<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Nov 11, 2008
</TR><!-- headline one : start --><TR>GM in dire straits <!--10 min-->
</TR><!-- headline one : end --><TR>Needs federal aid in coming weeks, automaker's chief </TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
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On Friday the biggest US automaker warned 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. -- PHOTO: THOMSON REUTERS
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CHICAGO - GENERAL Motors is in such dire financial straits that it needs to line up a federal aid package before president-elect Barack Obama takes office in January, the automaker's chief executive said on Monday.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story --><STYLE type=text/css> #related .quote {background-color:#E7F7FF; padding:8px;margin:0px 0px 5px 0px;} #related .quote .headline {font-family: Verdana, Arial, Helvetica, sans-serif; font-size:10px;font-weight:bold; border-bottom:3px double #007BFF; color:#036; text-transform:uppercase; padding-bottom:5px;} #related .quote .text {font-size:11px;color:#036;padding:5px 0px;} </STYLE>GM to lay off 1,900 more
DETROIT - GENERAL Motors says it plans to lay off another 1,900 factory workers at parts stamping, engine and transmission factories in North America as it cuts expenses to deal with a worsening cash crisis.
The largest US automaker said in a filing with the Securities and Exchange Commission on Monday that the layoffs are a result of declining sales.
Why US automakers are in a mess
DETROIT - AT FORD Motor they called it 'Blue,' a team set up around the year 2000 to design an array of small, fuel-efficient cars to compete with the Japanese.
It didn't get far because no one could figure out how to make money on low-priced compacts with Ford's high labor costs. Besides, the automaker was racking up billions in profits by selling pickups and sport utility vehicles. Times were good and gas was cheap.
GM shares hit 62-yr lows
DETROIT - GENERAL Motors (GM) shares tumbled as much as 31 per cent to a 62-year low on Monday after analysts downgraded the automaker, citing cash levels that may fall below the minimum needed in the first quarter of 2009.
Analysts also warned that while government aid would decrease the risk of a bankruptcy for the No.1 US automaker, any assistance would come at a significant cost to existing shareholders.
Obama urges fast aid
WASHINGTON - PRESIDENT-ELECT Barack Obama asked President George W. Bush at their White House meeting on Monday to back immediate emergency aid for the US auto industry, The New York Times reported.
Citing people familiar with the discussion, the Times said Mr Bush indicated he might support some aid to the struggling automakers and a broader economic stimulus package if Mr Obama and Democrats in Congress dropped opposition to a free-trade pact with Colombia.
</TD></TR></TBODY></TABLE>'This is an issue that needs to be addressed urgently,' Mr Wagoner told Automotive News, adding that now is the time to 'overshoot, not undershoot' the level of assistance.
GM is willing to offer the government preferred stock, speed the introduction of fuel-efficient vehicles and set limits on executive compensation in exchange for financial aid, Mr Wagoner said.
But Mr Wagoner did not think it would be 'a very smart move' for him to resign.
'It's not clear to me what purpose would be served', Mr Wagoner said. 'I think our job is to make sure we have the best management team to run GM.'
GM shares plunged more than 30 per cent on Monday after an analyst forecast their price would fall to zero, but recovered slightly by the end of trading to 3.36 per share, down 23 per cent.
'We are lowering our target on GM equity to zero dollars,' the Deutsche Bank report said.
'Even if GM succeeds in averting a bankruptcy, we believe that the company's future path is likely to be bankruptcy-like,' it said.
'While we believe that GM's secured creditors may get a par recovery, unsecured creditors may get very low recovery. Equity shareholders are unlikely to get anything.'
The shares closed at US$4.36 (S$6.52) on Friday, down from more than US$30 a year ago.
On Friday the biggest US automaker warned 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.
The company announced a third-quarter loss of US$2.5 billion and said it had burned through another US$6.9 billion of cash during the three-month period, leaving it with cash reserves of US$16.2 billion.
GM has said it needs cash reserves of between US$11 and US$14 billion to cover the cost of its operations.
Mr Wagoner said that while the company's cash burn in the fourth quarter should ease to US$1 billion a month, it will likely not be able to survive without government help.
GM has developed a turnaround plan which assumes that sales fall to 11.7 million vehicles next year from recent averages of around 15 million a year.
'I'd question whether the US industry as a whole could survive that without support,' Mr Wagoner said, adding that even with government help the automaker will have to do 'significantly more restructuring' if industry sales stay that low.
Mr Wagoner and executives from Ford, Chrysler and the United Auto Workers Union asked for the federal government to speed up delivery of US$25 billion in loan guarantees for the development of fuel-efficient vehicles.
They also requested another US$25 billion in loan guarantees to support operations amid a sharp economic downturn which has pushed vehicle sales to a 25 year-low.
Democratic leaders in the US Congress called Saturday for funds contained in a US$700 billion federal rescue plan for the financial sector to be diverted to the struggling auto industry.
Mr Obama's chief of staff urged swift action on Sunday to rescue the US auto industry, but declined to say whether Obama supported the appeal by Democratic House speaker Nancy Pelosi and Senate Majority leader Harry Reid. 'As president-elect Obama has said throughout the campaign and as I think as recently as Friday ... the auto industry is an essential part of our economy and an essential part of our industrial base,' Congressman Rahm Emanuel told ABC. -- AFP
</TR><!-- headline one : start --><TR>GM in dire straits <!--10 min-->
</TR><!-- headline one : end --><TR>Needs federal aid in coming weeks, automaker's chief </TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
On Friday the biggest US automaker warned 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. -- PHOTO: THOMSON REUTERS
</TD></TR></TBODY></TABLE>
<!-- START OF : div id="storytext"-->
CHICAGO - GENERAL Motors is in such dire financial straits that it needs to line up a federal aid package before president-elect Barack Obama takes office in January, the automaker's chief executive said on Monday.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story --><STYLE type=text/css> #related .quote {background-color:#E7F7FF; padding:8px;margin:0px 0px 5px 0px;} #related .quote .headline {font-family: Verdana, Arial, Helvetica, sans-serif; font-size:10px;font-weight:bold; border-bottom:3px double #007BFF; color:#036; text-transform:uppercase; padding-bottom:5px;} #related .quote .text {font-size:11px;color:#036;padding:5px 0px;} </STYLE>GM to lay off 1,900 more
DETROIT - GENERAL Motors says it plans to lay off another 1,900 factory workers at parts stamping, engine and transmission factories in North America as it cuts expenses to deal with a worsening cash crisis.
The largest US automaker said in a filing with the Securities and Exchange Commission on Monday that the layoffs are a result of declining sales.
Why US automakers are in a mess
DETROIT - AT FORD Motor they called it 'Blue,' a team set up around the year 2000 to design an array of small, fuel-efficient cars to compete with the Japanese.
It didn't get far because no one could figure out how to make money on low-priced compacts with Ford's high labor costs. Besides, the automaker was racking up billions in profits by selling pickups and sport utility vehicles. Times were good and gas was cheap.
GM shares hit 62-yr lows
DETROIT - GENERAL Motors (GM) shares tumbled as much as 31 per cent to a 62-year low on Monday after analysts downgraded the automaker, citing cash levels that may fall below the minimum needed in the first quarter of 2009.
Analysts also warned that while government aid would decrease the risk of a bankruptcy for the No.1 US automaker, any assistance would come at a significant cost to existing shareholders.
Obama urges fast aid
WASHINGTON - PRESIDENT-ELECT Barack Obama asked President George W. Bush at their White House meeting on Monday to back immediate emergency aid for the US auto industry, The New York Times reported.
Citing people familiar with the discussion, the Times said Mr Bush indicated he might support some aid to the struggling automakers and a broader economic stimulus package if Mr Obama and Democrats in Congress dropped opposition to a free-trade pact with Colombia.
</TD></TR></TBODY></TABLE>'This is an issue that needs to be addressed urgently,' Mr Wagoner told Automotive News, adding that now is the time to 'overshoot, not undershoot' the level of assistance.
GM is willing to offer the government preferred stock, speed the introduction of fuel-efficient vehicles and set limits on executive compensation in exchange for financial aid, Mr Wagoner said.
But Mr Wagoner did not think it would be 'a very smart move' for him to resign.
'It's not clear to me what purpose would be served', Mr Wagoner said. 'I think our job is to make sure we have the best management team to run GM.'
GM shares plunged more than 30 per cent on Monday after an analyst forecast their price would fall to zero, but recovered slightly by the end of trading to 3.36 per share, down 23 per cent.
'We are lowering our target on GM equity to zero dollars,' the Deutsche Bank report said.
'Even if GM succeeds in averting a bankruptcy, we believe that the company's future path is likely to be bankruptcy-like,' it said.
'While we believe that GM's secured creditors may get a par recovery, unsecured creditors may get very low recovery. Equity shareholders are unlikely to get anything.'
The shares closed at US$4.36 (S$6.52) on Friday, down from more than US$30 a year ago.
On Friday the biggest US automaker warned 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.
The company announced a third-quarter loss of US$2.5 billion and said it had burned through another US$6.9 billion of cash during the three-month period, leaving it with cash reserves of US$16.2 billion.
GM has said it needs cash reserves of between US$11 and US$14 billion to cover the cost of its operations.
Mr Wagoner said that while the company's cash burn in the fourth quarter should ease to US$1 billion a month, it will likely not be able to survive without government help.
GM has developed a turnaround plan which assumes that sales fall to 11.7 million vehicles next year from recent averages of around 15 million a year.
'I'd question whether the US industry as a whole could survive that without support,' Mr Wagoner said, adding that even with government help the automaker will have to do 'significantly more restructuring' if industry sales stay that low.
Mr Wagoner and executives from Ford, Chrysler and the United Auto Workers Union asked for the federal government to speed up delivery of US$25 billion in loan guarantees for the development of fuel-efficient vehicles.
They also requested another US$25 billion in loan guarantees to support operations amid a sharp economic downturn which has pushed vehicle sales to a 25 year-low.
Democratic leaders in the US Congress called Saturday for funds contained in a US$700 billion federal rescue plan for the financial sector to be diverted to the struggling auto industry.
Mr Obama's chief of staff urged swift action on Sunday to rescue the US auto industry, but declined to say whether Obama supported the appeal by Democratic House speaker Nancy Pelosi and Senate Majority leader Harry Reid. 'As president-elect Obama has said throughout the campaign and as I think as recently as Friday ... the auto industry is an essential part of our economy and an essential part of our industrial base,' Congressman Rahm Emanuel told ABC. -- AFP
