GM grapples to avoid filing bankruptcy as cash vanishes

[Barefootsies]

General Motors Corp., for 77 years the world's largest automaker and an icon of American industry, revealed a dire financial outlook Friday that has the company teetering on the edge of bankruptcy.

Ford Motor Co. delivered its own grim forecast -- although not immediately as dire as GM's position.

Hemorrhaging cash and with sales dropping to 25-year lows last month, the Detroit automakers announced financial results that show they each are burning through more than $2 billion a month to maintain operations. GM warned that its cash reserves could sink below the minimum level it needs to operate by year's end unless it gets federal aid or can tap other resources.

GM Chairman and Chief Executive Officer Rick Wagoner said the company will take every step possible to avoid bankruptcy -- which GM continues to insist is not an option -- as the automaker attempts to survive the squeeze of a global credit crunch on vehicle sales.

"We're convinced that the consequences of bankruptcy would be dire," Wagoner said. "We need to find a way to get through this, and that's really our focus."

GM, Ford and Chrysler LLC are seeking federal loans to help them weather the financial crisis and move forward to retool their companies.

GM reported a net loss of $2.5 billion in the third quarter and said it burned through $6.9 billion in cash to end September with $16.2 billion in cash. That is just barely above the $11 billion to $14 billion GM said it needs to operate and doesn't include its cash burn from October.

The mounting losses led GM to announce:

? It's putting merger talks with Chrysler LLC on hold.

? It will cut 3,600 hourly workers and eliminate about 2,000 more salaried jobs.

? It will cut costs by $5 billion in addition to its July plan to cut $10 billion in costs and raise another $5 billion through new debt and asset sales.
Immediate assistance needed

"Even if GM implements the planned operating actions that are substantially within its control, GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business," Chief Financial Officer Ray Young said during a conference call with analysts.

By no later than next June, the automaker said, it would fall significantly short of the amount needed to operate.

GM wouldn't say how much cash it had on hand at the end of October, but analysts say they believe the automaker is operating very close to its minimum level and must receive substantial government aid to avoid bankruptcy. GM shares closed Friday down 44 cents, or 9.2%, at $4.36 per share.

Top executives of GM, Ford and Chrysler and the UAW president met with Congressional leaders Thursday to discuss getting a reported $50 billion in loans to help the companies withstand the weak economy and pay for future needs. The money would be in addition to $25 billion in loans that Congress passed in September to help retool auto plants to build more fuel-efficient vehicles.

GM and other U.S. automakers need such aid or the domestic auto industry will fall, taking with it nearly 3 million jobs and demolishing the retirement funds of people throughout the country, analysts said. For every job in an assembly plant, there are 7.5 jobs with auto parts suppliers and other companies.

A traditional bankruptcy wouldn't work for GM, said Jim Hall, director of analysis for 2953Analytics.

"Their contingency plan is they need a government bridge loan," he said. "As soon as they announce a bankruptcy, their buyer base will dry up. Their supplier base will dry up. As soon as the sales drop, there would be dissolution."

Perceptions of running out of cash can quickly turn into reality at a company like GM. At year's end, GM's outside auditors have to say whether there's substantial doubt about the company's ability to be, in business parlance, a going concern. If the auditors make such a statement, GM will violate a number of credit agreements, including at least $6 billion in loans -- which banks could call back immediately. The automaker would either have to get a waiver from its lenders or secure even more loans.
Liquidity plan

In the meantime, GM said it is doing everything within its power to conserve cash without seriously damaging the product plans it views as vital to generating future revenue.

Because of the seizing of credit markets and the precipitous drop in U.S. sales in the last few months, GM has said the plan it announced in July to conserve and raise $15 billion in cash will no longer be enough for the automaker to survive through 2009.

The automaker said it is on track to or has completed most of the $10 billion in cost cuts it announced in July, but the company said it is unable to borrow the $2 billion to $3 billion it planned to borrow and can no longer count on raising $2 billion to $4 billion through asset sales.

The automaker is seeking buyers for its Hummer brand of SUVs, the ACDelco parts distribution division and a manufacturing plant in Strasbourg, France.
More cuts planned

The automaker announced $5 billion in additional cost-cutting actions Friday and said it is now basing its business plan on much lower U.S. sales expectations than it did for its original July 15 restructuring plan.

At that time, GM made its plans based on U.S. industry light vehicle sales of at least 14 million, which at the time seemed conservative to most analysts. In 2007, U.S. consumers purchased 16.2 million vehicles. So far this year, however, the U.S. auto industry is on track to sell only 13.8 million light vehicles.

So GM has adjusted its business plan to be prepared for U.S. light vehicle sales of 11.7 million in 2009 and 12.7 million in 2010.

Based on those new projects and its dwindling cash reserves, the automaker said it amended its July cost-cutting with $5 billion more in cuts. Those include:

? Cutting another $500 million in salaried costs for a total elimination of more than 7,000 U.S. and Canadian salaried and contract employees, including the approximately 5,000 announced July 15.

? Cutting capital spending in 2009 to $4.8 billion from a planned $7.2 billion by reducing program spending.

? Slashing structural costs by $1.5 billion in addition to the $2.5 billion planned in July by further cutting things such as spending to trim the dealer network and engineering expenses.

? Reducing working capital expenses an additional $500 million.

As part of its production cuts, GM on Friday also announced plans to indefinitely lay off 3,600 hourly workers at 10 plants beginning early next year as it slows the rate of production at those plants in response to the slackened consumer demand for new vehicles.

Still, absent a dramatic and unexpected turnaround in the global economy and auto industry, GM said it must have outside help to weather the credit crunch.

"The problems in the auto industry are a direct result of the credit crisis," Wagoner said. "The U.S. government's actions to help stabilize the credit markets and eventually ease the credit crunch are an essential first step to the economy's and the auto industry's recovery, but further strong act

http://www.freep.com/article/2008110...SS01/811080331

[Jai]

does this mean GM CARS will go 50% off and every will buy chinese cars

[pigman]

They will probably sell of a lot of brands.

wouldnt it help if GM stop wasting so much money on advertising???... we all know they exist...they sponsor every sporting event it seems....every 20 mins there is a commercial etc.... i would imagine they would save a bundle if they stopped advertising as much as they did, atleast for the time being.

[EscortBiz]

car companies need to stop making new cars every year and stop making 5000 versions of a car, and with the younger generation wanting a different style car to drive every year offer short term (12mo.) leases.

Dealerships are dead because a new year comes out and they are forced to get rid of everything on their lot, do cars that are a 04 model that last till 08 without chanign the year number so it dont fuck people up.

So many other things they have to do so they can adjust to the current times, but big corps dont like change and they die because the whole world changes and they cant.

[IllTestYourGirls]

That is what happens when you make products no one wants to buy.

[woj]

Originally Posted by IllTestYourGirls

That is what happens when you make products no one wants to buy.

yea, foreign auto makers are doing not even close to that badly...

[IllTestYourGirls]

Originally Posted by woj

yea, foreign auto makers are doing not even close to that badly...

Most if not all of American car companies have seen their market share plummet.

[Wolfy]

My first foreign vehicle was a Mazda MPV that lasted 4 times longer than any other american vehicle I had ever owned... nad I've owned a few. After that, I bought a Nissan SER Spec-V, and I never had a problem with it... I traded that in for my Toyota Sequoia. I've put 80k on my Toyota with one problem: the bolt came unscrewed that holds the drivers side window on the track. I screwed it back on and it's fine.

I'm all about buying American, but at the same time... a smart move for anyone's money is to buy the product with the best value, and that's going to be a Toyota, Honda, or a Nissan over GM, Ford or Chevy any day.

[GetSCORECash]

GM should go into bankruptcy. The government shouldn't step in and lend them money to build cars people simply don't want.

If the government want's to help GM, they should speed up the approval process for US automakers to bring over EU cars which the American consumer is looking for. Ford and GM have great cars in Europe which would easily sell in the US market.

[ninavain]

Originally Posted by LilBro

wouldnt it help if GM stop wasting so much money on advertising???... we all know they exist...they sponsor every sporting event it seems....every 20 mins there is a commercial etc.... i would imagine they would save a bundle if they stopped advertising as much as they did, atleast for the time being.

didn't you vote for McCain???

[The Duck]

This crisis is all just a big charade.

[Drake]

Originally Posted by IllTestYourGirls

That is what happens when you make products no one wants to buy.

Exactly... this is what I don't understand. This market loss trend that has been occuring for more than 20 years. Why didn't they change?

[AlienQ - BANNED FOR LIFE]

Well maybe they should build cars that get good mileage and not try and sell Gas swilling SUV's for 10 years during the Bush Administration.


Fuck them and their over paid CEO's that they pay over 7 figures a year. Yet more college fuck kids that got a diploma at work driving a company into the ground. Anyone with a mother fucking half brain knew that GM cars were shit well long before the Oil crisis. SUV's are just stupid to fucking make. Period.

[AlienQ - BANNED FOR LIFE]

I voted for Obama and all and I know that Obama is going to have to do more bail outs I just hope these bail outs are done well and just not pay off the very people responsible for running the economy into the ground.

THese guys at GM built SUV's from the beginning of the Oil Crisis, these guys at GM Knew a fucking Oil Crisis was on the way long before it happened yet they just kept on building shit cars with horrible gas mileage, providing credit to any dumb dick that was dumb enough to walk on the lot and buy a GM POS Gas eating whore from hell...

[SomeCreep]

General Motors' business has been declining for 30 years. They're not profitable. They've got 3 months of cash reserves, before they need to file for bankruptcy. If GM goes bankrupt, the economy will plunge near depression. Over 1,000,000 jobs will be lost. GM needs $25 billion dollars from the government to sustain themselves.

So now the government is asking, "Is GM's business truly viable? Or will a cash loan only prolong the inevitable?"

Not even soap operas get this good.

[AlienQ - BANNED FOR LIFE]

Originally Posted by SomeCreep

General Motors' business has been declining for 30 years. They're not profitable. They've got 3 months of cash reserves, before they need to file for bankruptcy. If GM goes bankrupt, the economy will plunge near depression. Over 1,000,000 jobs will be lost. GM needs $25 billion dollars from the government to sustain themselves.

So now the government is asking, "Is GM's business truly viable? Or will a cash loan only prolong the inevitable?"

Not even soap operas get this good.

I agree.
Why save a failure in the first place? The GM death is inevitable.
I do not think its much of a worry, other companies will come in and form and make better cars. THe underlying industry of GM will evolve as they will be forced to which will re-create itself.

Originally Posted by ninavain

didn't you vote for McCain???

Yes i did vote McCain...what does that have to do with stating an opinion i have about GM?

[farkedup]

Originally Posted by LilBro

wouldnt it help if GM stop wasting so much money on advertising???... we all know they exist...they sponsor every sporting event it seems....every 20 mins there is a commercial etc.... i would imagine they would save a bundle if they stopped advertising as much as they did, atleast for the time being.

My wife and I were talking about this exact thing and I did a little research. Something like 1.4BILLION is being spent in online advertising by them in 08 who knows TV and sporting events, mags etc

Everybody wanting a sports car KNOWS the corvette is as good as it gets around $50k

Also the guy below this post stated something like 5k types of each car.

Ford got big due to the assembly line and not offering custom options like custom colors and other things and was able to offer vehicels FAR cheaper than the competiton due to simplicity of manufacturing.

those 2 massive problems on top of HORRIBLE contracts with the UAW have all lead to a clusterfuck.

Being here in MI I hear more about contract negotiations than other parts of the country. Those union idiots are always convinced that GM NEEDS them and thats why they refuse to give in to reasonable pay cuts. Fact is EVERY other country will do the work cheaper than those union workers will AND this damn government doesn't tax imports much at all. Tax the hell out of things coming in to make them want to build shit here.

[kane]

I had read somewhere that part of GM (and all the US automakers) problem is the deal they struck with the unions. If I remember correctly they now pay the retirement salaries of more people than actually work for them so they basically are paying two salaries for every worker they have. Things don't go well when that happens.

Add into that when the SUV started taking off they pretty much abandoned trying to make and sell a good car that got good mileage and now that people aren't buying SUVs anymore they are having to adjust on the fly.

[Barefootsies]

Originally Posted by farkedup

Everybody wanting a sports car KNOWS the corvette is as good as it gets around $50k

[farkedup]

Originally Posted by Barefootsies

A sports car is meant for SPORT right? that means track fun. Base manual transmission with just Z51 addon you can get around $42-45k

You will not find a car that can even come close to that base corvette on ANY track other than a drag strip without spending more. M3 coupe is over 50k which is a badass car... Seriously nothing else can compare without costing way more or weighing WAY more.

Mustang GT500? can't handle but can go straightline fast and simply weighs too much to handle properly. I'm a mustang guy but corvettes and mustangs are totally different cars.

[TheSenator]

Sorry, put no money for GM. Let the players sort it out on the free market.

[IllTestYourGirls]

Originally Posted by SomeCreep

General Motors' business has been declining for 30 years. They're not profitable. They've got 3 months of cash reserves, before they need to file for bankruptcy. If GM goes bankrupt, the economy will plunge near depression. Over 1,000,000 jobs will be lost. GM needs $25 billion dollars from the government to sustain themselves.

So now the government is asking, "Is GM's business truly viable? Or will a cash loan only prolong the inevitable?"

Not even soap operas get this good.

We need to worry about the inflation that all these bailouts and inflation packages (stimulus packages) will cause. What good is a $15 dollar an hour job when a loaf of bread costs $20?

[uno]

Originally Posted by Mike33

Exactly... this is what I don't understand. This market loss trend that has been occuring for more than 20 years. Why didn't they change?

I'm having a hard time remembering the last time GM wasn't in trouble.

[uno]

Originally Posted by IllTestYourGirls

We need to worry about the inflation that all these bailouts and inflation packages (stimulus packages) will cause. What good is a $15 dollar an hour job when a loaf of bread costs $20?

I can't wait for old school soviet bread lines!

[Manowar]

they need a bailout ASAP

[crockett]

I dunno.. I still have a 55 Chevy truck sitting in my warehouse. I don't see too many 55 Toyota's or Nissans running around.

The point being the American companies used to make the best and longest lasting cars around. It was in the 70's through the 90's that they turned to shit. The reality is, GM actually turned it's self around with their products in the last 8 years.

The new corvettes are actually pretty nice and well built cars.. I'm not a redneck but the new camaros are pretty damn nice as well and have been getting very good reviews. Chevy/GMC full size trucks are much better than anything Toyota makes. I own a 4 door Toyota Tacoma with every option under the sun. My dad has a full size Chevy 4 door truck and it rides so much better and is much quieter and comfortable. His full size Chevy truck with a V8 actually gets the same gas mileage as my mid size Toyota Tacoma.

The problem is that GM was actually turning it's self around but the economy has actually killed it for them. When the economy is bad, it's hard to rebuild your reputation. So GM is battling two problems it's former reputation and the economy. I've actually been thinking about trading in my Tacoma for a full size Chevy truck. I have no doubght that GM is making a better truck at this point.

It's the years of abuse by the unions that killed them.

I might be wrong, but I don't think Toyota is as badly crippled by unions as the Detroit automakers.

Having said that, they are not immuned from the downturn either

Toyota's Quarterly Global Profits Expected To Drop by 50%

[DannysReviews|com]

Originally Posted by Wolfy

I'm all about buying American, but at the same time... a smart move for anyone's money is to buy the product with the best value, and that's going to be a Toyota, Honda, or a Nissan over GM, Ford or Chevy any day.

Toyota. Enough said. Quality car right there.

[tony286]

i was in the uaw,i worked for gm building cars when i was 19. i worked at the tarrytown plant we built the Pontiac 6000 and the Buick century.
The problem isnt the union its the shit management.Like the two cars above its the same fucking car different trim what a waste of money. Toyota offered GM to partner on hybrid technology and gm turned them down. Its easy to blame the working guy who busts his fucking ass to feed his family. That was some of the hardest most fucked up work I ever did.
If the government helps them all should executives have to take radical pay cuts until they return to real profitability.

[tony286]

ford makes a quality car this is my second. My first was a sable, had 150k miles before trading it in. The only problem I ever had a was brake light switch. Now have a grand marquis the car is rock solid.

[IllTestYourGirls]

https://youtube.com/watch?v=E4sLx5O_3M0#t=3m01s

[nico-t]

[After Shock Media]

Is this where I can say fuck the unions?
Also fuck both companies for building so many big ass cars. Then again fuck you consumers who were buying or at least leasing those big ass cars, often from money people pulled out from refinancing their piggybank er house.

I know it probably is not the best idea for most, but I really think they should be left alone and if they fall and take out another 2 million or so additional jobs that are associated with them from below so be it. I do mean from parts makers, to car salesmen, etc.

[Super Negro]

whatever fucking happens, stop with the god damn bailouts and government loans for companies in trouble

the only thing a bailout does for ANYONE is postpone the inevitable

if something is going to fail, let it fail, throwing money at a problem doesn't get rid of it, just ask my ex-wife