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Thursday, February 26, 2009

Is General Motors (GM) Racing To Bankruptcy? It Looks Like It, As The Company Bleeds $9.6 Billion This Quarter!

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The automaker General Motors said Thursday that its cash reserves were down to $14 billion at the end of 2008, a year when the industry’s worst sales slump in decades nearly forced the company into bankruptcy before the federal government gave it a lifeline.

G.M. lost $30.9 billion, or $53.32 a share, in 2008 and spent $19.2 billion of its cash reserves.

For the fourth quarter, it lost $9.6 billion, or $15.71 a share, as its global sales fell 26 percent. It spent $6.2 billion of its reserves in the fourth quarter alone. The company has said in the past that it needed a minimum of $11 billion to $14 billion in reserves to finance operations.

In 2007, the company lost $43.3 billion, a record, mostly the result of a noncash accounting charge; it adjusted the figure higher by $4.6 billion on Thursday.

The losses, though, are unlikely to shake investors, who have already realized the automaker’s perilous state. G.M., which has borrowed $13.4 billion from the government since December, said last week that it might need as much as $30 billion to complete the restructuring plan that it has submitted to the Treasury Department.

The $14 billion that G.M. had on hand in December included the $4 billion of federal assistance that it had received at that time, meaning that the company would have been below its minimum level without the cash. An additional $9.6 billion was disbursed to G.M. in January and February.

Executives have repeatedly insisted that the company’s best option is to restructure outside of bankruptcy. G.M. estimated last week that it would need nearly $100 billion to finance a bankruptcy reorganization.

G.M.’s reported 2008 revenue of $149 billion was 17 percent lower than the previous year’s revenue of $180 billion. Global sales fell 11 percent in 2008, its centennial year, making Toyota of Japan the world’s largest automaker and ending G.M.’s 77-year reign at the industry’s pinnacle.

Excluding one-time charges, G.M. lost $16.8 billion last year, or $29 a share. Its fourth-quarter operating loss was $5.9 billion, or $9.65 a share, worse than the per-share loss of $7.40 that analysts were expecting, on average.

Its revenue in the fourth quarter fell 34 percent to $30.8 billion.

G.M.’s global automotive operations lost $10.4 billion last year, compared with a $553 million profit in 2007.

It lost $2.1 billion in the quarter in North America, the most troubled market, compared with $1.1 billion in the final months of 2007. It reported losses in all of its other geographical regions, as well.

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