With the announcement on Thursday that General Motors is dangerously close to bankruptcy, according to its auditing firm, Deloitte & Touche, the thought of what may happen to its light- and medium-duty truck businesses should be paramount to industry insiders.
GM has tried in the past to sell its medium-duty business to Navistar, but that deal fell through last year. Then, in September 2008, Isuzu emerged as a potential bidder. That, too, has not materialized. Then, late in February, Navistar’s CEO & president, Dan Ustian, said his company was still interested.
There seems to be plenty of interest, but no actual buyers. Why?
Well, it’s quite possible that GM has missed out on the chance to sell its medium-duty business altogether. For anyone interested in the business before, why would they buy now? The idea is to buy low, sell high, but more importantly, knowing when to buy and sell. If GM is on the verge of filing bankruptcy, or, even liquidating its assets as the New York Times reports Deloitte & Touche suggests is a possibility in an article this morning, then why buy now?
If you’re Navistar, Isuzu, or any other unnamed potential bidder, the prudent thing seems to be to wait it out. A bankruptcy filing would dramatically lower the value of GM’s assets.
GM has until March 31 to present its plan of viability to President Obama’s auto task force. Reports now say the company needs up to $30 billion for survival. In a regulatory filing, GM admitted the serious situation it’s in. “Our recurring losses from operations, stockholders’ deficit and inability to generate sufficient cash flow to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern,” it wrote.
Like all the automakers, GM misread the marketplace. Because of this situation, and the worsening economic and credit crisis, a real possibility exists that no one will buy the medium-duty business, meaning the potential loss of thousands of vehicles each year that are vital to this nation’s economic future, from the local floral shop that needs the trucks to make deliveries, to municipalities and even small and mid-size delivery fleets.
It’s all about timing.