GM reports $2.5B 3Q loss, says running out of cash
Friday, November 7, 2008; 3:22 PM
DETROIT, Mich. -- General Motors Corp. reported a $2.5 billion loss in the third quarter and warned Friday that it could run out of cash in 2009 if the U.S. economic slump continues and it doesn't get government aid.
GM also said it has suspended talks to acquire Chrysler. While it didn't specifically name the automaker, GM said it was setting aside considerations for a "strategic acquisition."
"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," the company said in a statement.
Privately held Chrysler said it won't comment on GM's statement, but added it remains focused on returning to profitability.
GM said its cash burn for the quarter accelerated to $6.9 billion, and government aid will be "essential" because of the slow economy and credit crisis.
If companies run out of cash, generally they can sell assets, cut costs or file for bankruptcy protection to keep creditors at bay while they develop a financial reorganization plan.
But in a conference call with reporters and analysts, GM Chairman and CEO Rick Wagoner said the company will "take every action we possibly can" to avoid bankruptcy.
"We're convinced that the consequences of bankruptcy would be dire," he said, adding that the company will use every source of funding it can.
"We need to find a way to get through this, and that's really our focus."
The company also said it will indefinitely lay off about 3,600 workers beginning early next year as it slows production at 10 of its assembly plants.
The news came hours after Ford Motor Co. said it lost $129 million for its third quarter and will cut about 2,260 more white-collar workers in North America as the industry tries to weather the worst economic downturn in decades. As U.S. and global economies have rapidly deteriorated, auto sales have nearly shut down.
Wagoner had said in a statement earlier that the third quarter "was especially challenging for the auto industry."