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We'll go bust without bail-out or merger, says General Motors

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  • We'll go bust without bail-out or merger, says General Motors

    Oh dear .......

    General Motors, the biggest US car group, warned last night that it could run out of cash early next year without a government bail-out, a merger or asset sales.

    GM said its liquidity during the first half of 2009 would "fall significantly short" of the minimum required, even with the draconian measures it has put in place or is planning to in order to raise its cash by $20bn (£12.7bn) next year.

    The warning came as it reported third-quarter results, which were delayed for 45 minutes while trading in its stock was suspended in New York. These showed an operating loss of $4.2bn compared with $1.6bn a year earlier.

    Ford, the second-largest US carmaker, had earlier reported an operating loss in the third quarter of $3bn as its production and sales slumped amid the financial turmoil. The struggling manufacturer, which made a net loss of $129m, was drained of $7.7bn cash in the quarter and will cut the costs of its dwindling North American workforce by a further 10%.

    GM spent $6.9bn in the same period and will cut core white-collar jobs and slash capital spending.

    The two groups are in urgent talks with the outgoing Bush administration and the Obama team about gaining access to $50bn of soft loans on top of $25bn in federal aid for green technologies.

    Rick Wagoner, GM's chief executive, said: "The US government's actions to help stabilise the credit markets and eventually ease the credit crunch are an essential first step to the economy's and the auto industry's recovery, but further strong action is required."

    Alan Mulally, Ford chief executive, said the industry would not recover until 2010. "We could access bridging loans and pay them back and keep this very important industry alive as it is so important to the economy and the overall recovery," he said.

    But GM's approach to the White House for $10bn aid to help finance a merger with Chrysler, the third big carmaker suffering a cash outflow as consumers desert dealerships, was turned down. It said the merger was now off the agenda.

    Instead, underlining the worst financial crisis for 70 years, GM said it would retain the minimum amount of liquidity for the rest of this year. But it said that, in the first half of next year, it needed a dramatic turnaround in markets or access to capital markets, other private sources of funding, government aid, drastic cost-cutting or all of these.

    Amid predictions the industry could collapse next year, Ford said it was cutting its North American hourly employees by 2,600, bringing this year's reduction to 7,000. More than 2,000 white-collar staff will also go by the end of January.

    It is halting merit pay increases in the US and performance bonuses for all global employees. Capital spending is being slashed to as low as $5bn a year. Volvo, its Swedish arm, is axing 6,000 jobs.

    Mulally said: "These are challenging and historic times for the global automotive industry but I am more convinced than ever that Ford has the right plan to see us through ... We will emerge as a lean, globally integrated company poised for profitable growth."

    Ford, which sold Jaguar and Land Rover to India's Tata this year, said its output was down by half a million cars in the second quarter and forecast that the overall US car market would be 2.3m vehicles lower. The European market would be down 1m.

    Lewis Booth, chief financial officer, said the company planned to cut production in the current quarter by 378,000 units, including 211,000 in the US. But the group had already achieved $3bn in cost savings in the first nine months of this year and it retained $18.9bn in cash.

    The plight of the US industry contrasted sharply with that of the German carmaker Porsche, which reported a 46% surge in annual pre-tax profits to €8.6bn (£7bn), thanks to earnings of €6.8bn on hedging transactions.

  • #2
    This is no surprise LOL

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