General Motors has been an American fixture for 111 years, but some warn that might be ending. The Michigan automaker faces tough obstacles ahead critical to its survival.
“[J]im, I know you talk about this, think about this everyday for a living and have a formula regarding this,” Williams said. “But first, what’s going on out there? I heard one analyst today said, ‘GM will go out of business,’ though I know a lot of people disagree with that and it’s a scary thought.”
Goldman Sachs (NYSE:GS) downgraded GM’s stock earlier in the day and that forced GM to a 53-year low and put it at a risk of default. Goldman Sachs also downgraded Citigroup’s (NYSE:C) to a sell on June 26.
“I think GM is a huge part of the problem, [and] as you said, Citigroup,” Cramer replied. “These are companies that need much more cash than they have right now or they can raise – so their stocks keep going lower. Unless we get a break in oil – which keeps going up, food – which keeps going up, or houses – which keep going down – Brian, it’s going to get worse, not better.”
The drop in GM and Citigroup sent the Dow plunging to “its worst June since the Great Depression,” according to Bloomberg on June 26. A June 26 Dow Jones story said some interpreted Goldman Sachs' downgrade to mean the automaker is going out of business.
“We’re going to move in the opposite direction of oil, and General Motors is going to go out of business, at least according to Goldman Sachs,” Art Hogan, chief market strategist at Jefferies & Co. said to Dow Jones.
“I think both of them [GM and Ford] have issues and as I told an elected official from
Chanos, a renowned short seller, has been known for his ability to smell blood in the water. In 2001, he became one of the first to short Enron and profited greatly from the company’s demise. In 2002, Chanos testified in front of the House Committee on Energy and Commerce. He told the committee he saw the fall coming nearly a year before its ultimate collapse.