GM has a market cap of about $15 billion dollars. Their financing unit, GMAC, is rumored to be worth about $35 billion. That implies GM's auto unit is worth negative $20 billion. Something's not right.
If the financing unit is as profitable as it states, and they weren't historically just long duration over the past 10 years, why not let someone buy just the mortgage and insurance portions of GMAC, which make about $1.7 billion a year, for $20 billion. Then the owners of GM could let GM go bankrupt and still make a bundle. Perhaps these units were just long the yield curve, and in today's flat yield curve environment, their earnings are not as robust as they appear.
If the financing unit is as profitable as it states, and they weren't historically just long duration over the past 10 years, why not let someone buy just the mortgage and insurance portions of GMAC, which make about $1.7 billion a year, for $20 billion. Then the owners of GM could let GM go bankrupt and still make a bundle. Perhaps these units were just long the yield curve, and in today's flat yield curve environment, their earnings are not as robust as they appear.
HedgeFundGuy - am 2005-11-07 03:53 - Rubrik: Finance
Bill Tozier (guest) meinte am 7. Nov, 12:43:
At least one chunk of the problem may be the appalling business with the Fiat acquisition, and the real [put] option "strategy" that was used in the acquisition.
Robert Schwartz (guest) meinte am 7. Nov, 23:32:
What is not right is that GM has off-balance sheet liabilites for retire benefits, enviromental problems and other things that leave a huge hole.
