GM is running on fumes
Last Updated: February 25, 2009: 3:02 PM ET
NEW YORK (CNNMoney.com) -- General Motors will soon give more details
about how close it came to running out of cash at the end of last year.
More importantly, it may give federal officials overseeing a bailout of
the company a better idea of how much more cash it will need to stay out
of bankruptcy and by when it must get it.
GM will report its fourth quarter results Thursday morning, and analysts
surveyed by Thomson Reuters forecast that the company's net loss hit
$4.2 billion, or $7.40 a share.
If analysts' estimates are right, GM (GM, Fortune 500) will have
reported net losses over the past four years of about $78 billion.
But analysts and regulators may be far more interested in how much cash
GM burned during the quarter.
The company's auto operations burned through $6.9 billion in the third
quarter, leaving it with only $16.2 billion of cash heading into the
fourth quarter. That set off alarm bells since GM has said it needs a
minimum of $11 billion to $14 billion to conduct operations.
Automakers typically burn through a healthy chunk of cash during the
third quarter since that is when they change production to a new model year.
But sales at GM and across the industry went from bad to worse in the
fourth quarter, putting more pressure on dwindling cash reserves.
GM got $9.4 billion of a $13.4 billion loan from the federal government
in the fourth quarter's closing days, saving it from a bankruptcy filing.
While the company has given updates on its operations several times
since the third quarter results, most notably in two turnaround plans it
submitted to the federal government, it has yet to detail how much it
lost and how much cash it went through in the fourth quarter.
However, GM warned in its most recent viability plan that it expects to
burn through $13.3 billion in the first quarter of this year.
That is one reason that GM is asking the federal government for an
additional $16.6 billion in loans through 2011, while privately held
Chrysler is asking for $5 billion more. Chrysler has indicated it needs
the money by the end of the quarter but GM has been less clear about the
immediacy of its cash need.
February auto sales expected to be bleak
How quickly GM may need new loans could come into better view Tuesday
once it and other automakers report February sales and give their
outlook for the year ahead.
Industrywide sales plunged 37% in January to a 26-year low, and it looks
like there was little improvement in February.
Jesse Toprak, industry analyst with sales tracker Edmunds.com expects
that February sales plunged 40% from a year ago. Sales should be
slightly above the January total, however.
"Things aren't getting any better, although they're not getting much
worse from the worst month in decades," he said, adding that he's not
expecting sales to pick up from current levels until the economy starts
to stabilize, perhaps in July or August.
"We talk about the problems GM and Chrysler. But no one is immune from
what's going on," he said. "Even the most financially healthy company
like Toyota (TM) is suffering."
GM is now forecasting 2009 sales of just over 10 million cars and light
trucks, down 1.5 million vehicles from its estimate in early December.
Chrysler also recently cut its 2009 sales projection to 10.1 million.
Edmunds, as well as research firms J.D. Power & Associates and R.L.
Polk, also have sales estimates in the 10 million range for the year.
And if those grim forecasts are accurate -- or turn out to be too
optimistic -- then GM, Chrysler and Ford Motor (F, Fortune 500) will
keep losing money for the foreseeable future.