General Motors Corp and Ford Motor Co reported far deeper-than-expected quarterly losses on Friday and said their rate of cash burn had accelerated, as an extended slump in car sales raised questions about the future of the US auto industry.
Both companies said they would take aggressive steps to cut costs further. The two largest US automakers reported third-quarter results after the world's No 1 automaker, Toyota Motor Corp, slashed its profit forecast for the year. President-elect Barack Obama said on Friday that help for the US auto industry was a high priority and urged the Bush administration to do "everything it can" to accelerate disbursement of $25 billion of loans to the industry previously approved to make fuel economy improvements.
"I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel efficient cars here in the United States," Obama said. GM shares fell more than 9 percent while Ford rose 2 percent.
The two burned through a combined $14.6 billion in cash in the face of deepening global downturn. Chrysler LLC is also burning through cash quickly, sources said. Ford and GM both expect their rate of cash use to decline in the fourth quarter.
GM also indicated it had set aside consideration of an acquisition of smaller rival Chrysler - without mentioning the company's name - saying it was focused on cost-cutting and other steps to free up $20 billion in liquidity through 2009. Cash preservation has become crucial for GM, which said its cash holdings would fall short of the minimum needed to run its business without new funding or other drastic action.
Analysts saw that as presenting two alternatives, a government rescue package, or a potential bankruptcy if a bid for aid fails. "We're convinced that the consequences of bankruptcy would be dire and extend far beyond GM," Chief Executive Rick Wagoner said. "We are going to take every action we possibly can to avoid it, and we are going to use every source of funding."
The news came the day after the heads of Ford, Chrysler and GM - once called the Big Three, due to their dominance of the industry - as well as the head of the United Auto Workers union went to the US Congress seeking $50 billion in federal aid to help them ride out the crisis. Shares in GM and Ford have tumbled dramatically this year, with Ford down 71 percent and GM down 83 percent, far deeper slides than the 43 percent fall of the global Dow Jones Automobiles & Parts Titans 30 index.
In Germany both Bayerische Motoren Werke AG - BMW, the world's largest premium carmaker - and its rival Daimler AG, maker of Mercedes, posted sharp sales declines in October, citing weakness in the United States and western Europe. Both BMW and Daimler have reduced profit forecasts for their automobile businesses in two consecutive quarters following a sharp drop in demand.
Porsche SE posted a 46 percent rise in pretax profit for the 12 months ended in July that easily topped analysts' forecasts. The growth was largely the result of better-than-expected returns from hedging strategies on shares of Volkswagen AG.