Dear Mr. Wagoner - Bankruptcy May Be Your Only Option (F, GM)

General Motors (NYSE: GM) and Ford (NYSE: F), the "good, the bad, and the ugly." Well there is no good, just bad and ugly. Today, both struggling auto makers reported dismal quarterly results, but more importantly disclosed how fast they are burning through their cash.

GM reported an insane third quarter loss of $7.35 per share, and said it burnt through $6.9 billion in the quarter. The company has about $16.2 billion left - or enough for 2.34 more quarters at the current burn rate. We all know that October was even worse for the auto makers, with GM reporting a 45% drop in sales, so cash burn could be worse. GM announced plans to improve liquidity by another $5 billion, but said liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business. GM said its liquidity will fall significantly short of what is needed in the first half of 2009 unless the automotive industry significantly improve, it sells assets, takes more aggressive working capital initiatives, gains access to capital markets, or gets a government bailout.

Ford reported a loss of $1.31 per share, and said it burnt through $7.7 billion in the quarter. The company has about $29.6 billion left - or enough for 3.84 more quarters at the current burn rate. But again, we all know October was bad and November will stink too.

GM also announced that it has ended merger talks with Chrysler to focus on its immediate liquidity challenges.

GM's CEO Rick Wagoner has constantly said 'bankruptcy is not an option', but it is looking like that is the end game unless the government gives them a bailout. They simply do not have the cash to survive much longer.

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