GM - As the Clock Ticks: 1st Quarter, Saturn, Shareholders, GMAC Hot Topic

The maelstrom that's GM's world these days has been sucking down equity and spewing out wreckage this week. The company extended its run of quarterly negative earnings reports to seven, sustaining a net loss of $6 billion since the first of the year while burning through $10.2 billion.

Shareholders face wipe-out

As one of the Dow Jones 30 Industrials, GM has long been a bellwether of America's economic fortunes; but the company's latest plan for equity distribution would all but wipe out its remaining share holders with a 100 to one reverse split. Plans submitted to the Securities and Exchange Commission call for flooding the market with some 60 billion shares. The net result will be to drive GM's share price to a penny after which remaining shareholders will receive one share worth $1 for every 100 shares previously owned. Current share price is hovering in the $1.60 area.

Saturn suitors may include Penske, Nissan

Penske Automotive Group, Inc. and Nissan Motor Company are privately discussing a joint venture to acquire the Saturn brand and its network of nearly 400 U.S. dealerships close sources say. Roger Penske said this week his company has "looked at Saturn" but would not elaborate.

Penske currently runs a unique U.S. distribution network for Daimler's Smart line of microcars. Called "plug and play" by Penske execs, Smart cars are ordered online. The vehicles are then manufactured to customer specs and delivered to Penske dealerships for fulfillment. In acquiring Saturn's dealer network, Penske would then need to form a joint venture with one or more manufacturers. Enter Nissan.

Nissan's participation might involve rebranding cars it builds in North America as Saturns and distributing them through the Penske network – perhaps in the "plug and play" mode.

GM is accepting bids for Saturn until June 1 - a red letter day on the company calendar - with plans to divest itself of the brand by the end of the year. Saturn brand manager Jill Lajdziak says proposals are being evaluated with the field to be narrowed over the summer. GM has said it will provide product through the end of the calendar year and perhaps longer with a manufacturing contract from the new owners.

GMAC must come up with $11.5 billion

GMAC is finding there are strings attached to the $5 billion in TARP funds it's received since being designated a "banking institution". The government's much anticipated "bank stress test" results indicate GM's financial arm must come up with $11.5 billion - the capital cushion required to weather with no further TARP assistance the worst-case scenario of an extended recession.

Only Bank of America and Wells Fargo among the nation's largest banking institutions are being required to raise more capital than GMAC. Although a separate company from GM, GMAC's total business is impacted by auto financing, specifically by GM and, more recently, Chrysler customers. With both automakers's facing dramatic reductions in dealerships and, potentially, customers plus lower values for repossessed, leased and trade-in vehicles, GMAC's immediate income prospects remain grim. The limited nature of its business and low quality of its loans will make it difficult for GMAC to attract new investment, putting its viability at further risk.