- The Washington Times - Saturday, November 8, 2008


GM also said it has suspended talks to acquire Chrysler. While it didn’t specifically name the automaker, GM said it was setting aside considerations for a “strategic acquisition.”

“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.

Privately held Chrysler said it won’t comment on GM’s statement, but added it remains focused on returning to profitability.

GM said its cash burn for the quarter accelerated to $6.9 billion, and government aid will be “essential” because of the slow economy and credit crisis.

If companies run out of cash, generally they can sell assets, cut costs or file for bankruptcy protection to keep creditors at bay while they develop a financial reorganization plan. But in a conference call with reporters and analysts, GM Chairman and CEO Rick Wagoner said the company will “take every action we possibly can” to avoid bankruptcy.

“We’re convinced that the consequences of bankruptcy would be dire,” he said, adding that the company will use every source of funding it can.

“We need to find a way to get through this, and that’s really our focus.”

The company also said it will indefinitely lay off about 3,600 workers beginning early next year as it slows production at 10 of its assembly plants.

The news came hours after U.S. and global economies have rapidly deteriorated, auto sales have nearly shut down.

Mr. Wagoner had said earlier that the third quarter “was especially challenging for the auto industry.”

“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,” he said.

The nation’s biggest domestic automaker reported a net loss of $4.45 per share during the quarter, compared with a record-setting loss of $39 billion, or $68.85 per share, a year ago. Its adjusted loss was $4.2 billion, or $7.35 a share, with an adjusted loss of $2.8 billion for its automotive operations.

Revenue fell to $37.9 billion from $43.7 billion, due largely to credit freezing across the globe.

The loss exceeded 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 401(k) plans and suspended tuition reimbursement. In addition, salaried employees will not get incentive pay next year for their work in 2008, GM said.

It said it will slow down assembly line rates at North American factories beginning next year, but it gave no details. It also said several new vehicle programs would be delayed, but it would spend more on its Chevrolet Volt electric car and other fuel-efficiency programs.

But the cuts and delays may not be enough.

“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.


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