Summary:
On Wednesday, Gm Motors announced that they are partnering up with the SAIC Motors Inc to create new models, and electric cars for China. They are going to share the cost of development and research. The memorandum that states this partnership also says that there is no ownership transfer, and should help both companies create new development opportunities in other rising markets. China is an important country for GM because it has become the largest auto market in the world, and there was a 37% growth in Chinese sales for GM. After announcing bankruptcy in 2009, GM also announced that they will make a filing soon to sell their shares to the public again. However, their common stock will be sold by the four current owners (U.S. Treasury Department, a union-controlled trust fund, and the Canadian government) instead of GM Motors themselves. They had already paid back about 7 billion of their loans, and paid Treasury about $700 million in dividends and interest. They said they are planning to purchase $2 billion worth of shares back from the Treasury, and also have to repay the other $40 billion of their debt to Treasury. The value of the company is predicted to be between $40 billion-44billion by recent reports.
Connection:
The connection to chapter two would be that the four current owners who actually owns GM will have to add the dividends account to their balance sheets if they are going to issue shares of GM to the public again. To calculate their retained earnings they will have to acknowledge the amount of dividends on the balance sheet. The amount of dividends they will have to give in the future will have to follow a GAAP, that is briefly described in this chapter, that dividends are determined and announced by a vote of the company’s board of directors, and creating a dividends declared account, and the amount will be a legal liability for GM. Speaking about liabilities, they have a huge number under that account. As you can see, they still owe $40 billion to Treasury, and definitely other large amounts under other accounts payables. Furthermore, they are planning to repurchase $2 billion worth of shares from Treasury. This transaction will affect the cash flow statement under the financing activities because GM is repurchasing their shares.
The connection to chapter two would be that the four current owners who actually owns GM will have to add the dividends account to their balance sheets if they are going to issue shares of GM to the public again. To calculate their retained earnings they will have to acknowledge the amount of dividends on the balance sheet. The amount of dividends they will have to give in the future will have to follow a GAAP, that is briefly described in this chapter, that dividends are determined and announced by a vote of the company’s board of directors, and creating a dividends declared account, and the amount will be a legal liability for GM. Speaking about liabilities, they have a huge number under that account. As you can see, they still owe $40 billion to Treasury, and definitely other large amounts under other accounts payables. Furthermore, they are planning to repurchase $2 billion worth of shares from Treasury. This transaction will affect the cash flow statement under the financing activities because GM is repurchasing their shares.
Reflection:
General Motors (GM), one of the big three manufacturers of automobiles and automotive goods, has been faltering financially since the United States recession which started in late 2007. In fact, the once great company was on the verge of bankruptcy. The company filed for bankruptcy protection on June 1, 2009. By ordering the issuance of new shares, the automotive giant will be effectively raising large sums of money to get them out of this financial crisis. When a company such as GM is in danger of bankruptcy, I think they are making a good move by issuing new shares in a desperate attempt to raise funds. I think they are on a good way to recovering their loans, since they could already pay back $7 billion and more to their creditors. However, I think many potential investors may avoid buying up the shares of a company that is still financially unstable. Only time can tell whether this move will be enough to bring General Motors out of their financial crisis.
General Motors (GM), one of the big three manufacturers of automobiles and automotive goods, has been faltering financially since the United States recession which started in late 2007. In fact, the once great company was on the verge of bankruptcy. The company filed for bankruptcy protection on June 1, 2009. By ordering the issuance of new shares, the automotive giant will be effectively raising large sums of money to get them out of this financial crisis. When a company such as GM is in danger of bankruptcy, I think they are making a good move by issuing new shares in a desperate attempt to raise funds. I think they are on a good way to recovering their loans, since they could already pay back $7 billion and more to their creditors. However, I think many potential investors may avoid buying up the shares of a company that is still financially unstable. Only time can tell whether this move will be enough to bring General Motors out of their financial crisis.
