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Deutsche Bank Says GM's (GM) Stock Is A Big Fat 'Goose Egg'

November 10, 2008 8:38 AM EST
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Price: $45.19 +1.35%

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    25 Buy, 13 Hold, 1 Sell

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Deutsche Bank downgrades General Motors (NYSE: GM) from Hold to Sell with a $0 price target, saying witout external government intervention GM may not be able to fund its U.S. operations beyond December.

The firm said, "Even if GM's suppliers do not change the company's commercial payment terms, GM's U.S. cash position will likely decline to less than $5 bn by late December, and we believe that this level could be overwhelmed by payables coming due in early January."

Deutsche Bank said the U.S. will be compelled to give GM a bailout, saying a recent study by the Center For Automotive research projected an immediate loss of over 2.5 MM jobs, and a $125 bn decline in personal income if the company fails.

Deutsche Bank said a government bailout will not likely help shares, and therfore lowered their price target to Zero. They said, "Even if GM succeeds in averting a bankruptcy, we believe that the company's future path is likely to be bankruptcy-like. We believe that the U.S. may ultimately need to provide GM with at least $10 bn in loans to keep the company afloat through 2009/2010, and potentially as much as $25 bn to fund GM's cash burn and restructuring. While we believe that that GM's secured creditors may get a par recovery, unsecured creditors may get very low recovery. Equity shareholders are unlikely to get anything. We are lowering our target on GM equity to $0."

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