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tudiritenu · at 9:30 AM

Nov. 11 (Bloomberg) -- General Motors Corp., burning cash as U.S. sales slide, is being pushed closer to bankruptcy as it waits to learn whether the auto industry will win a new round of government loans.

Only federal aid can prevent a collapse of the biggest U.S. automaker, analysts including Buckingham Research Group's Joseph Amaturo said before the shares tumbled today for a fifth straight day. Reorganizing in court protection also may not be possible, because the credit crunch has dried up financing.

``Strategic bankruptcy is not an option for GM,'' said Mark Oline, a credit analyst with Fitch Inc. in Chicago. ``This is an issue of operating or not operating.''

The prospect of a forced liquidation raises the stakes for GM's quest for new federal borrowing after saying on Nov. 7 it may run out of operating cash as soon as year's end. GM had $16.2 billion on hand as of Sept. 30, down from $21 billion at the end of June, and needs $11 billion to pay its monthly bills.

``A bankruptcy wouldn't address our immediate liquidity concerns,'' said Renee Rashid-Merem, a spokeswoman for Detroit- based GM. ``It's not an option for GM because it creates more problems than it solves.''

GM's U.S. sales, which fell 21 percent last quarter and 45 percent in October, ``would be devastated'' by a bankruptcy filing, Chief Executive Officer Rick Wagoner said in a Nov. 7 Bloomberg Television interview. The ``unimaginable consequence'' of a bankruptcy ``motivates us to really come up with cash in every way possible,'' he said.

Obama-Bush Talks

Wagoner, 55, is cutting jobs and shutting plants after almost $73 billion in losses since the end of 2004. He told trade publication Automotive News that GM needs an aid package before President-elect Barack Obama takes office in January.

Investors may be concluding that GM won't succeed. The shares slid 27 cents, or 8 percent, to $3.09 at 9:45 a.m. in New York Stock Exchange composite trading. That extended yesterday's plunge to a 59-year low after Deutsche Bank AG said the shares may be worthless in a year.

GM, Ford Motor Co. and Chrysler LLC have asked for $50 billion in aid to weather the worst auto market in 17 years, people familiar with the discussions said. That would be in addition to $25 billion approved in September to help retool plants to build more fuel-efficient vehicles.

`Growing Support'

``There's growing support in Washington, in Congress, to give government assistance to GM and the other automakers,'' said Bruce Zirinsky, co-chairman of the financial restructuring department of Cadwalader, Wickersham & Taft LLP in New York. ``The question is going to be how that gets done and at what price to the shareholders and creditors.''

Obama spoke with President George W. Bush about the urgency for an aid plan at a White House meeting yesterday, aides to the president-elect said.

Earlier, the White House signaled its opposition to a proposal by House Speaker Nancy Pelosi of California and Senate Majority Leader Harry Reid of Nevada for Treasury Secretary Henry Paulson to tap the $700 billion bank-rescue package to aid automakers.

Democratic lawmakers reject Paulson's arguments that he lacks authority to do so, Senator Carl Levin of Michigan said yesterday in an interview.

Legislation's Wording

Should Paulson continue to resist using funds from the financial bailout approach, Congress would craft language to help the automakers and add it to the stimulus plan to be considered next week, Levin said. Treasury spokeswoman Brookly McLaughlin referred questions to the White House.

Bill Ackman, manager of the Pershing Square Capital Management LP hedge fund in New York, said GM shouldn't take government money because ``it has been hamstrung for years because it has too much debt and it has contracts that are uneconomic.''

Ackman, who said he doesn't have a position in GM securities, said yesterday on the Charlie Rose show the automaker should file for a so-called prepackaged bankruptcy with financing to keep operating while in court protection.

That may be difficult. Those debtor-in-possession loans have ``all but shut down,'' CreditSights Inc. said yesterday in a report. The loans, which are paid off when companies exit bankruptcy, aren't being made as lenders become more averse to risk, wrote Chris Taggert, a New York-based analyst.

GM would have no choice but to shut down, said Maryann Keller, an independent auto analyst and consultant based in Greenwich, Connecticut. A GM failure that stops production would cost 2.5 million jobs in the U.S. in the first year, according to the Ann Arbor, Michigan-based Center for Automotive Research.

tudiritenu · at 9:29 AM

Starbucks Corp.’s fourth-quarter results were affected by more than $105 million in restructuring costs but even figuring in those costs, the coffee giant missed analysts’ expectations by a good margin.

The Seattle-based company (NASDAQ: SBUX) reported first-quarter net income of $5.4 million, or 1 cent per share, compared with $158.5 million, or 21 cents per share a year earlier. Figuring in the one-time restructuring costs that Starbucks has previously announced, the company’s adjusted results were net income of $71 million and earnings of 10 cents per share.

Fourth-quarter revenues rose to $2.5 billion from $2.4 billion in 2007.

Analysts polled by Thomson Financial Network expected earnings of 13 cents per share and revenues of $2.58 billion.

For fiscal 2008, Starbucks reported net earnings fell to $315.5 million, or 43 cents per share, from $672.6 million, or 87 cents per share a year earlier. Revenues rose to $10.4 billion from $9.4 billion in 2007. Analysts expected fiscal 2008 earnings of 74 cents per share and revenues of $10.4 billion.

For fiscal 2009, the company basically said that it depends upon the economy and did not provide specific quarterly earnings-per-share targets. The company did say that its U.S. store total will decline by 20 next year, with 225 stores shutting down and 205 new stores opening. Worldwide, the company will open about 700 net new stores.

tudiritenu · at 9:28 AM

NEW YORK -- U.S. stocks fell sharply Tuesday, with the Dow Jones Industrial Average down more than 200 points, as the outlooks from corporations ranging from luxury home builder Toll Brothers and coffee-shop operator Starbucks suggested consumer spending is even worse than feared.

Meanwhile, many financial stocks such as Citigroup, American Express and Goldman Sachs Group traded near multiyear lows as the demands on the U.S. Treasury's rescue package seemed to grow by the hour, with Fannie Mae the latest on the list in need of assistance.

"It doesn't seem to get any better, no matter how much money they throw at the financials," said a trader at a midsize Wall Street firm. "Now [the crisis] has obviously contaminated the economy to a pretty severe extent, and the layoff notices are coming fast and furious. The General Motors/Chrysler/Ford Motor saga is extremely unnerving."

Overall, the Dow Jones Industrial Average was recently down 265, or 3%, to 8608. The broad Standard & Poor's 500 declined 27, or 3%, to 892. The Nasdaq Composite shed 44, or 2.7%, to 1573.

American Express became the latest company in the financial sector to seek bank-holding company status. Shares of the credit-card provider were off 7% to $22.28 as traders interpreted the move as a cry for help from the government.

"Whether institutions like it or not, the only prudent thing to do is assume a protracted worst-case funding scenario," analysts at Oppenheimer wrote in a note to investors. "Funding however was not our primary concern with [American Express]; consumer credit losses have been. Our concerns for [American Express] and other consumer lending-related stocks continue to be worse-than-expected credit losses."

Toll Brothers shares lost 3.6% to $18.27 as it warned that "preliminary signs of stability" in September were "upended" by the financial crisis in October.

Starbucks late Monday said its profit tumbled 97% in its fiscal fourth quarter, hurt by charges to shut stores and cut jobs. The coffee chain said current fiscal year same-store sales could fall between 2% and 7%. Shares were down 3.4% to $9.86.

In an effort to target the crux of the housing and financial crisis, Citigroup will modify the terms of as much as $20 billion in mortgages for borrowers who are current on their loan payments but at risk of falling behind. Roughly 130,000 borrowers are likely to see a reduction in their monthly loan payments, CitiMortgage said. Shares of Dow component Citigroup were off 1.6% to $11.03, trading at their lowest level since 1996.

Embattled mall operator General Growth Properties Inc. saw its stock price fall sharply Tuesday after the Chicago company warned it could file for bankruptcy protection if it doesn't raise more capital to pay down its hefty debt load.

General Growth's share price was down 60% in recent trading.

Tuesday, November 11, 2008

GM's Skid Quickens as Crunch Raises Bankruptcy Threat

Starbucks’ Q4 earnings well below expectations

Gloomy Outlooks Pressure Stocks

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