General Motors Corporation (GM) on Friday said it lost US$2.5 billion in the third quarter and warned that it could run out of cash in 2009 if the United States (US) economic slump continues and it doesn't get government aid.
GM also said it has suspended talks to acquire Chrysler. Although it didn't specifically name the automaker, GM said it was setting aside considerations for a "strategic acquisition."
significant benefits
"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.
The automaker said its cash burn for the quarter accelerated to US$6.9 billion, and government aid will be essential because of the slow economy and credit crisis.
The move came hours after Ford Motor Company said it lost US$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 US and global economies have rapidly deteriorated, auto sales have nearly shut down. GM said government aid is critical to help the US auto industry through the downturn.
"The third quarter was especially challenging for the auto industry. Consumer spending, which represents close to 70 per cent of the US economy, fell dramatically, and the abrupt closure of credit markets created a downward spiral in vehicle sales," Chairman and CEO Rick Wagoner said in a statement.
The automaker reported a net loss of US$4.45 per share during the quarter, compared with a record-setting loss of US$39 billion, or US$68.85 per share, a year ago.
Revenue fell to US$37.9 billion from $43.7 billion, due largely to credit freezing across the globe.
The loss exceeded Wall Street estimates. Analysts surveyed by Thomson Reuters predicted a loss of $3.70 per share on sales of $39.4 billion.
The struggling company announced it would improve liquidity by $5 billion by the end of next year by cutting capital spending, reducing sales promotions, and further cutting production in the first quarter.
The company also suspended its matching contribution for employee retirement savings plans, and suspended tuition reimbursement. In addition, salaried employees will not get incentive pay next year for their work in 2008, GM said.
GM increased its plan to reduce salaried worker costs to 30 percent. During the summer, the company announced a 20 per cent cut.
"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," the company said in a news release.
"Looking into the first two quarters of 2009, even with its planned actions, the company's estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions significantly improve" or it receives government funding, the news release said.