Damodaran values GM

Valuation expert Aswath Damodaran says you don’t need fancy equations to value GM:

Has GM taken good projects? Of course not.

How much money should GM be able to borrow? Nothing! You already are losing billions.

How much should they pay out in dividends? Nothing. They don’t have the cash flow.

What should they be worth? Probably nothing. We’re done.

So why’s the government refusing to do the obvious: let GM fail and (hopefully) allow creative destruction to find value in some of the pieces? How about, for example, repurposing some of GM’s workers and machinery to build railcars? America could sure use a rail system like Europe’s. The trains running from my home in Stamford to Manhattan are literally falling apart. Every few weeks the train bringing my wife home from Manhattan is delayed an hour or so because it broke down en route.

Posted by James on Tuesday, March 03, 2009