General Motors Corp. posted a $9.6 billion fourth-quarter loss and said it burned through $6.2 billion of cash in the last three months of 2008 as it fought the worst U.S. auto sales climate since 1982 and sought government loans to keep the century-old company running.
The nation’s biggest domestic automaker said Thursday it lost $30.9 billion for the full year and expects to state in its upcoming annual report whether its auditors believe the company remains a “going concern.” GM and its auditors must determine whether there is substantial doubt about the automaker’s ability to continue its operations. GM burned through $84.7 million a day in 2008.
Chief Financial Officer Ray Young said the determination will depend a lot on whether GM gets further government loans and whether it can accomplish its restructuring goals.
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.”
Rival automaker Ford, which has not sought U.S. government emergency aid, said Thursday it has adequate liquidity amid worsening industry conditions and has no doubt about its ability to continue as a going concern.
GM 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.”
Young said GM would reduce its structural costs by another $4.5 billion in 2009, from $30.8 billion to $26.3 billion.
GM’s adjusted cash burn for the year in 2008 was $19.2 billion, but Young expects that to fall to $14 billion in 2009 as the company cuts structural costs.
The company still will need more government help, he said, because GM expects the entire auto industry to sell a dismal 10.5 million vehicles in the U.S. this year.
Most of the cash burn this year can be attributed to the temporary shutdown of many GM plants during the month of January, he said.
“We’re not pleased with a negative $14 billion cash flow burn, that’s still a very, very sizeable amount,” he said, “but at the same time we recognize that the industry conditions in ’09 are going to remain fairly challenging.”
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 fell 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 fourth-quarter loss included $3.7 billion in special items, including a $1.1 billion charge for a drop in value of machinery for the Hummer and Saab brands, which are up for sale. Other charges included $900 million for restructuring, including worker buyout and early retirement payments, and $660 million to increase reserves for former parts arm Delphi Corp.’s future pension obligations.
The charges were offset by a $533 million net gain from a bond exchange at GM’s financial arm, GMAC Financial Services.
Excluding special items, GM’s fourth-quarter adjusted loss was $5.9 billion, or $9.65 per share.
That was worse than Wall Street expected. Analysts surveyed by Thomson Reuters predicted a quarterly loss of $7.40 per share on sales of $35.1 billion.
For the full year, GM’s net loss was $53.32 per share, the second-worst annual result in the company’s history. The worst loss occurred in 2007, when the Detroit-based company lost $38.7 billion, or $68.45 per share, in 2007, due largely to charges for unused tax credits.
GM’s $6.2 billion cash burn for the quarter is the difference between the company’s actual cash balances at the start and end of the quarter, including $4 billion in government loans received Dec. 31.
The cash burn rate narrowed from $6.9 billion in the third quarter, reflecting GM’s restructuring efforts.
The company last year announced the closure of four assembly plants and a parts stamping factory.
Last week, a plan GM submitted to the Treasury Department to justify more loans said the company would close five more U.S. factories and cut another 47,000 jobs globally. GM also reached a tentative deal with the United Auto Workers on concessions that will reduce labor costs.
Since 2000, 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.
GM ended last year with about $14 billion in cash, $10.5 billion less that the $24.5 billion it had at the end of 2007. The 2008 figure is close to the minimum amount of cash GM has said it needs to fund its operations.
Young said GM’s total debt at the end of 2008, including the first $4 billion in government loans, was $45.3 billion. The company has been negotiating with bondholders to convert most of that debt to equity, which is a requirement of the government’s loan terms.
Young told reporters the credit crisis spread from the U.S. to other markets, making the fourth-quarter a challenging one.
But there was some hope, he said. While global sales fell, some emerging markets, such as China, are off to a good start in 2009.
“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.
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