As Ford and GM Bleed Cash, A More Urgent Push for Loans

Ford reported a $129 million (6 cents a share) third-quarter net loss, compared with a loss of $380 million (19 cents) a year earlier.

The American giants were not the only automakers to see their earnings suffer in the economic downturn. Across the Pacific, Toyota warned that this year's profits would hit a 13-year low.

As auto sales have dropped dramatically -- to levels not seen since World War II -- automakers have had to dig deeper into their pockets to make ends meet.

Ford's third-quarter revenue fell 22 percent to $32 billion, compared with the same period a year ago. GM's revenue was down 13 percent to about $38 billion.

Previously GM said it was burning through about $1 billion a month. Now it's spending cash at a rate of $2.3 billion each month, moving dangerously close to its minimum operating requirement of $11 billion to $14 billion.

In July, GM announced laid out a plan to improve its cash reserves by $15 billion. Yesterday it added another $5 billion, which included cutting an additional 10 percent cut to its white-collar workforce. The company has also been trying to sell some of its product lines, such as the Hummer.

GM called off its talks with Chrysler about a potential merger -- a union some think might strengthen GM's long-term finances.

"We are cutting to the bone," said Fritz Henderson, GM's president and chief operating officer.

Chrysler said it wouldn't comment on its private business meetings, but its chairman and chief executive Robert L. Nardelli said in a statement that "returning Chrysler to profitability continues to be the key focus of the management team."

Ford's net loss included a $2.3 billion gain as the company transferred the burden of much of its health costs to a UAW-run trust, helping narrow the company's net loss to $129 million.

The company aims to improve its cash situation by $14 billion to $17 billion by the end of 2010. Ford said it would trim 10 percent of its white-collar workforce, suspend matching contributions for 401(k) retirement accounts and take other steps to slow spending.

"A once-a-century crisis is here and automakers are having a hard time coping with it," said Aaron Bragman, an auto analyst with Global Insight.

Less than 24 hours before these announcements, both automakers huddled with House Speaker Nancy Pelosi and Senate Majority Leader Harry M. Reid to request an additional $25 billion loan in a possible November stimulus package. Congress has already approved a $25 billion loan package to foster the development and production of fuel-efficient vehicles.

This week the Energy Department outlined the rules of the program, allowing automakers to begin applying for the funds. But the money probably will be distributed slowly, as it will be allotted for use in specific projects.

"We have taken it as far as we can as an executive branch," Commerce Secretary Carlos M. Gutierrez said in an interview. "If Congress can do something to advance this money to the industry, any ideas to adjust the legislation to unlock those loans, we would be interested in listening."

By the end of the day, GM shares fell 9 percent to $4.36. Ford stock climbed 2 percent to close at $2.02.