Seeking More Aid, GM Posts Massive 2008 Losses
As Detroit battles the worst U.S. auto sales climate since 1982, GM posted a $9.6 billion fourth-quarter loss and said it burned through $6.2 billion of cash in the same period. It ended the year with $14 billion in cash, including the first $4 billion in loans it received from the U.S. Treasury.
Revenue plunged by more than a third to $30.8 billion.
The automaker also warned its pension plans were underfunded by about $12.4 billion as of the end of 2008, raising the risk of a greater funding gap in the years ahead.
GM’s loss was the deepest among Big Three automakers in 2008 as industry-wide auto sales dropped to 16-year lows. Ford lost $14.6 billion. Chrysler, controlled by private equity firm Cerberus Capital Management, lost $8 billion.
Chief Financial Officer Ray Young said much will depend a lot on whether GM gets further government loans and whether it can accomplish its restructuring goals, the Associated Press reported.
Young said that auditors are studying the future of the company because “there’s uncertainty with how the Treasury will view our viability plan,” and “uncertainty on whether we’re going to be able to execute the terms of our loan agreement.”
The company has received $13.4 billion in federal loans since Dec. 31 and says it needs up to $30 billion to stay out of Chapter 11 bankruptcy protection. Top GM executives were in Washington, D.C., Thursday to meet with the Obama administration’s auto task force to talk about restructuring and additional loans.
“2008 was an extremely difficult year for the U.S. and global auto markets, especially the second half,” Chairman and CEO Rick Wagoner said in a statement. “These conditions created a very challenging environment for GM and other automakers and led us to take further aggressive and difficult measures to restructure our business.”
GM reported a net loss of $15.71 per share for the fourth quarter, compared with a loss of $722 million, or $1.28 per share in the year-ago period.
Quarterly revenue dropped 39 percent to $30.8 billion from $46.8 billion, as credit availability froze across the globe, and a lack of consumer confidence and fears of job losses kept people from buying vehicles.
GM’s U.S. salaried work force has shrunk by 33 percent from its 2000 high of 44,000 people. At the same time, the number of hourly workers has plunged by more than half — to about 63,700 people at the end of last year from 133,000 in 2000.
Young said there was some hope. While worldwide sales dropped in 2008, some emerging markets, such as China, are off to a good start this year.
“A lot of the governments in these countries are putting a lot of stimulus into the economy as well as the automotive market,” he said, citing lower sales tax rates on cars sold in China and Brazil.
Also Thursday, French President Nicolas Sarkozy said he wants U.S. aid to the car sector to be checked to see if it fits World Trade Organization rules, escalating tensions over rival industrial policies.
Sarkozy, who has announced aid for French automakers that critics have called protectionist, also said he would ask for a coordinated European plan to help the car industry.
“We need to see if the U.S. aid is compatible with the WTO,” Sarkozy said at a roundtable discussion in eastern France on the car industry, a sector which accounts for one in 10 French jobs, according to Reuters.
The EU’s transport chief said on Thursday it would consider appealing to the WTO if U.S. aid made conditions unfair for European manufacturers, but he warned against double standards inside and outside the bloc.
“Europe is evaluating — if that help should impinge on the competitiveness of our producers — appealing to the WTO,” European Transport Commissioner Antonio Tajani said in an interview with Italian paper La Stampa.
GM shares fell 13 cents, or 5.1 percent, to $2.42 in mid-day trading.