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 on Thursday.
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 last week.
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 bankruptcy filing.
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 Detroit-based automaker.
GM shares rose to $1.72 in premarket trade, up from a close at $1.66 on Wednesday.
(Reporting by Kevin Krolicki; editing by John Wallace)