GM in talks over bailout plan as it reveals $31bn losses

Published on Thursday 26 February 2009 21:23

STRUGGLING carmaker General Motors was last night nursing annual losses of nearly $31 billion (£21.7bn) as it fought to stay afloat amid the worst US market for new car sales in 16 years.

The grim results came as GM chief executive Rick Wagoner and other executives met members of the car industry task force headed by US Treasury secretary Timothy Geithner and White House economic adviser Larry Summers.

GM is looking for up to $30bn in a bid to prevent it from going bankrupt. It has been kept afloat with the aid of US government funds since the start of the year.

Ford, which has not sought US government emergency aid, stressed it has adequate liquidity amid worsening industry conditions and has no doubt about its ability to continue as a going concern.

GM's loss for 2008 was the deepest among Detroit-based carmakers. Ford lost $14.6bn, while Chrysler, controlled by private equity firm Cerberus Capital Management, fell $8bn into the red.

GM, owner of the Opel and Vauxhall marques in Europe, said its auditors were likely to cast doubt on its viability as it sought an expanded federal bailout to stay afloat.

The group burned through $5bn in the fourth quarter and ended the year reliant on the first $4bn in loans from the US Treasury. Quarterly revenues plunged by more than a third to $30.8bn. Over the past four years, GM has lost $82bn and cut more than 90,000 jobs. The combined loss is equivalent to about $56 million a day since the start of 2005.

S&P equity analyst Efraim Levy said GM's cash burn forecast for this year could prove too low because of the dramatic slump in sales. "It reinforces for us the notion that GM will need multi-billion government assistance to continue as a going concern," he added.

Dennis Virag, president of Automotive Consulting Group, said GM had a chance to restructure if the recession does not deepen further.

"If the economy does not further erode and if we do see a pickup in the second half of the year, GM could foreseeably correct the situation with government funding," he said.

Wagoner warned: "We expect these challenging conditions will continue through 2009 and so we are accelerating our restructuring actions."