Photo courtesy of Associated Press
General Motors Corp. reported a net loss of $2.54 billion while Ford Motor Co. reported a third-quarter net loss of $129 million.
Revenue at GM for the third quarter was $37.9 billion, down from $43.7 billion in the year-ago quarter, reflecting sales declines across the industry driven by unstable market conditions, instability in the credit markets and dramatic retraction in consumer demand, especially in North America and Europe.
While Ford's operating loss, excluding items, widened to $3 billion or $1.31 a share, in the third quarter, from $24 million a year earlier. The quarter's net loss of $129 million included a $2.3 billion gain mostly related to writing off retiree health costs being transferred to a union-run trust. Revenue in the third quarter was $32.1 billion, down $9 billion from the year-earlier period, as revenue in the automotive business dropped 23% to $27.8 billion.
Much of the outflow in the third quarter related to lower production volume as the auto maker idled plants and laid off workers to respond to the drop in consumer demand, especially for pick-up trucks and SUVs.
Critically, Ford also has available credit lines of $10.7 billion to supplement its gross cash of $18.9 billion at the end of the third quarter. Ford doesn't expect to tap the loan revolvers, noting that the company will continue to aggressively reduce costs and manage cash with discipline.
More worrisome than the crippling losses was the greater-than-expected cash burn at each company. Ford plowed through $7.7 billion, seeing its liquidity position plummet to $18.9 billion. GM burned $6.9 billion and declared that its cash position at $16.2 billion wasn't enough to keep the company going through next year without immediate government intervention.
The companies' poor earnings make it clear Ford and GM are running out of money to finance their Michigan-based businesses, with GM the sicker of the two. Even if GM implements the planned operating actions that are substantially within its control, GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business.
The weakness has expanded around the globe in ways that auto makers hadn't anticipated, further reducing optimism about the prospects for U.S. auto makers. Until the latest quarter, international sales had helped offset weakness at home. Now, a slew of foreign auto makers have reported disappointing earnings and weak outlooks as the global scenario deteriorates.
President-elect Barack Obama, in a press conference, called for the current administration to speed up the assistance Congress already has enacted to help the auto sector. "The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil," he said.
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Sources :
- The Wall Street Journal: GM, Ford Post Losses as Liquidity Worsens, November 7, 2008 4:07 pm ET
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