Deutsch Bank: GM's Shares May Become Worthless

General Motors shares plummeted $1, or 23% to $3.36 on the New York Stock Exchange today-their lowest point since 1949- after a Deutsche Bank AG analyst downgraded the automakers stocks, saying they may be worthless in a year. "Even if GM is able to secure immediate U.S. government support, we believe that GM's predicament has the potential to set in motion a sequence of events that would be bankruptcy-like," said Deutsche Bank analyst Rod Lache.

In the note that was sent to investors, Lache wrote that that General Motors' U.S. cash reserves could very well fall to $5 billion by late December meaning that the largest American automaker would virtually run out of cash and would not be able to pay the supplier bills for its domestic operations that come due in January 2009.

And even in the scenario that GM somehow manages to get a government aid, Lache supported that such an action would most likely make unsecured investors such as shareholders make a run for it.

Last Friday, 7 November, GM announced that it lost $2.5 billion (net loss) in the third quarter of the year while burning $4.8 billion in cash. The firm's (global) cash reserves on September 30, 2008, totaled $16.2 billion.
"Even if GM implements the planned operating actions that are substantially within its control, GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business," the company said in a statement.

In order to keep its operations afloat, GM is looking to secure at least $10 billion in government loans.

Via: Freep