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 Chief Executive Officer Rick Wagoner asked the Treasury for more cash to survive through 2009.
The nation’s biggest domestic automaker said Thursday it lost $30.9 billion for the full year.
GM’s cumulative deficit ballooned to $82 billion since the end of 2004 when the company last had an annual profit. Full-year sales fell 17 percent to $149 billion, damped by a recession that ravaged new-car demand.
“The size of the loss matters not only because it impacts what it will cost to restructure the company, but also the kind of bill for which the taxpayer is on the hook,” said John Casesa, a managing partner at consultant Casesa Shapiro Group LLC in New York.
The future of Detroit-based GM may pivot on whether Wagoner, 56, is able to persuade President Barack Obama’s auto task force to approve as much as $16.6 billion in additional money on top of $13.4 billion in loans so far. Wagoner was meeting with the panel in Washington.
“It’s really a bit of a stamp of notice on something we already recognize,” said Kimberly Rodriguez, restructuring specialist for the audit, tax and advisory firm Grant Thornton LLC. “The fact that they’re into the government for financing in order to maintain viability pretty much says there’s a going concern problem.”
GM executives met for several hours with members of President Barack Obama’s auto industry task force Thursday. Company spokesman Greg Martin said the meeting “was just the beginning of the hard work ahead for GM and the president’s team.”
“We found a genuine willingness among the task force to understand our business, industry challenges, and GM’s restructuring plan,” Martin said.
GM and other automakers took the unprecedented move of shutting down many factories for most of January to stop cars from piling up with low consumer demand. But GM’s size, with 243,000 employees worldwide and 47 factories in the U.S. alone, keeps its fixed costs high.
The automaker expects the entire industry to sell a dismal 10.5 million vehicles in the U.S. this year, down from 13.2 million in 2008. But GM says it can’t break even until U.S. sales reach 11.5 million to 12 million.
“We’re not pleased with a negative $14 billion cash flow burn, that’s still a very, very sizable amount,” Chief Financial Officer Ray Young said Thursday. “But at the same time we recognize that the industry conditions in ‘09 are going to remain fairly challenging.”
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. It expects to post a profit on an adjusted, pre-tax basis, by 2010.
Young said GM would reduce its structural costs by another $4.5 billion in 2009, from $30.8 billion to $26.3 billion. The company said it cut North American structural costs by roughly $12 billion from 2005 through 2008.
But Tynan wonders why GM didn’t cut more costs sooner in anticipation of a downturn.
“If there was all this sort of fat, why wasn’t this done earlier, before we got into this crisis mode?” he asked.
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