General Motors Loses $6B In First Quarter Of 2009
Posted May 7, 2009 12:00 pm.
This article is more than 5 years old.
Bankruptcy fears may have scared potential car buyers away from General Motors, one possible reason for the carmaker’s US$6 billion loss in the first quarter of 2009.
The company’s chief financial officer, Ray Young, said talk of the company filing for Chapter 11 protection is a likely factor in the loss, amounting to $9.78 per share. GM has until June 1 to either present its restructuring plan or file for bankruptcy.
Dropping sales, mainly in North America and Europe, accounted for a revenue drop from $42.4 billion to $22.4 billion in the quarter. And though the company managed to cut its structural costs by an impressive $3 billion, it wasn’t enough to offset diminished revenue.
GM received US$9.4 billion in U.S. government loans at the beginning of the year, but to be considered eligible for more funding the Obama administration must be confident the company’s restructuring plan will help it become viable again.
And though the numbers were far from positive, analysts were expecting worse. As for the June 1 deadline, GM must check a lot of items off its list by then. For one, it must reach a cost-cutting agreement with its unions, it will also close factories and cut jobs to prove it can repay its loans. Additionally it will complete a debt-for-stock swap with bondholders.
The company is trying to close 2,600 dealerships and is selling or phasing out its Saturn, Saab, and Hummer lines. The Pontiac line will be scrapped as well.
Chrysler was forced to file for bankruptcy protection recently after talks broke down among some of its lenders.
