The result isn't unexpected, as Ford announced a similar pre-tax result earlier today and the industry in general has been releasing poor to dismal figures all week. Nevertheless, the big loss means the planned pairing of Chrysler and GM is officially on the back burner for the near term even if major aid from the federal government does come through.
“The third quarter was especially challenging for the auto industry. Consumer spending, which represents close to 70 percent of the U.S. economy, fell dramatically, and the abrupt closure of credit markets created a downward spiral in vehicle sales,” said Rick Wagoner, Chairman and Chief Executive Officer. “The U.S. government’s actions to help stabilize the credit markets and eventually ease the credit crunch are an essential first step to the economy’s and the auto industry’s recovery, but further strong action is required.”
Concerning previous talks with Chrysler concerning a possible merger or acquisition, Wagoner was succinct: ""We've concluded at this particular time that we are better off to put 100% of our efforts on the liquidity side. We've set aside such actions as a near term priority."
Financial prognostication through the end of 2008 is not optimistic, with the company planning to barely scrape by with the funds necessary to continue operations. The first two quarters of 2009 are equally bleak, with GM predicting it will barely be able to remain in business barring an economic turnaround, massive asset sales or some other intervention. The company hasn't come out and stated that bankruptcy is imminent, but the implication lies heavily over the news.
“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 Wagoner. “Given the current lack of credit availability we must take further difficult ‘self-help’ actions.” Those self-help actions will be taken above and beyond the restructuring program announced earlier this year, designed to generate an additional $15 billion in liquidity for the company.
Production cutbacks, development delays and reduced support of the dealer network will account for major portions of the new initiatives. Additionally, GM plans to reduce its salaried employee cost by about 30%, meaning major layoffs throughout North America will likely be necessary, though GM plans to encourage as many voluntary early retirements and 'mutual separation programs' as possible.
The final tally has GM posting a $2.8 billion loss before tax, a loss of $2.5 billion after tax, an adjusted operating cash flow loss of $6.9 billion, and a net earnings loss per share of $4.45. Adjusted losses for Q3 2008 amounted to $4.2 billion, however, compared to $1.6 billion in the same period of 2007.