GM circling the drain too
Century-old GM, an icon of American manufacturing, has been battered by a plunge in car sales as American consumers tighten their belts and shift away from the big moneymaking pickup trucks and SUVS that have long the staples of GM's lineup.
GM, which has slashed jobs and closed plants since early in the decade, has warned that it could run low on cash by the end of the year unless it gets a taxpayer-funded rescue from the government.
"The board has a responsibility to keep all options open considering the circumstances," said Vice President of Communications Tony Cervone. "Chapter 11 protection is not a viable option because it doesn't fundamentally address the issues at hand today."
The board, which has been meeting regularly by teleconference since the company's finances worsened, agrees with Chairman and CEO Rick Wagoner that bankruptcy would be disastrous for the company, Cervone said. Wagoner has said it would scare away customers who would not make a big-ticket purchase from an automaker that is under court protection.
Instead, Cervone said the board supports Wagoner's strategy to seek congressional approval of low-interest government loans, getting the company through its liquidity problems until the U.S. auto market recovers and it can be profitable again, Cervone said.
"The board continues to support management and has continued to express support for management," Cervone said.
11/22/08 This rumor is upgraded to 'strong' today. General Motors Corp.’s board of directors is willing to consider filing for bankruptcy protection, Reuters reports on its Web site, citing the Wall Street Journal. The Journal, citing unnamed sources, said the board was willing to consider “all options" for GM, which has said it could be near the minimum amount of cash it needs to operate by the end of the year. The story said the board’s position on a potential filing put it in conflict with Chairman and CEO Rick Wagoner. Wagoner had told Congress this week that bankruptcy is not a viable option for the company because people wouldn’t buy vehicles from a bankrupt company. Detroit Free Press
[Editor's Note: All three American manufacturers are already bankrupt, but their management is so bad they have not figured it out yet. And you wonder why they are in such dire straits?]
11/09/08 General Motors Corp., for 77 years the world's largest automaker and an icon of American industry, revealed a dire financial outlook Friday that has the company teetering on the edge of bankruptcy.
Ford Motor Co. delivered its own grim forecast — although not immediately as dire as GM's position.
Hemorrhaging cash and with sales dropping to 25-year lows last month, the Detroit automakers announced financial results that show they each are burning through more than $2 billion a month to maintain operations. GM warned that its cash reserves could sink below the minimum level it needs to operate by year's end unless it gets federal aid or can tap other resources.
GM Chairman and Chief Executive Officer Rick Wagoner said the company will take every step possible to avoid bankruptcy — which GM continues to insist is not an option — as the automaker attempts to survive the squeeze of a global credit crunch on vehicle sales.
"We're convinced that the consequences of bankruptcy would be dire," Wagoner said. "We need to find a way to get through this, and that's really our focus."
GM, Ford and Chrysler LLC are seeking federal loans to help them weather the financial crisis and move forward to retool their companies.
GM reported a net loss of $2.5 billion in the third quarter and said it burned through $6.9 billion in cash to end September with $16.2 billion in cash. That is just barely above the $11 billion to $14 billion GM said it needs to operate and doesn't include its cash burn from October.
The mounting losses led GM to announce:
• It's putting merger talks with Chrysler LLC on hold.
• It will cut 3,600 hourly workers and eliminate about 2,000 more salaried jobs.
• It will cut costs by $5 billion in addition to its July plan to cut $10 billion in costs and raise another $5 billion through new debt and asset sales. More at Detroit Free Press