Ford, GM Report Massive Losses

GM Loses $2.5B, Ford Loses $129M In 3Q; Both Automakers Announce Major Job Cuts, Cash Burns

(CBS/AP)  Motown is singing the blues.

Ford Motor Co. said Friday it lost $129 million in the third quarter as the struggling automaker burned through $7.7 billion in cash and set plans for more job cuts.

Meanwhile, General Motors Corp. says it lost $2.5 billion in the third quarter. The situation is so dire that GM said today it might run out of money by the end of the year.

So GM's proposed merger with the equally-troubled Chrysler is off, reports CBS News correspondent Cynthia Bowers. Its sole focus: its own survival.

"We have no plans whatsoever to consider anything but to continue to run the business," said GM Chairman and CEO Rick Wagoner.

The automaker said its cash burn for the quarter accelerated to $6.9 billion due to a severe U.S. auto sales slump. The company on Friday reported a net loss of $4.45 per share during the quarter, compared with a record-setting loss of $42.5 billion, or $75.12 per share, a year ago.

About 3,600 GM workers will be laid off indefinitely beginning early next year as the automaker slows down production at 10 of its assembly plants.

And Ford says it will cut its white collar work force by 10 percent - 2,200 people.

This is on top of the 48,000 jobs the Big Three automakers have already shed so far this year.

The crisis is exacerbated by the worst car market in 15 years. No automaker is immune, but compared to last October sales are down at Ford 30%, at Chrysler down 34 percent, and at GM 45 percent.

With a state unemployment rate near nine percent, those who still have jobs at nearby plants wonder which shift could be their last.

"I just can't even think about it," one worker said.

What's next could be a nightmare. One job lost inside the plant jeopardizes as many as a dozen outside, jobs like Nick Fetahu's.

Just outside Detroit at Little Joe's Diner, which he manages, Fetahu has one eye on his kitchen, the other on the automakers for whom his customers work.

"Everyday you come in to work you're afraid, is anybody gonna come in today or not?" Fetahu said.

"I'm very scared," Fetahu told CBS News. "This year, 2008, was probably the worst year I've seen."


Not Quite Money To Burn

Ford said it will cut North American production in the fourth quarter by 40,000 units more than what was announced in September, primarily with shift reductions and temporary plant shutdowns. In September the company announced a fourth-quarter production cut of 171,000 units over the fourth quarter of last year, mainly in trucks.

The salaried cuts, Ford said, equate to about 10 percent of its North American salaried work force of 22,600. It will reduce the work force primarily through personnel reductions and attrition, Mulally said.

It also said it has no plans to offer more buyout or early retirement packages to blue-collar workers.

The automaker started the year with 89,000 employees in North America but reduced that number to 80,200 as of Sept. 30 through attrition, hirings, buyouts and layoffs.

In a further effort to cut costs, Ford said it will eliminate merit pay increases in 2009 for salaried workers in North America, along with performance bonuses for salaried employees worldwide. It also will suspend matching contributions for U.S. salaried employees who take part in the company's savings and stock investment program.

Ford also announced that some of its vehicle programs will be deferred, although the company described the moves as minor timing changes.

Ford said it lost $2.6 billion pretax in North America, compared with a loss of $1 billion in the year-ago period.

It recorded a pretax profit of $480 million in South America, compared with $386 million last year. In Europe, the company made $69 million, a sharp drop from the $293 million in the year-ago period.

Ford's Asia-Pacific operations made $4 million, down from $30 million a year ago, while it lost $1 million on its interest in Mazda, compared with a profit of $14 million in the third quarter of last year.

Volvo lost $458 million, wider than the $167 million loss last year. Ford Motor Credit Co. had a pretax profit of $161 million, far lower than the $546 million in the same quarter last year.

"While Ford has been dramatically affected by the difficult business environment, we remain absolutely convinced that we have the right plan and are taking the right actions to weather this difficult period and emerge as a lean, globally integrated company poised for long-term profitable growth," Alan Mulally, president and chief executive, told industry analysts during a teleconference.

Ford said it lost 6 cents per share for the quarter, compared with a loss of $380 million, or 19 cents per share, a year ago.

The company posted a pretax loss of $2.7 billion from continuing operations. But it was offset partly by a $2 billion gain as the company shifted retiree health care liabilities to a trust run by the United Auto Workers.

Ford's global automotive operations had a pretax loss of $2.9 billion for the quarter, compared with a pretax loss of $362 million a year earlier.

Sales fell 22 percent to $32.1 billion from $41.1 billion due to lower volume and the sale of Jaguar and Land Rover.

Excluding special items, Ford lost $1.31 per share, worse than Wall Street expected. Analysts surveyed by Thomson Reuters predicted a loss of 94 cents per share on sales of $28 billion.

Dearborn-based Ford reported its worst three-month performance ever in the second quarter, when it lost nearly $8.7 billion.

The cash burn - in which a company spends more money than it takes in - was far higher than the $2.1 billion Ford used up in the second quarter.

Ford said the cash burn primarily reflected pretax automotive losses, changes in working capital and payments to its credit arm to reduce interest rates for buyers. It was exacerbated by sales drops and production cuts of 500,000 fewer vehicles from second-quarter levels, resulting in $3 billion less in incoming cash for the quarter.

Chief Financial Officer Lewis Booth would not say if he expects the cash burn rate will continue at the present levels, but said he was confident the company can make it through 2009.

"With our present assumptions, we are comfortable with our liquidity position," Booth told reporters Friday morning. "I think it goes without saying, forecasting the future at the moment is extremely difficult. Trying to find out just exactly what is happening with the consumer is really tough."

Industry analysts say that if the economy doesn't improve, Ford could run out of money sometime after 2010.

The company reported having $18.9 billion in cash on hand on Sept. 30, down from $26.6 billion at the end of the second quarter.

U.S. automakers have approached the U.S. government for low-interest loans as they try to weather the global economic slowdown. Ford is also among automakers that are talking with the European Commission for a low-interest loan of 40 billion euros, or about $51 billion. It also is talking to other governments.

[noloyalisti]

These companies are EXACTLY the reason corporations should be HEAVILY regulated and should wield NO political power. Big corporations are the PROBLEM not the solution unless they are HEAVILY regulated. That goes for weapons, oil, insurance and health care. Time to nationalize for the good of the people (instead of the CEOs and politicians).

[incog-nito]

myself buy American. Today we say rember 9-11, I rember the cry REMBER PEARL HARBOR!!!curbs33

Posted by curbs33 at 08:10 PM : Nov 09, 2008

Buy American? Are you kidding? "American" companies are the ones responsible for outsourcing and moving jobs to other countries. They''re the ones pushing for "free trade" agreements, basically forcing the American worker to "compete" against those in other countries making a tiny fraction of their pay, working under little to no labor laws or regulations. Guess which side has been winning?

[bozworth4]

jobs with little or no healthcare, firing of employees who are injured at work, and relying on temporary workers that earn half the wages of a permanent employee.[37]
Posted by usadvisor101

Kinda sounds like Wal-Mart. But do not fear the UNIONS will keep the fire employees. Wonder how much of a car price is labor? Anybody???

[curbs33]

This took longer to happen than I thought. this started when the auto market was flooded with cars for alot less money,from Third World Countrys. The Goverment shoul have made it harder to sell at this lower price. I myself buy American. Today we say rember 9-11, I rember the cry REMBER PEARL HARBOR!!!curbs33

[KLHILL]

Let em fold, building Hummers as gas was soaring, just for profits. The exec''s have millions as the workers on the floor will suffer from greedy management

[wardoglrs]

This is not the way a Republic works and as long as there are plenty of ill informed voters you will never get your country back.
The constitution does not give the elected prez the authority to choose his VP as an example of amendments passed by the house. Are money is by law to be only Gold & Silver not phony FRN''s or worthless
Paper money with no value.

America blew it by putting in a Neo Con again and again you will be disappointment. Bush is a fine example of what really is most of what the hill has to offer

[exfed4]

These arrogant car executives are on a par with the loser bankers. The writing was on the wall a long time ago and they ignored it. Let them all go belly up. The Japanese can more than hold their own and they make a better product. Death to American automakers.

[aubfmet]

If the auto makers want a bailout, the union workers must be ready for a pay cut. Put it in writing. Also the designers must be ready to make some fuel efficient cars. If you don''t want to, you don''t have to but the competition will.

[payasyougo]

Did the "rich" quit buying cars?

[incog-nito]

Some people think "free trade", like "free market", is a cure-all to all economic woes. Here''s how free is supposed to work ideally: I sell you something you don''t make or can''t make very cheaply, and vice-versa, and we''re both better off as a result.

Nowadays free trade actually works like this: I (China) sell you what you don''t make, and I (China) also sell you what you used to make but don''t anymore because I make it much more cheaply. I (China) keep getting richer and more powerful while you (the U.S.) keep getting poorer.