Markets

Loss Shows GM Is Short of Both Time and Money

By Jim Henry

Updated on: February 26, 2009 / 1:19 PM EST / MoneyWatch

Time is money, and GM doesn't have enough of either one.

GM's latest losses reported today show that the company is falling behind in the race against time. GM is trying to shrink itself to the point where it can become profitable at much lower volume. So are Chrysler and Ford. But that point is getting lower and more difficult to achieve all the time, because sales and revenues are shrinking even faster.

GM today reported a net loss of $30.9 billion in 2008, versus a net loss of $43.3 billion in 2007. Both years were distorted by what an analyst once called "GM's usual smorgasbord of special items." Adjusted for one-time special items, GM had an "adjusted" net loss of $16.8 billion in 2008, versus a net loss of about $300 million in 2007.

Crucially, GM burned through $7 billion in cash in the second half of 2008, despite receiving $4 billion in government loans on Dec. 31. As of Dec. 31, 2008, GM had $14 billion in cash and equivalents, down from $21 billion on June 30, or $27.3 billion a year earlier.

Simply stated, cash burn means GM has more money going out than it has coming in. That situation is getting worse, as sales fall.

From the end of June 2007 to the end of June 2008, GM's cash and cash equivalents shrank at an average rate of about $1.6 billion per quarter. That shrinkage more than doubled in the second half of 2008, to an average of $3.5 billion per quarter.

GM suffered pre-tax losses in every one of its major global markets, led by North America, which had a pre-tax loss of $2.1 billion in the fourth quarter, down from a pre-tax loss of about $1.1 billion in the year-ago quarter. GM's Latin America and Asia Pacific regions, which were profitable in the year-ago quarter, fell to pre-tax losses in the most recent quarter.

In a written statement, GM characterized the U.S. recession, followed by the rest of the world's major economies, as a "global contagion."

GM Chairman and CEO Rick Wagoner said the company expects the same business conditions to continue in 2009.