GENERAL MOTORS warned yesterday that prolonged uncertainty over its financial condition risked 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,” said Ray Young, GM’s chief financial officer.
The warning came shortly after it reported a $6 billion (€4.4 billion) first-quarter loss and an accelerating cash drain. GM now depends on US and other government aid for its survival.
It plans to file for court protection by June 1st if it cannot restructure its balance sheet through a debt for equity swap with unsecured bondholders and the US government, and gain 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 Detroit rival, filed for Chapter 11 protection last week, but warned that it was unlikely to survive if it could not complete a restructuring by July 1st.
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 $88 billion. 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 $3.3 billion, or $5.80 a share, a year earlier. Revenues almost halved to $22.4 billion from $42.4 billion.
The cash outflow totalled $10.2 billion. Although higher than previous quarters, the drain was less than GM had projected, owing to stringent cost controls.
The car-maker, which lost its top spot in global car sales to Toyota last year, has so far received $15.4 billion in aid. It expects to need another $2.6 billion this month and $9 billion for the rest of the year.
Under pressure from the Obama administration’s car industry taskforce 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.
First-quarter operating losses in North America climbed from $400 million to $3.2 billion, while Europe swung from a small profit to a $2 billion loss.
