GM Posts $15.5 billion Loss as Sales Sputter

By Reuters -  |  Posted 2008-08-01 Email Print this article Print
 
 
 
 
 
 
 

The struggling automaker's cash position has become an increasing concern for investors and analysts, who have begun to question whether and when GM's liquidity could fall below the levels needed to run its cash-hungry global operations.

DETROIT (Reuters) - General Motors Corp posted a $15.5 billion quarterly loss on Friday, as North American sales dropped by 20 percent and plunging prices for SUVs prompted deep charges for its auto finance business.

GM shares tumbled 6 percent in reaction to the automaker's announcement of the deeper-than-expected loss, the third-largest quarterly loss in its history.

The No. 1 U.S. automaker also burned through $3.6 billion in cash in the quarter as it reduced inventory of slower-selling vehicles in its slumping home market.

GM ended the second quarter with $21 billion in cash and $5 billion in credit facilities. It said it had provided notice in July that it would draw down $1 billion under a secured revolving loan facility.

The struggling automaker's cash position has become an increasing concern for investors and analysts, who have begun to question whether and when GM's liquidity could fall below the levels needed to run its cash-hungry global operations.

Chief Financial Officer Ray Young said GM's second-quarter cash position was slightly better than the automaker had forecast and said GM was on track with a plan to free up $15 billion in liquidity through 2009 with a combination of cost-cutting, asset sales and new borrowing.

Charges for a planned reduction of about 15 percent of GM's salaried work force in the United States and Canada will hit third-quarter results, Young said.

"From my perspective, we are going to get the second quarter behind us and just move ahead with our restructuring and liquidity plans that we announced over the last 60 days," Young told reporters.

Erich Merkle, an automotive consultant with accounting and consulting firm Crowe Chizek, said GM's loss underscored the need for it to shed more brands outside Chevrolet and Cadillac, a step the automaker has so far resisted.

"Do they have the resources to make all those different divisions competitive at the same time? I don't think so," Merkle said. "You have got to take a hard look at GMC, Saturn, Buick, Pontiac -- anything really outside of Chevrolet and Cadillac."



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