[size=150:2eur4utg]GM: Almost out of cash[/size:2eur4utg]
No. 1 automaker posts huge loss - says it has made case to Washington for rescue.
NEW YORK (CNNMoney.com) -- General Motors shook an already embattled auto industry Friday as it reported a huge loss that was much worse than expected and warned it is in danger of running out of cash in the coming months.
GM, the nation's largest automaker, reported it lost $4.2 billion, or $7.35 a share, excluding special items. That's up from the loss $1.6 billion or $2.86 a share it reported a year earlier and was far worse than the forecast of analysts surveyed by earnings tracker Thomson Reuters, which had forecast a loss of $3.70 a share.
But the most shocking news came in its statements about its cash position. GM said it had burned through $6.9 billion during the quarter and warned that it "will approach the minimum amount necessary to operate its business" during the current quarter.
In addition, the company said that in the first half of next year its "estimated liquidity will fall significantly short" of what it needs to continue operating. It said the only thing that would save it would be a significant improvement in economic and automotive industry conditions, help from the federal government, better access to capital markets or some combination of those options. (Siis sosialismilla vetoapua)
The report was by far the most grim assessment by a company that has insisted it is not considering filing for bankruptcy court protection. While the release did not mention the threat of bankruptcy, the outlook appeared to raise the possibility of such a dramatic step.
Dave Cole, chairman of the Michigan think tank the Center for Automotive Research, said the chances that GM would be forced to file for bankruptcy were high unless Congress takes almost immediate action to bail out the industry.
"This is not something that can go on and be dealt with in the next year, it needs to be dealt with in the next few weeks," said Cole. "When your cash is gone, you're gone."
The company announced a series of additional job cuts and spending cuts designed to help it improve its cash reserves by $5 billion. But it warned that even those steps would not be enough unless conditions outside its control improve.
"The company has engaged in discussions with various U.S. federal government agencies and congressional leaders about the ... the need for immediate government funding support given the economic and credit crisis and its impact on the industry, including consumers, dealers, suppliers and manufacturers," according to a company announcement.
GM CEO Rick Wagoner joined the chief executives of Ford Motor (F, Fortune 500), privately-held Chrysler LLC, as well as the president of the United Auto Workers union Thursday afternoon in meetings with House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., to seek support for a wide-ranging bailout package. Both congressional leaders voiced support for additional help for the sector following their meetings.
Among the topics discussed were a $25 billion loan to fund union-controlled trust funds that would be set up in the coming year to cover the health care costs of retirees and their family members. Shifting about $100 billion of those costs from the automakers' balance sheet to the trust funds was a key concession the companies won from the UAW in the 2007 labor deals.
The discussions also touched upon allowing the automakers to tap into the $700 billion bailout of Wall Street firms and the nation's banks that was passed by Congress last month. Treasury has so far rejected auto-industry inquiries about accessing that pool of money.
The automakers also renewed their pre-election request to double the $25 billion low-interest loan program approved by Congress, as part of energy legislation, to help automakers convert to making more fuel-efficient vehicles in an effort to meet the demands of car buyers and new federal rules.
Shares of GM (GM, Fortune 500), whose trading was halted ahead of the announcement, fell 16% after they resumed. To top of page