GM stock is down over 14% today to a price of about ten bucks a share — lowest point in decades. Why? Well, according to the research-boys at Merrill Lynch, GM's got $27 billion in cash on hand and the automaker needs $10 billion to run the business on a day-to-day basis. To deal with the shortfalls involved with rebuilding the company, they'll apparently need to raise $10-$15 billion in the next year or two. How are they to do that? No one really knows. And that answer caused the usually bullish boys at Merrill to say "Bankruptcy? Yeah, it could happen."
True, Merrill analyst John Murphy's right, it's not out of the realm of possibility. Especially if GM continues to show the downward sales trend they've been showing the past few months, and especially after the car industry carnage we saw yesterday. In addition to the b-word, Murphy also cut GM to "underperform" from "buy" and lowered his price target for the largest U.S. automaker to $7 from $28. So, that's the deal. And now you know.
UPDATE: Kevin Tynan from Argus Research was just on CNBC a few minutes ago and I agree with what he has to say — there's a lot of steps between here and bankruptcy, and frankly it's a long shot for that to happen.