Rival Ford announces more job cuts
DETROIT – The American auto industry is running on fumes.
General Motors, the nation’s largest automaker, warned Friday that it may run out of money by the end of the year after piling up billions in third-quarter losses and burning through cash at an alarming rate. Ford sustained heavy losses, too.
The situation is so severe that GM has suspended talks to acquire Chrysler and is appealing to the government for help as the slumping economy drags car sales to their lowest level in a quarter century.
GM Chairman and CEO Rick Wagoner said the company will “take every action” possible to avoid bankruptcy.
“We’re convinced that the consequences of bankruptcy would be dire,” he said, adding that the company would use every source of potential funding. “We need to find a way to get through this, and that’s really our focus.”
GM also planned more job cuts, including 5,600 salaried and factory workers. But company officials cautioned that those measures alone would not be enough and that federal aid is essential.
Ford saw its cash supply decline rapidly and announced its own job cuts Friday. But it’s in better shape because the company borrowed billions of dollars in 2007 by mortgaging its factories. The Dearborn-based manufacturer said it had enough cash to make it through 2010.
Friday’s events called into question the future of Detroit’s three automakers and heightened pressure on the government to take action.
President-elect Barack Obama on Friday indicated that help may be on the way. At a news conference, he said Congress must pass an economic stimulus measure either before or just after he takes office in January, and he mentioned aid for the auto industry.
IHS Global Insight analyst George Magliano said the cash problems reported by GM and Ford were worse than experts had thought. And that raised the risk of bankruptcy.
“It’s close,” he said about the possibility of one of the U.S. automakers filing for Chapter 11 protection. “Up until now, we knew the cash numbers were tough, but we didn’t know how bad.”
GM said it lost $2.5 billion in the third quarter, but it spent $6.9 billion more than it took in – nearly double the spending rate of the second quarter.
The news came just hours after Ford announced it had lost $129 million for the quarter. The company burned through $7.7 billion in cash, but said it could keep going through 2009. Ford also said it would cut another 2,260 white-collar workers in North America.