General Motors Corp said it burned through $10.2 billion in the
first quarter as it failed to cut costs fast enough to offset a sharp
decline in global sales and was kept afloat by a federal bailout.
Revenue dropped by almost half to $22.4 billion as the company cut
production by about 900,000 vehicles and tried to run down costly
inventories on dealer lots in the United States and Europe.
Chief Financial Officer Ray Young said there was evidence consumers
were scared away from GM cars and trucks because of concern the
automaker was headed for bankruptcy.
You could not offset the revenue implosion that we experienced
here, Young told reporters following release of the quarterly results
He said GM still hoped to complete a debt restructuring out of court
but was ready for bankruptcy if that proved necessary. He said GM was
pressing ahead with contingency plans for a quick bankruptcy process,
drawing on the experience of Chrysler LLC, which filed for bankruptcy
We are very very cognizant of this issue of revenue perishability
and how consumers react to the threat of bankruptcy, Young said.
So that's from our perspective the importance of avoiding
bankruptcy at all costs. But if we have to go through a bankruptcy, the
importance of doing it quickly -- get in and out very very quickly --
in order to alleviate the concerns of consumers, he said.
Young said GM would make a decision at the end of this month on
whether an offer to extinguish $24 billion in bond debt in exchange for
new shares had garnered enough support for the company to avoid a
GM lost market share in the quarter as its global sales fell 28 percent, compared with an industrywide decline of 21 percent.
GM posted a first-quarter net loss of $6 billion, compared with a loss of $3.3 billion a year earlier.
Excluding $73 million of one-time net charges, it lost $9.66 per
share. That was within the wide range of analysts' expectations.
GM is facing a government-imposed June 1 deadline to reach
agreements to overhaul its operations and cut more than $40 billion in
debt. To date, the company has taken $15.4 billion in emergency loans
from the U.S. Treasury.
The first quarter was also marked by GM's failure to win federal
backing for a turnaround plan that the U.S. autos task force concluded
was too slow-moving to succeed.
The Obama administration ousted Rick Wagoner as GM chief executive at the end of the quarter.
Creditors have been looking beyond GM's results, focusing instead on
whether it succeeds in winning debt concessions from its bondholders
and the United Auto Workers union.
The automaker said on Thursday that it had not yet reached the deal it needs with the UAW.
It also said the Treasury had not yet agreed to convert half of the
loans it has extended to GM into stock in a restructured company, as
the automaker has proposed.
Young said GM was back in talks with union representatives this week
and was ready to negotiate around the clock to reach a settlement.
The UAW faces pressure to accept GM stock in exchange for about $10
billion the union is owed for a trust fund for retiree healthcare. That
would give the union a 39 percent stake in the restructured company.
Under the restructuring plan GM detailed last month, the government
would own a majority stake, effectively nationalizing the 100-year-old
GM shares rose to $1.72 in premarket trade, up from a close at $1.66 on Wednesday.