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GM’s Make Or Break Earnings Report


Wall Street and the entire nation will be watching GM on Thursday. The auto giant reports earnings, and many wonder, will it be their last before bankruptcy?

GM is about four weeks away from its June 1st decision day; that is the day it must present a viable restructuring plan or be forced into Chapter 11.

Avoiding Bankruptcy

Some market watchers including our own Guy Adami believe that bankruptcy is all but inevitable. However, new GM CEO Fritz Henderson said Monday in an interview with The Associated Press that he still thinks the company can restructure outside of bankruptcy.

The toughest challenge, Henderson says, will be getting 90 percent of the bondholders to sign on. As you might know, in order to avoid bankruptcy the government has mandated that GM persuade 90 percent of its bondholders to accept a deal in which they exchange roughly $27 billion in debt for 10 percent of GM's stock.

If its restructuring is successful, GM shares would be at least 50 percent owned by the U.S. government, with the United Auto Workers getting around 39 percent, bondholders 10 percent and current stockholders 1 percent.

Getting Leaner & Meaner

GM also plans to thin its dealer ranks by 2,600 by 2010, and is planning to force up to 1,200 dealers to leave the business for not meeting capital requirements and sales and customer service goals in their franchise agreements.

On top of that, GM also plans to ax its Pontiac brand and sell off or wind down Hummer, Saab and Saturn.

What To Watch

It’s no secret that GM is expected to post big losses. Investors will be particularly eager to hear about the business going forward.

Analysts will look for updates on GM's cash burn, its offer to exchange $27 billion in bond debt, and the company's prediction for sales through the remainder of the year.

They'll also want to know how GM plans to deal with a number of parts supply companies that are expected to go under when GM and Chrysler temporarily close their factories starting this month.

Ten analysts polled by Thomson Reuters expect a first-quarter loss of $11.05 per share on revenue of $20.2 billion.


Meanwhile, it's worth noting that rival Ford is diving into the electric car market. According to the New York Times, "Ford is investing $550 million to turn a factory that was dedicated to making large and fuel-hungry sport utility vehicles into a modern and scalable small-car plant that will eventually produce an all-electric version of the Focus."

Checking Auto Sector

Read More:

> GM expected to report huge 1Q loss, sales slump

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Trader disclosure: On May 6th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (WFC), (GS), (SDS), (AGU), (PCLN), (GE); Seymour Owns (AAPL), (BAC), (F), (FXI), (RIG), (TM), (TSO); Finerman's Firm Owns (BAC) Preferred Shares And Is Short (BAC) Stock; Finerman's Firm Owns (CSCO); Finerman's Firm Owns (MSFT) And (MSFT) Put Spreads; Finerman's Firm Owns (PM); Finerman's Firm Owns (PBR); Finerman's Firm And Finerman Own (RIG); Finerman's Firm And Finerman Own (WFC) Preferred Shares; Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO); Najarian Owns (BX) Call Spread; Najarian Owns (DFS) Calls; Najarian Owns (EWZ) Call Spread; Najarian Owns (FIG); Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (MCD) And Is Short (MCD) Calls; Najarian Owns (NVDA) And Is Short (NVDA) Calls; Najarian Owns (TSO) Call Spread; Najarian Owns (XLI) Put Spread; Najarian Owns (XHB) Call Spread; Najarian Owns (XLF) Call Spread; Najarian Owns (BYD) Calls

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