General Motors today reported a steep net loss of $6 billion for the first quarter of 2009, potentially another half-step in the direction of a bankruptcy filing on June 1.
The single biggest factor for GM's loss is that demand has fallen off a cliff. Revenues fell by nearly half versus the year-ago quarter. GM's worldwide production fell by more than 900,000 cars and trucks, or about 40 percent, to only about 1.3 million.
GM has until a government-imposed deadline of June 1 to come up with a restructuring plan that will win the approval of the U.S. Treasury. For now, Treasury is keeping GM afloat with loans. The new plan hinges on concessions from GM bondholders, who are being asked to accept only a portion of the face value of their GM debt.
Meanwhile, with less money coming in, GM's cash is dwindling. GM reported it burned through $2.6 billion in cash since the end of 2008, taking its cash down to $11.6 billion. A year earlier, GM had $24.3 billion in cash.
Last fall, GM said it needed an absolute minimum of about $11 billion in cash, to pay suppliers and run its monthly operations â€" not counting capital expenditures on plants, land and equipment.
GM is cutting its operations faster and deeper than ever, to try and shrink its breakeven point. In December 2008, GM's first appeal for government funds said that GM would restructure itself to become profitable at an annual sales rate for the entire U.S. market of 12.5 million to 13 million.
But U.S. sales continued to plummet. GM said in a revised plan in February 2009 that it would shrink its breakeven point to a market of 11.5 to 12 million. After the Obama Administration shot down that "viability plan" in late March, GM last month cut its estimated breakeven point to a U.S. market with only 10 million U.S. sales. That would be the lowest since the early 1970s.
At the same time, GM recently added Pontiac to the list of brands to be dropped, along with Hummer, Saturn and Saab. The company also increased by about 8,000 the number of jobs it plans to cut. GM had 61,000 hourly employees in 2008. The company now expects only 38,000 by 2011.