GM Considers Cash-Raising Options to Get Through '09

In Shanghai, China, a man walks pasts an advertisement showing a Buick Excelle. GM is the biggest overseas automaker in China.
In Shanghai, China, a man walks pasts an advertisement showing a Buick Excelle. GM is the biggest overseas automaker in China. (By Qilai Shen -- Bloomberg News)
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By Frank Ahrens
Washington Post Staff Writer
Tuesday, July 8, 2008

General Motors needs cash. Lots of it, and fast.

The struggling Detroit automaker, clinging to its slim sales lead over Toyota, needs at least $10 billion to fund the company until a projected return to profitability in 2010, analysts say. The company is beginning to reap the rewards of labor concessions given in the 2007 contract, but those may not be enough to meet the company's cash needs, analysts say.

GM said yesterday that it believes it has "sufficient liquidity and financial flexibility to meet its 2008 funding requirements," spokeswoman Renee Rashid-Merem wrote in an e-mail.

But what about next year?

One possibility bouncing around Wall Street is splitting sluggish GM North America from its growing international division and spinning off the latter in an initial public offering.

But even though GM is considering a number of options -- including the possibility of further layoffs and delaying capital expenditures -- such a split-up/spinoff is not even on the table, said a source close to the company who spoke on the condition of anonymity because internal discussions are underway.

Another cash-raising scenario has GM selling off some of its eight vehicle brands: Chevrolet, GMC, Pontiac, Saturn, Buick, Cadillac, Saab and Hummer. GM said last month that it will explore a sell-off of the gas-guzzling Hummer line.

But if GM tried to sell one or more of its legacy brands, such as Buick or Cadillac -- which could raise billions in cash -- the process would be much harder than selling Hummer.

"They are woven together in a fabric," said David E. Cole, chairman of the Center for Automotive Research. "Trying to take a chunk out of the fabric is pretty difficult to do."

In other words, the days of being a "Buick man" or a "Pontiac family" might be over for many U.S. car buyers, but not for GM.

For the better part of the past century, when GM owned as much as 50 percent of the U.S. auto market, customers were GM lifers. A young man was introduced to GM with his first car, often a sporty Chevy. As he aged and advanced in income and status, he moved up the GM ladder, trading in his Chevy for a Pontiac, then Buick, Oldsmobile and, once he had reached the rarified air of upper-middle management, a Cadillac.

Other GM customers would pick a brand, say, Buick, and buy nothing but Buicks, bad-mouthing Oldsmobiles and Pontiacs, not knowing or caring that, under each brand's signature chrome, they were much the same car. (For a long time, however, each division produced its own engine, which increased brand loyalty. When soaring Oldsmobile sales in the 1970s led GM to substitute Chevrolet engines for the beloved high-performance Rocket V-8 engines, GM took a public relations hit from Olds loyalists once they discovered the difference.)

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