2nd UPDATE: GM 4Q Loss Sparks Viability Concerns
26 Februar 2009 - 6:05PM
Dow Jones News
General Motors Corp. (GM) on Thursday fleshed out the scale of
its financial crisis, reporting a $9.6 billion loss for the fourth
quarter and warning that auditors may question its viability.
The largest U.S. auto maker burned through $6.2 billion in cash
during the October to December quarter and expects to use up
another $14 billion for the whole year, as the once-profitable
businesses in Asian and Latin America succumb to the industrywide
slump in auto sales.
GM executives suggested the pricing environment was likely to
improve after a difficult start to the year, with sales buoyed by
the return of its finance arm to providing customer support.
The company said it is awaiting word on whether it will receive
going concern status from auditors, with a determination expected
in March.
Ray Young, chief financial officer, said the going concern
status will depend largely on whether GM succeeds in getting more
U.S. government aid.
He said the company's future remains in doubt because it is
unclear whether GM can execute its restructuring goals of the
company will receive adequate government aid.
"The impact of the credit crisis has started to spread to
emerging markets," added Young on a conference call. "It's been a
tough year. But when we sent out the viability plan last week we
very much understood 2008 and we fully realize the world was going
to be more of a challenge in the near term."
GM executives will meet U.S. Treasury officials later Thursday
in pursuit of up to $16.6 billion in additional aid that the
company said earlier this month was essential to avoid a bankruptcy
filing. GM is seeking concessions from workers, bondholders and
other parties to qualify for the federal funding, along with at
least $6 billion from overseas governments.
Thursday's results, which fell short of Wall Street
expectations, underscore the impact of deteriorating conditions
around the globe that have driven once-profitable overseas
operations into the red.
Revenue fell to $30.9 billion from $43.3 billion in the fourth
quarter, and the company ended the year with $14 billion in
liquidity compared with $16.2 billion as of Sept. 30.
GM's revenue is on track to sink further in the first quarter
after the auto maker essentially stopped vehicle production in
January to lower inventories.
Operating losses worsened in North America and Europe while its
once-profitable Latin American and Asian businesses also suffered
deficits.
Young said GM executives were in Washington, D.C., on Thursday
to answer questions from Treasury officials on the auto maker's aid
request. "These are not negotiations," he said. "We are there to
respond to their request for information." He warned the first
quarter cash burn was would be "quite significant," though the
liquidity drain in 2009 is expected to be less than last
year's.
The fourth-quarter loss compares with a $1.5 billion deficit a
year earlier.
The reported net loss of $15.71 a share for the fourth quarter
compares with a deficit of $2.70 in the same period last year.
GM last week said it could run out of money as soon as March
without more cash from the U.S. and other governments.
The cash burn was less than the $6.9 billion in the three months
to Sept. 30. The year-end cash position includes $4 billion of the
$13.4 billion in U.S. federal loans GM received last year.
The results cap a year in which GM lost $30.9 billion, the
second biggest loss the auto maker's 100-year history.
GM said Thursday it's awaiting word from auditors as to whether
the company must be labeled a going concern in filings to the U.S.
Securities and Exchange Commission, a judgment that casts doubt on
the company's ability to survive. The determination is expected in
March.
The company barely escaped a bankruptcy filing in 2008 after the
government promised emergency loans. GM said it needs up to $16.4
billion more to survive a downturn that has U.S. auto sales
tracking at lows unseen since the 1980s.
GM shares were flat at $2.55 in recent trading.
The latest results, excluding charges, came in well short of
Wall Street expectations. GM's adjusted loss was $5.9 billion,
compared with a $46 million deficit a year earlier.
GM has lost more than $80 billion since 2005 when Chief
Executive Rick Wagoner began the race to cut costs, slim down
operations and overhaul operations in North America.
On Thursday, Young said GM would reduce structural costs by
another $4.5 billion in 2009, from $30.8 billion to $26.3
billion.
-By Sharon Terlep, Dow Jones Newswires; 248-204-5532;
sharon.terlep@dowjones.com