Ford, GM Losses Hit Harder Than Anticipated; Automakers Seek $50B in Federal Aid
The latest US automaker to report dismal results, General Motors posted a bigger than expected loss for the third quarter. Earlier Friday, Ford posted a worse-than-expected $2.98 billion quarterly operating loss and told investors that it would look to cut salary expenses by 10 percent, a move that follows a 15 percent cut earlier this year.
The adjusted loss was $7.35 a share, well more than analysts estimates of $3.70 a share. Revenues were $37.9 billion, below estimates, while the cash-burn rate more than doubled to $6.9 billion for the quarter.
GM's stock was halted briefly before the company announced the latest results. When trading resumed, it fell sharply
That news came the day after the heads of GM, Ford and Chrysler—once called the Big Three due to their dominance of the industry—went to the US Congress seeking $50 billion in federal aid to help them ride out the crisis.
GM, however, hinted that talks to merge with Chrysler had ended.
GM, Ford and Chrysler are burning through cash quickly as they struggle to survive a sharp global downturn in demand for cars that is threatening the future of the U.S. auto industry.
But the pain is not limited to Detroit, as even Japan's Toyota, now the world's No. 1 automaker, saw its shares plunge on Friday after it warned this year's profits would be the lowest in 13 years.
GM said improving its liquidity position remains a top priority for the company.
In response to changing conditions, GM has taken steps to improve its liquidity by $20 billion through 2009. To date, $10 billion in internal operating actions have been completed or are on track for completion or are on track for completion by the end of next year.
However, the company said that even with these actions, its liquity for the remainder of this year "will approach the minimum amount necessary" to operate its business.
Looking into the first half of next year, even with these plans, the company's estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions "significantly improve."
GM said it needs receive substantial proceeds from asset sales, take more aggressive working capital initiatives, gain access to capital markets and other private sources of funding, receive government funding under one or more current or future programs, or some combination of these.
Published on November 7, 2008
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