General Motors (GM) will take “every action we possibly can” to avoid bankruptcy, president and chief executive Rick Wagoner said on Friday after warning that the US automaker could run out of cash in the first half of next year.
“We’re convinced the consequences of a bankruptcy would be dire and extend far beyond General Motors and therefore we are going to take every action we possibly can to avoid it,” Wagoner said in a conference call. “We need to find a way to get through this and that is really our focus.”
For the third quarter, GM announced a loss of US$2.5 billion and said it had burnt through another US$6.9 billion in cash during the three-month period. The company warned that its estimated liquidity during the remainder of this year “will approach the minimum amount necessary to operate its business.
“Looking into the first two quarters of 2009, even with its planned actions, the company’s estimated liquidity will fall significantly short of that amount,” the company said in a statement giving its starkest warning yet.
To survive, it said it would need “significantly” improved market conditions — highly unlikely in the current economic climate — or help from the government, suppliers or other investors.
Wagoner said one example of a way to help avoid bankruptcy was a request that he and other automakers made on Thursday for US$25 billion in loan guarantees from the federal government.
“We’ve asked for funding support to address” the impact of the credit crisis on the automotive sector “in the spirit that significant funding support went into the financial sector,” he said.
Asked about whether a sale of GM was a possibility, Wagoner said: “That option hadn’t come up, but I would say we’re going to continue to scheme any ideas we can.”
While GM said it would do everything it could to cut costs and raise revenue by advancing the sales of assets, the automaker said on Friday it had suspended takeover talks with Chrysler.
“GM has recently explored the possibility of a strategic acquisition that it believed would generate significant cost reduction synergies and substantially strengthen GM’s financial position in the medium and long term, while being neutral or modestly positive to cash flow even in the near term,” the company said, without naming Chrysler.
“While the acquisition could potentially have provided significant benefits, the company has concluded that it is more important at the present time to focus on its immediate liquidity challenges and, accordingly, considerations of such a transaction as a near-term priority have been set aside,” GM said.
Chrysler reiterated on Friday that it “neither confirms nor discloses” the nature of its private business meetings.
In a statement after the GM announcement, the No. 3 US automaker said it continued to focus on profitability in the challenging economic and market conditions.
“As an independent company, we will continue to explore multiple strategic alliances or partnerships as we investigate growth opportunities around the world that would aid in our return to profitability,” Chrysler said.
Separately, embattled US automaker Ford Motor Co warned of tough times ahead as it reported heavy financial losses and plans to slash an additional 10 percent from its salaried North American worker costs.
“We now believe the global economic and industry slowdown will now be broader, deeper and longer than previously expected,” Ford president and chief executive Alan Mulally said in a conference call.
Mulally said he expected demand to weaken further next year before recovering in 2010.
He said Ford would continue to trim costs and production in response to weakening demand, although it does not currently have plans to close additional factories. Ford was able to narrow its net third-quarter loss to US$129 million from US$380 million in the third quarter of last year through major cost-cutting measures, including wiping US$2 billion in health care costs from its books as a result of a recent labor agreement, the No. 2 US automaker said in a statement.
But its revenues fell by nearly US$10 billion to US$41.1 billion in the third quarter as sales plummeted.
The company burned through US$7.7 billion in cash to keep its operations going in the third quarter and said it was looking for new sources of financing to help maintain its operations. It now has just US$18.9 billion remaining in its cash reserves and access to a line of credit of US$10.7 billion.
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