GM Going Bankrupt? I Don't Buy It And Here's Why

GM logo, General Motors logo
GM logo, General Motors logo

Just when you think, "How much worse can it get for General Motors, along comes a day like yesterday. When Merrill Lynch downgraded the stock and said "bankruptcy is not an impossibility" for the automaker what was already a horrific slide became even worse.

The sell-off of GM stock makes you think it's a foregone conclusion this company is going belly up.

Well, for those of you writing off GM, be careful. This company may be in a crisis, but that does not mean bankruptcy is likely in the near future.

How can I be so sure? My belief is based on two things. First, this company has plenty of cash to get through this year and if it needs more next year, it has several options. The bottom line is this company has the resources to ride out this terrible stretch. At some point these guys will need to get the revenue and sales to support their turnaround, and whether or not that happens is still unclear. But before they throw in the towel, they have the time and resources to make a serious run at turning things around.

The second reason I don't expect GM to go bankrupt is because this company's leaders will likely act on their own, before they have someone else (creditors) call the shots. If that means finding an alliance or third party to inject more money into the company, then that's what they'll do. You get the idea. They'll pick their poison before letting someone else do it.

Bottom line: be careful buying into the bankruptcy talk surrounding GM. Sure these guys are in major financial bind, and the future looks bleak. But they can get out of it and will try several options to raise cash before chapter 11 become the best option.

Questions? Comments?