald A. Tadross said General Motors' tactics to fix its business won't work and advised investors to sell on expected production losses.

"The company's product cycle is at a peak, earnings-per-share quality is weak and the stock is expensive, in our view," Tadross wrote in a report to investors Monday.

"We believe GM management is glossing over the current and future cost of rightsizing the business for the lower share."

GM's suggestion that it might tap into a $4.5 billion secured credit line signals that its $13 billion in cash, as well as assets from its $16 billion in Voluntary Employees Beneficiary Association (VEBA) fund, aren't enough to brace the company against what could be some "serious cash burn" at the end of the year, Tadross said.

Why the cash burn? A possible 8% drop in production in the back half of the year, Tadross forecasted, as GM's production falls in line with the company's negative sales, its product pipeline peaks and as its balance sheet hurts GM's ability to compete.

Once GM's production falls, Tadross said he expects the stock market to have a hard time finding alternative ways for GM to stop the cash burn.

Tadross said GM (nyse: GM - news - people ) was his least favorite stock pick in the auto sector, rated "sell" with a $10 price target.
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Jerome81
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Username: Jerome81

Post Number: 1031
Registered: 11-2003
Posted From: 64.142.86.133
Posted on Tuesday, June 27, 2006 - 3:26 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

I am no financial expert, but I do follow the auto industry extensively.

The only way I see a $10 price target is a Delphi bankruptcy. Then I see it going way below that. If that doesn't happen, it will stay above $10.

Lets see if I'm right.
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Mikeg
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Username: Mikeg

Post Number: 86
Registered: 12-2005
Posted From: 69.136.155.244
Posted on Tuesday, June 27, 2006 - 6:34 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

I agree with Jerome81 that it could happen if the Delphi bankruptcy judge voids Delphi's union contracts and the UAW strikes, taking down a vulnerable GM (not likely to happen before the court decision date, which was recently postponed to Feb. 2007).

It could also happen if the Delphi negotiations drag on and the Wall Street analysts like Mr. Tadross (modern-day Delphi Oracle wanna-be's) keep mentioning GM and the "B" word in the same breath, spooking off potential purchasers of GM products.

It could also happen if the 2007 negotiations with the UAW fail to get a new National Agreement that abolishes the infamous "jobs bank".

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