CHICAGO: General Motors, the biggest US automaker, warned yesterday that it would run out of cash in the first half of next year and appealed to the US government for help to save it from collapse.
On a dramatic day for the ailing Detroit giant, it also said it had suspended takeover talks with fellow struggling peer Chrysler and reported a deepening of its cost-cutting plan.
Trading in GM shares — which had been suspended after a delay in the scheduled financial results release — plunged almost 13 percent to $4.18.
“GM’s estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business,” the company said in a statement giving its starkest warning yet.
“Looking into the first two quarters of 2009, even with its planned actions, the company’s estimated liquidity will fall significantly short of that amount,” it said.
To survive, it said it would need significantly improved market conditions — highly unlikely in the current economic climate — or help from the government, suppliers or other investors.
“GM has taken a host of aggressive ‘self help’ actions to improve its business, but additional support from the US government to aid the auto industry during this industry downturn is essential,” the company said.
The direct plea for government help came after GM and other auto executives held talks with Democratic House of Representatives Speaker Nancy Pelosi on Thursday in Washington.
Congress recently authorized $25 billion in loan guarantees to help US automakers develop more fuel-efficient vehicles, but automakers are believed to be seeking new low-cost loans without strings attached.
GM President and Chief Executive Rick Wagoner said that “letting GM go” would be far more significant than the bankruptcy of Lehman Brothers investment bank, which sparked the latest round of the financial crisis in September. “There is no comparison whatsoever,” he told the CNBC television channel.
For the third quarter, the company announced a loss of $2.5 billion and said it had burned through another $6.9 billion of cash during the three-month period.
Also yesterday, Ford, the No. 2 US automaker, said it had lost $129 million in the third quarter and had burned through $7.7 billion of cash.