GM's Wagoner: No Bankruptcy and Enough Cash
By Michelle Krebs July 11, 2008General Motors Corp. CEO Rick Wagoner, insisting the automaker has the cash it needs, dismissed speculation that the automaker might file for bankruptcy.
His remarks came early on a day that GM's stock plummeted to another low -- under $10 a share -- not seen in a half-century.
Comments in the past week about a potential bankruptcy are "not at all constructive or accurate," Rick Wagoner said Thursday.
GM has $24 billion in cash and $7 billion in credit facilities, he said.
"Under any scenario we can imagine ... our cash position will remain robust through this year" and the company has options for raising cash beyond that, Wagoner said at a lunch meeting of Dallas business leaders.
The bankruptcy speculation has increased and GM stock has been hammered over the past two months, losing more than half its value. Dealers are worried that the negative chatter will hurt sales, and Wagoner conceded that consumers wouldn't want to buy cars from a company in bankruptcy.
"That kind of news isn't helpful, but as long as we can get the dealers the right information ... I think we can address it," he said.
GM shares continued their slide Thursday, falling 64 cents, or 6.2%, to $9.69 in New York trading. Last week, GM stock closed under $10 for the first time since 1954.
U.S. vehicle sales have slumped from an annual rate of about 17 million to 15 million so far this year, and even lower in the past few months. And in the wake of rising fuel prices, the mix of vehicles has changed away from profitable trucks and big SUVs to cars.
Wagoner said the trend toward cars is permanent and his company is planning for the change and for higher oil prices: 18 of the next 19 GM models under development are cars or crossovers, not trucks.
But, he added, the company didn't foresee oil prices doubling in a year.
"We missed that, but I think us and 99.9% of the rest of the people in the world did, too," he said.
Still, he insisted that changing tastes won't force GM to "ride off into the sunset."
A Merrill Lynch & Co. analyst had said July 2 that GM may need to raise $15 billion and that bankruptcy is "not impossible" should U.S. economic conditions worsen.
"Some of the critics call this the end of the U.S. auto industry as we know it," Wagoner said in the speech. "We're taking the tough but necessary actions to keep GM competitive over the long, long term."
GM was not alone in seeing its stock value drop.
On a day when the price of oil rose more than $5 a barrel, many auto stocks tumbled.
Ford shares fell 37 cents, or 7.5%, Thursday to close at $4.58.
Among U.S. auto-parts makers, shares of Lear Corp., Federal-Mogul Corp., Noble International Inc., and American Axle and Manufacturing Holdings Inc. all fell by more than 5%
Wagoner told business leaders at a luncheon in Dallas that speculation about a potential bankrupty filing is "not at all constructive or accurate."
He said GM has $24 billion in cash and $7 billion in credit, countering further speculation by analysts that the automaker is burning through cash so quickly that it will need to borrow as much as $15 billion to stay afloat.
"Under any scenario we can imagine ... our cash position will remain robust through this year" and the company has options for raising cash beyond that, Wagoner said.
Wagoner acknowledged dealers are worried that the negative publicity will hurt sales. He noted consumers wouldn't want to buy cars from a company in bankruptcy. "That kind of news isn't helpful, but as long as we can get the dealers the right information ... I think we can address it," he said.
GM stock has lost more than half its value in recent months and continued its slide on Thursday, closing down at $9.69 a share. GM stock price of under $10 a share is a first since 1954.
"Some of the critics call this the end of the U.S. auto industry as we know it," Wagoner said in the speech. "We're taking the tough but necessary actions to keep GM competitive over the long, long term."
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