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Sat, May 09, 2009 - Page 10 News List

GM posts Q1 loss of US$6bn, cuts production by 40%

AFP , WASHINGTON

The General Motors world headquarters building is pictured on Thursday in Detroit, ­Michigan. GM posted a US$6 billion loss for the first quarter of this year and announced more plant closures.

PHOTO: AFP

General Motors (GM) reported a US$6 billion first-quarter loss on Thursday as global sales crashed amid speculation that the troubled US auto giant may soon collapse.

GM slashed global production by more than 900,000 vehicles, or 40 percent, as it tried to rein in costs and inventories but still burned through a whopping US$10.2 billion in cash after revenues were nearly cut in half.

Concern that GM will be forced to declare bankruptcy helped push the automaker’s global market share down to 11.2 percent from 12.4 percent in the first quarter of last year, chief financial officer Ray Young said.

“We need to get this thing behind us and make sure the story regarding General Motors is not about the restructuring but about the great products we have,” Young said in a conference call. “We’re focusing very much on the cost side of the business but once you start losing revenues, you get into a vicious circle from which you can’t recover.”

Debt-ridden GM has taken more than US$15 billion in government loans and faces a June 1 deadline to complete a major restructuring plan or be forced to follow its rival Chrysler into bankruptcy court.

Young declined to speculate on the likelihood of bankruptcy, but said: “If we had to go through an in-court process, it is an imperative for us to go in and out quickly.”

Excluding special items, GM reported a net loss of US$5.9 billion, or US$9.66 per share, compared to a US$381 million loss or US$0.67 per share in the corresponding quarter last year.

Most analysts had expected the largest US-based automaker to post a loss of US$11.05 per share, meaning a decline of more than US$6.7 billion.

GM said its first quarter revenue plunged 47 percent to US$22.4 billion from US$42.4 billion in the same quarter last year.

“We continue to see a 60 to 80 percent chance of a GM bankruptcy,” said JP Morgan Chase analyst Himanshu Patel. “While the GM equity today is largely uninvestable, we increasingly believe GM may emerge substantially stronger from a bankruptcy — provided the Chapter 11 process is not overly drawn out — particularly given the scope of targeted dealer cuts.”

GM chief executive Fritz Henderson remained confident in a rapid overhaul plan unveiled last month aimed at staving off bankruptcy.

The new plan, which calls for more job cuts and an end to the fabled Pontiac brand, aims to ease a crushing debt burden by converting much of the debt to stock — a move giving a combined 89 percent of GM shares to the US Treasury and the United Auto Workers union.

Bondholders would get 10 percent of the company’s stock through an exchange of US$27 billion in outstanding bonds, leaving the existing common shareholders with just 1 percent of GM.

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