GM Motors on the verge of "BANKRUPTCY" ?

Last night i remember i was watching a news bulletin on NDTV and i heard in there headlines that General Motors (GM) of USA is also on its way to bankruptcy. The news really shocking, however even they don't have much regarding the matter at that moment except that Deutsche Bank analyst Rod Lache on Monday set a target price of zero for GM stock.

However since the news was not so clear at that moment so i tried to search on it whole day today on internet to get some more info and also i wanted to know why this situation created for General Motors, USA? So i have collected few matters after my online research, which i wanted to share with everyone so that the whole scene gets little clear for everyone.

Everyone might be knowing that General Motors Crop. is the largest automaker of USA and in India also General Motors sells its product through brand name Chevrolet.There are more than seven models in India which Chevrolet is selling in India currently.

But then why such a situation of bankruptcy created for General Motors which is one of the largest automaker of the USA and also of the World? The answer is that yet no petition for bankruptcy is filled from General Motors and all news of bankruptcy is an analysis on the company's current earning status.

However, its true that General Motors have asked US Government for aid after saying last week that it may not have enough cash to operate this year. If US Government rejects its petition and no aid is provided to the company then it will go and apply a petition for bankruptcy. But till now speculation are that US Government will give financial aid to the company and save it from being a bankrupt company.
But after that also analysts feel that company dont have bright future and again same scenario will rise after few years. Now the question arises why all analysts are thinking like that?
The answer is due to General Motors release of a dismal third-quarter earnings report, creating uncertain times for 2,640 emloyees (tentative) at the Fairfax Assemply Plant. General Motors (NYSE: GM) reported Friday that it lost $2.5 billion in the third quarter, or $4.45 a share. That compares with a loss of $42.5 billion, or $75.12 a share, last year.

Along that analysts also feels that it has been hamstrung for years because it has too much of debt and it has contracts that are uneconomic and according to analysts the solution id this problem is not to lend more money rather General Motors should to pre-packaged bankruptcy.

According Barclays Capital Analyst, without additional financing, GM’s cash will fall to less than the $11 billion to $14 billion minimum it needs in the first quarter of 2009. He set a target price of $1 for GM stock. The stock was in the $6 range a week ago.

However, Deutsche Bank Analyst Rod Lache, yesterday set a target price of zero, saying that even if GM succeeds in averting bankruptcy, the company’s future path will likely be “bankruptcy-like.”

GM already has implemented several provisions designed to cut costs by 30 percent. GM suspended the company match for its 401(k) plan in the United States, effective Nov. 1, and suspended matching contributions for tuition assistance and other reimbursement programs, also effective Jan 1. Executives will receive no discretionary cash bonuses in 2008.

GM also has announced that it plans to lay off about 3,600 employees at 10 assembly plants throughout the country.

Even GM has announced that the company will lay off workers for an indefinite period at the Fairfax plant on Feb. 2 based on seniority but that the company still is determining a specific number.

GM dropped to its lowest level in 59 years yesterday after a Deutsche Bank AG analyst downgraded the shares and said they may be worthless in a year. The shares have lost 86 per cent of their value this year.

Another reason that found in some blogs is that the company is facing the current situation since company use to over pay its workers that is around $81 for 1 hour as compared to $40 for 1 hour paid by its competitor companies like Hyundai, Toyota, Honda and etc to there workers.

So its one of the news after Lehmann Brothers Bankruptcy, which we have to look forward and there was various analysis and reasons given on various websites for GM bankruptcy but i tried to mainly focus on the main reason for which this situation arises and tried to cover up every important matter in brief. But some one knows something regarding this matter he should leave comment below.