GM posts $6B loss in first quarter
- Source: Ce.cn
- [09:34 May 08 2009]
- Comments
In a conference call with reporters and industry analysts, Young cautioned that a revenue drop can be dangerous for the company's financial health.
"Once you start losing revenue, you get yourself into a vicious circle in which you cannot recover," he said.
He conceded that the second quarter will be tough for GM because it is shutting many of its US factories for up to 11 weeks to further slash dealer inventories, but said he is confident GM's revenue will recover.
"You will see the global industry recover," he said. Once the company gets through inventory cuts and bankruptcy talk, Young said revenue will bounce back because GM is making more money on new products than on the vehicles they replaced.
"When you add all these factors together, our assessment is clearly our revenue line will improve in the future," he said.
GM's cash burn for the quarter was offset by $9.4 billion in US government loans GM received in the first quarter. GM got another $2 billion in April, bringing total government loans to $15.4 billion.
As bad as the results look, analysts were expecting worse. Excluding special items, GM's fourth-quarter adjusted loss was $9.66 per share, beating Wall Street's expectations. Analysts surveyed by Thomson Reuters predicted a loss of $11.05 per share on revenue of $20.2 billion.
The company reported an operating loss of $3.2 billion from its North American operations alone.
GM posted an operating loss of $2 billion in Europe while it squeezed out a small profit in Latin America. Sergio Marchionne, the chief executive of Italy's Fiat SpA, is in talks to take over GM's operations in Europe - Germany's Opel, Britain's Vauxhall and Sweden's Saab. Fiat confirmed Thursday it is interested in the Latin American operations.
Young would not comment on Fiat's interest in GM's European or Latin America units. Fiat will have a 20 percent stake in Chrysler when that automaker emerges from bankruptcy protection.
GM faces an almost impossible list of restructuring tasks to complete before the June 1 deadline. It must get new cost-cutting agreement with its unions, complete a debt-for-stock swap with 90 percent of its bondholders, close factories and cut jobs to prove to the government it can repay the loans.
The largest US-based automaker also is trying to cut 2,600 dealerships and is in the process of selling or phasing out the Saturn, Saab and Hummer brands. GM has already decided to get rid of Pontiac.
GM shares fell 5 cents, or 3 percent, to $1.61 in morning trading.
Young said GM is continuing to simultaneously prepare for bankruptcy as well as its preferred option of restructuring out of court.
GM has made an offer to the holders of roughly $27 billion in debt to swap 225 shares of stock for every $1,000 GM owes. The deadline for the swap is May 26, and Young would not comment when asked if the offer might change.
CEO Fritz Henderson said Monday that the Treasury Department will not allow GM to offer more than 10 percent of the company's stock to the debtholders.
GM ended the quarter with $11.6 billion in cash, down from $14.2 billion on Dec. 31.
"Results were awful, as expected, however, GM's cash burn was even worse than we were expecting," said Kip Penniman, a corporate bonds analyst with KDP Investment Advisors in Montpelier, Vt., wrote in a note to investors.
