GM Loses $4.2 Billion in 3Q; Running Near Empty Cashwise
By Michelle Krebs November 7, 2008By Michelle Krebs
DETROIT -- General Motors said Friday it lost $4.2 billion in the third quarter and was burning through cash ($6.9 billion in the third quarter alone) to the point that the automaker will be operating at minimal liquidity levels by the end of this year -- levels that will fall even further in next year's first half.
As a result its dire situation, GM announced it would cut more jobs and slash additional costs.
The automaker said GM's third-quarter loss, which was larger than analysts had anticipated, reflected rapidly deteriorating market conditions in the U.S., slowdowns in other mature markets around the world and continued losses at GMAC Financial Services, owned jointly by GM and Cerberus Capital Management, parent of Chrysler. (GM confirmed Friday merger talks between GM and Cerberus for Chrysler are off. The deal might have involved GM turning over the rest of its stake in GMAC to Cerberus, receiving Chrysler in return.)
"The third quarter was especially challenging for the auto industry," GM Chairman and CEO
Rick Wagoner said in the company's earnings statement. "Consumer spending, which represents close to 70 percent of the U.S. economy, fell dramatically, and the abrupt closure of credit markets created a downward spiral in vehicle sales."
Wagoner told employees Friday morning that the automaker will cut more jobs; slash capital spending; eliminate raises, bonuses, matching dollars in savings programs and tuition reimbursement; and extend the life of some models without redesign or replacement, while saving key product and technology programs. The Chevrolet Volt is known to be among those sacred cows.
The Numbers
GM reported a net loss of $2.5 billion in the third quarter, including special items. That compares with a net loss from continuing operations of $42.5 billion, which included a non-cash charge of $38.3 billion to establish a valuation allowance against some of the company's net deferred tax assets.
On an adjusted basis, GM posted a net loss of $4.2 billion, compared with a net loss from continuing operations of $1.6 billion in the same period last year.
Third-quarter revenue dropped to $37.9 billion from $43.7 billion in the year-ago quarter. GM said the revenue fall reflected the dramatic sales declines across the industry in North America and Europe, driven by unstable market conditions, instability in the credit markets and a plummet in consumer confidence and demand.
LEAVE A COMMENT