GM posts $6B quarterly loss, spends $10.2B-WEB ONLY

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General Motors Corp. today posted a $6 billion first quarter loss and said it
spent $10.2 billion more cash than it took in during the first three months of
the year as revenue plummeted by $20 billion.

Chief Financial Officer Ray Young said talk of the company going into Chapter
11 bankruptcy protection appeared to have scared some consumers away from
buying GM vehicles. GM faces a June 1 government deadline to finish a
restructuring plan or go into bankruptcy protection.

GM’s loss for the quarter amounted to $9.78 per share, compared with a loss of
$3.3 billion, or $5.80 per share, in the year-ago period.

Revenue dropped sharply – 47 percent – from $42.4 billion to $22.4 billion in
the quarter because of declining sales worldwide, mainly in North America and Europe, the company said.

Although the company cut structural costs by $3 billion, Young said that wasn’t
enough to offset plunging revenue.

“We cannot cut costs fast enough to offset that revenue loss,” he
said. “People are concerned about bankruptcy, and that’s the reason why we
want to avoid it if at all possible.”

Young said a U.S. government guarantee of GM and Chrysler warranties was not
revealed by the Obama administration until March 30, so during most of the
quarter, consumers were afraid that GM would not be around to honor its

He said people should be reassured by the warranty guarantee, but it might take
time to get the word out.

“I think it takes time for the news to get out to consumers,” he

GM’s cash burn for the quarter was offset by $9.4 billion in U.S. government
loans GM received in the first quarter. GM got another $2 billion in April and
received $4 billion in December, bringing total government loans to $15.4 billion.

As bad as the results look, analysts were expecting worse. Excluding special
items, GM’s fourth quarter adjusted loss was $5.9 billion, or $9.66 per share,
beating Wall Street’s expectations. Analysts surveyed by Thomson Reuters
predicted a quarterly loss of $11.05 per share on revenue of $20.2 billion.

The company reported an operating loss of $3.2 billion from its North American
operations alone.

GM posted an operating loss of $2 billion in Europe while it squeezed out a
small profit in Latin America. Sergio
Marchionne, the CEO of Italy’s Fiat SpA, is in talks to take over GM’s
operations in Europe.

Young would not comment on Fiat’s interest
in GM’s European or Latin America units. Fiat
will have a 20-percent stake in Chrysler when that automaker emerges from
bankruptcy protection.

GM faces an almost impossible list of restructuring tasks to complete before
the June 1 deadline. It must get new cost-cutting agreement with its unions,
complete a debt-for-stock swap with 90 percent of its bondholders, close
factories and cut jobs to prove to the government it can repay the loans.

The largest U.S.-based automaker also is trying to cut 2,600 dealerships and is
in the process of selling or phasing out the Saturn, Saab and Hummer brands. GM
has already decided to get rid of Pontiac.

Young said production during the quarter was down 900,000 vehicles from the
year-ago period, a 40-percent decline as GM temporarily shuttered factories to
stop its inventory from burgeoning.

“That’s why we saw the revenue implosion, a combination of weakness and
global volumes,” he told reporters yesterday.

The company intentionally cut low-profit sales to fleet buyers such as rental
car companies during the quarter, Young said.

Young said GM is continuing to simultaneously prepare for bankruptcy as well as
its preferred option of restructuring out of court.

GM has made an offer to the holders of roughly $27 billion in debt to swap 225
shares of stock for every $1,000 GM owes. The deadline for the swap is May 26,
and Young would not comment when asked if the offer might change.

CEO Fritz Henderson said Monday that the Treasury Department will not allow GM
to offer more than 10 percent of the company’s stock to the debtholders.

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