Carmakers Report Losses As They Burn Cash - Download Free Phim, Nhac, Phan Mem, Karaoke

conmeo · #1 (**permalink**) 11-07-2008, 11:26 AM

DETROIT — General Motors is edging closer to running out of money, as slumping sales and deteriorating economic conditions drove the automaker to a larger-than-expected loss of $4.2 billion in the third quarter, excluding a one-time gain.

G.M. also said that it was suspending its merger talks with a crosstown rival, Chrysler, in order to concentrate on stabilizing its own business. “We’ve set aside consideration of such a transaction as a near-term priority,” G.M.’s chairman, Rick Wagoner, said

The carmaker’s results came on the heels of similar dismal quarterly earnings from the Ford Motor Company, raising new concerns about the prospects for survival of the two largest American automakers.

G.M. said its revenue in the third quarter declined 13 percent, to $37.9 billion, compared with $43.7 billion a year ago on weak demand in its core North American and European markets.

Including the one-time gain, the loss was $2.5 billion, or $4.45 a share, compared with $42.5 billion, or $75.12 a share, in the quarter a year ago, a period that included a noncash charge of $38.3 billion on deferred tax assets.

The company also reported that it burned through $6.9 billion in cash during the quarter, and it ended the period with just $16.2 billion in cash reserves.

The rapid depletion of its cash position puts G.M. perilously close to dropping below the level needed to finance its operations.

G.M. said it had identified $5 billion in new actions to conserve cash, on top of an earlier plan to bolster its liquidity by $15 billion.

Still, G.M. said that it “will fall significantly short” of the cash needed to run its business in the first half of 2009 unless economic conditions improve and the company gets access to financial aid from the federal government.

“Even if G.M. implements the planned operating actions that are substantially within its control,” the company said, “G.M.’s estimated liquidity during the remainder of 2008 will approach the minimal level necessary to operate its business.”

Earlier, the Ford Motor Company said that it burned through $7.7 billion in cash in the third quarter, leaving it with $18.9 billion at the end of September, as vehicle sales in the United States plunged amid historically weak levels of consumer confidence and tight credit markets that have prevented some consumers from obtaining loans.

Ford’s automotive business lost $2.9 billion in the quarter, and the company announced more cuts to conserve cash, including an additional 10 percent reduction in salaried payroll costs and lower capital spending.

Over all, Ford said it lost $129 million in the quarter, or 6 cents a share, helped by a $2 billion gain as it shifted some retiree health care liabilities to a trust run by the United Automobile Workers union. In the same period a year ago, Ford lost $380 million, or 19 cents a share.

Excluding that gain and other one-time items, the company lost $2.7 billion. Its revenue was $32.1 billion, down from $41.1 billion in the third quarter of 2007.

“The global auto industry is facing unprecedented challenges,” Ford’s chief executive, Alan R. Mulally, said. “But we are absolutely convinced that we have the right plan and are taking the right actions to weather this difficult period. In these challenging times our plan is more important than ever.”

Ford said it expected to increase its cash on hand by $14 billion to $17 billion in the next two years with its new round of cutbacks. The company will eliminate as many as 2,200 salaried jobs by January and end merit-based raises, bonuses and investment contribution matches for those who remain. It also plans to reduce global vehicle inventories, delay development of “a few select vehicles” and sell more noncore assets. The company said it remained on track to reduce fixed costs this year by $5 billion.

Mr. Mulally said the additional actions were necessary because “we now believe the industry downturn will be broader, deeper and longer than previously expected.”

Underscoring the dire circumstances facing the industry, the chief executives of G.M., Ford and Chrysler met with Nancy Pelosi, the House speaker, and Harry Reid, the Senate majority leader, on Thursday about an emergency loan package. The meeting focused on a request by automakers for up to $25 billion in loans to help the companies get through the worst vehicle market in 15 years and avoid bankruptcy protection.

Mr. Mulally said Ford was hopeful that the government would step in but was not factoring that into its planning.

“We are not assuming that kind of help from the U.S. government at this time,” he said Friday. “We are absolutely going to continue to dialogue with the government and others, if things deteriorate, to keep this very important industry going.”

The loan request is in addition to $25 billion in low-interest loans administered by the Energy Department to assist automakers in developing more fuel-efficient vehicles.

Automakers have been battered by a weak economy, rising gas prices, a sharp shift away from their most profitable products and a credit crisis that has emptied dealer showrooms. The stunning falloff has affected all automakers, as shaky consumer confidence and the inability of many eager shoppers to get loans because of tight credit drove sales down 31.9 percent in October compared with the period a year ago.

Ford lost $8.6 billion in the first half of 2008. Its sales in the United States are down 18.6 percent this year through October.

G.M. lost $18.8 billion in the first six months. The company’s global sales fell 11.4 percent in the third quarter, with most of the damage done in the slumping vehicle markets of North America and Europe.

A lack of available credit for consumers has hurt all automakers this fall, but G.M. has been particularly hard hit by the problems of the finance unit GMAC Financial Services.

GMAC is controlled by Cerberus Capital Management, which has a 51 percent ownership stake. G.M. owns the remaining 49 percent. GMAC reported a $2.52 billion loss in the third quarter, mostly because its lack of access to available capital choked off the flow of auto loans to G.M. customers.

As a result, G.M.’s dealers have been increasingly unable to finance sales to even creditworthy customers. In October, G.M.’s United States sales plunged 45.1 percent, compared with a 31.9 percent drop for the overall industry.

Those declining sales have cut sharply into G.M.’s revenues and crippled its previously announced turnaround plans.

With the company burning through cash, G.M. said in July that it would increase its liquidity by cutting costs by $10 billion, and by raising $5 billion through new borrowing and asset sales.

But the company was unable to take on new debt, and has been unable to sell any major assets like its Hummer brand.

With revenues declining and its cash reserves rapidly diminishing, G.M. began looking for a merger partner this summer, according to people with knowledge of the company’s actions.

Mr. Wagoner first approached Ford, but its leadership rejected the overtures. In September, G.M. began talks with Chrysler, which is also controlled by Cerberus.

Those talks have now been suspended.

In a statement on Friday, G.M. said, “While the acquisition could potentially have provided significant benefits, we have concluded that it is more important at the present time to focus on our immediate liquidity challenges, and accordingly, we have set aside consideration of such a transaction as a near-term priority."

Chrysler said in a statement that it was still in the market for an alliance.

“As an independent company,” Chrysler said, “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."

Mr. Wagoner and other G.M. executives have repeatedly vowed that the automaker will not seek bankruptcy protection.

Analysts, however, believe that without an infusion of capital from the government, G.M. will exhaust its cash reserves next year.

For its part, Ford has reacted aggressively in recent months to the downturn, announcing a plan to convert three truck plants so they can build small cars instead and to bring six fuel-efficient vehicles to the United States from Europe in the next few years.

It is beginning a major new-product blitz, introducing a redesigned version of its stalwart F-series pickup this fall and more revamped models, including new versions of the Taurus and Mustang, next year. It is counting on strong sales of the F-series, despite lessened demand for trucks, to lift its short-term fortunes.

Any momentum that Ford has been building, though, took a big hit last month when its largest shareholder, the casino mogul Kirk Kerkorian, began selling off his stake. Mr. Kerkorian had previously expressed confidence in the company and in the leadership of Mr. Mulally, and that support pushed shares of the company to more than $8 in May. But the company’s stock hit a 26-year low of $1.88 last month.

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