GM warns it could run out of cash in 2009

DETROIT -- General Motors warned Friday that it has only a minimum amount of cash to operate its business through the end of the year, and even with planned restructuring will fall short of cash in the first two quarters of 2009.

"Even with its planned actions, the company's estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions significantly improve," the automaker said at the end of its third-quarter earnings report, released an hour later than planned.

The situation won't change unless GM receives "substantial proceeds from asset sales, takes more aggressive working capital initiatives, gains access to capital markets and other private sources of funding, receives government funding under one or more current of future programs, or some combination of the forgoing," the company said.

The automaker also said the liquidity crisis has forced it to back off plans to acquire stuggling rival Chrysler.

"While the acquisition could potentially have provided significant benefits, the company has concluded that it is more important at the present time to focus on its immediate liquidity challenges, and, accordingly, considerations of such a transaction as near-term priority have been set aside," GM said.

Chrysler issued a statement saying they don't comment on merger talks "as many times, they do not come to fruition."

GM reported a $2.54 billion loss for the third quarter, and so far this year has lost $21.26 billion.

In slides accompanying a press conference Friday afternoon, GM says it is facing its worst financial and credit crisis in more than 70 years. The turmoil is spreading globally, it says, slowing European markets, growth in Asia Pacific, and threatening to put the brakes on sales in Latin America. Throughout GM's recent downturn, it has relied on global sales to bolster its bottom line.

The automaker announced cost-cutting intiatives to raise another $5 billion, including selling Hummer, ACDelco and a technical and manufacturing center in Strasbourg, France. That should riase some $2 billion to $4 billion.

Additional job cuts and salary freezes should save $500 million. The automaker is also freezing some product development programs in North America and Europe by three to 12 months, reducing capital spending by $2.4 billion in 2009.

All this is on top of $10 billion in cuts announced in June, which GM says are still on track to be completed by the end of 2009.

"Volatility in the world's financial markets, tightening of consumer and business credit and historically low consumer confidence has created a very challenging environment," said Rick Wagoner, GM's CEO and chairman. "Given the current lack of credit availability, we must take further difficult 'self-help' actions."

GM says it doesn't know what the long-term consequences of this crisis will be, and how long it will take for the economy to hit recovery mode.

The automaker said its cash burn for the quarter accelerated to $6.9 billion due to the severe U.S. auto sales slump.

The company on Friday reported a net loss of $4.45 a share during the quarter, compared with a record-setting loss of $42.5 billion, or $75.12 a share, a year ago.

Revenue fell to $37.9 billion from $43.7 billion.

The New York Stock Exchange halted trading in GM shares before the announcement, which was about an hour later than expected. When shares resumed trading, they were 11.9% lower than Thursday's t $4.23 closing price.