IN SLOW LANE
Detroit, Aug. 1 (Reuters): General Motors Corp posted a $15.5 billion quarterly loss on Friday, as North American sales dropped 20 per cent and plunging prices of SUVs prompted deep charges for its auto finance business.
GM shares tumbled 6 per cent in reaction to the automakers announcement of the deeper-than-expected loss, the third-largest quarterly loss in its history.
The US auto maker also burned through $3.6 billion in cash in the quarter as it ran down inventory of slower-selling vehicles in its slumping home market.
GMs net loss was equal to $27.33 per share compared with a profit of $891 million, or $1.56 per share a year earlier, reflecting a sharp drop in demand for the light trucks that represent about 60 per cent of its sales.
GM took $9.1 billion in charges against second-quarter results, including $3.3 billion for buyouts of the US factory workers, $2.8 billion for its exposure to bankrupt former parts unit Delphi Corp and $1.6 billion to write down lease values.
Revenue fell to $38.2 billion from $46.7 billion a year ago.
Excluding one-time items, GM posted a loss of $6.3 billion, or $11.21 per share.
GM ended the second quarter with $21 billion in cash and $5 billion in credit facilities. It said it had provided notice in July that it would draw down $1 billion under a secured revolving loan facility.
Chief financial officer Ray Young said GMs second-quarter cash position was slightly better than what it had forecast and said GM was on track with a plan to free up $15 billion in liquidity through 2009 with a combination of cost-cutting, asset sales and new borrowing. Our focus is cash flow and liquidity, Young said.
The struggling auto makers cash position has become an increasing concern for investors and analysts, who have begun to question whether and when GMs liquidity could fall below the levels needed to run its global operations.
Standard & Poors on Thursday downgraded GM to B-minus and warned the auto maker was on track to burn through roughly $4 billion per quarter this year, sending GM bonds to a record low price.
After losses totalling $51 billion over the previous three years, and a $3.25 billion loss in the first quarter, GM faced a series of problems in the second quarter, including a slide in the US sales.
GMs global auto sales dropped 5 per cent and it lost $4 billion on its auto operations before charges in the second quarter as record gas prices sank demand for trucks and SUVs.
The auto maker was also hit by around $2 billion in pre-tax losses from a strike by the United Auto Workers union at a key supplier and some of its own plants during the quarter.