GM looking for $5 billion credit line due to U.S. sales decline

In preparation of another decline in U.S auto sales, GM is currently seeking a line of credit of at least $5 billion. The line of credit will also be used to repay other debt. According to the March 31 balance sheet, GM had $23.3 billion in cash, and $14 billion in debt.

The first half of this year saw a major U.S. sales increase from GM compared to a year earlier; 14%. Market share however, fell from 19.6% to 19.2% despite the shedding of Pontiac, Saab, Hummer, and Saturn, and despite an $865 million profit.

The company shows strong signs of promise in China, Russia, India, and Brazil, where most of the industry”s growth is expected to occur over the next decade, but is in the middle of restructuring unprofitable operations in Europe.

Securing this line of credit is crucial to GM”s cause of gaining financial independence, and put the company in a position to not hurry an IPO before the most prudent time.

“As (Ford CEO) Alan Mulally taught the industry, you can never borrow too much cash,” said Rebecca Lindland, an analyst with IHS Automotive. In 2006, Ford borrowed $18 billion, pledging nearly all company assets as collateral.

– By: Stephen Calogera

Source: Free Press