GM posts $6bn loss as bankruptcy looms

Discussion in 'Wall St. News' started by S2007S, May 7, 2009.

  1. S2007S


    So when do they file chapter 11, how many more billions of dollars do they have to lose, I mean if you think of it, with some basic math and a little bit of common sense it seems to me that GM is worthless at this point yet they keep throwing billions of dollars into it to keep it afloat. Amazing what this world has come to, that propping up failing companies is the way to thrive and advance our economic abilities. A real Fu$king JOKE!!!!

    GM posts $6bn loss as bankruptcy looms

    By Bernard Simon in Toronto

    Published: May 7 2009 13:12 | Last updated: May 7 2009 17:01

    General Motors, North America’s biggest carmaker, reported a $6bn first-quarter net loss and an accelerating cash drain on Thursday, underlining the pressure it faces to gain concessions from stakeholders or face bankruptcy.

    The troubled automaker warned that prolonged uncertainty over its financial condition risks creating a vicious circle of shaky consumer confidence and falling production and sales.

    “We need to get off the front page of the newspaper every day, we need to get this thing behind us”, Ray Young, the Detroit carmaker’s chief financial officer said.

    GM, which now depends on US and other government aid for its survival, plans to file for court protection by June 1 if it cannot restructure its balance sheet through a debt-for-equity swap with unsecured bondholders and the US government, and concessions from the United Auto Workers union.

    Citing the impact of bankruptcy speculation on sales around the world, Mr Young reiterated that the company would prefer to remain out of court protection. “But if we need to go in”, he added, “it’s imperative for us to be in and out quickly”.

    Chrysler, GM’s small Detroit rival, filed for Chapter 11 protection last week, but warned that it was unlikely to survive if it cannot complete a restructuring by July 1.

    Mr Young declined to say whether GM would follow Chrysler’s example of closing almost all its North American plants during a court-supervised restructuring. The decision will depend on the size of dealer inventories and sales.

    The first-quarter results bring GM’s losses since 2004 to a towering $88bn. GM shares have lost more than 90 per cent of their value in the past year, reflecting bankruptcy fears. They traded slightly lower at $1.63 on Thursday morning.

    The latest net loss, equal to $9.78 a share, compares with a loss of $3.3bn, or $5.80 a share, a year earlier. Revenues almost halved to $22.4bn from $42.4bn.

    The cash outflow totaled $10.2bn. Although higher than previous quarters, the drain was less than GM had projected, due to stringent cost controls. The carmaker, which lost its top spot in global car sales to Toyota last year, has so far received $15.4bn in aid from Washington. It expects to need another $2.6bn this month and $9bn for the rest of the year. GM has also asked for billions of dollars in loans from other governments.

    Under pressure from the Obama administration’s auto industry task force to speed up and widen its restructuring efforts, it has put three brands – Saab, Saturn and Hummer - up for sale, and will close a fourth – Pontiac – by the end of the year. It is also seeking outside investors in GM Europe, with up to seven parties expressing interest in the business, including Fiat and Magna International.

    Holders of $27bn in unsecured bonds have so far rejected a debt-for-equity offer that would give them a 10 per cent equity stake in the restructured company. The US government would end up as the majority shareholder, with the United Auto Workers holding about 39 per cent. Existing shareholders would be virtually wiped out.

    First-quarter operating losses in North America climbed from $0.4bn to $3.2bn, while Europe swung from a small profit to a $2bn loss. The two other regional divisions – Asia-Pacific, and Latin America, Africa and the Middle East – broke even.

    Mr Young singled out Russia as an especially challenging market. By contrast, GM’s market share in China rose to 13.7 per cent from 12.5 per cent