GM Posts $9.6 Billion Q4 Loss

by Robert Farago

Published: February 26th, 2009

General Motors has finally announced their fourth quarter results and its terminal. The ailing American automaker’s cash burn was a staggering $6.2 billion. That might have a little something to do with the fact that GM’s revenues shrank by 34.2 percent, from $46.8 billion to $30.8 billion. Q4 operating loss: $5.9B. Net loss: $9.6B (compared to a not inconsequential $1.5B a year previous). For those of you keeping score, today’s results mark GM’s fourth year without booking a profit and the second largest loss in GM’s entire history. Reacting to the carnage, the man at the helm recycled a press release from somewhere in the middle of this slide into bankruptcy. “2008 was an extremely difficult year for the U.S. and global auto markets,” CEO Rick Wagoner said in a statement. “We expected these challenging conditions will continue through 2009, and so we are accelerating our restructuring actions.” At GM, restructuring actions accelerate you. Nose first. Pro forma mea minimus culpa filed, Red Ink Rick is headed to DC with his well-worn begging bowl . . .

The man with a plan—cut, cut, cut, cut, cut, cut, cut—will share his vision with the Presidential Task Force on Automobiles. Wagoner’s looking for—ready?—another $16.6 billion.

That’s a genuine concern for anyone who isn’t already laughing/crying. In fact, Bloomberg wonders if GM is still, legally, a “going concern.”

GM said its 2008 annual report is likely to include a “going concern” opinion from auditors, a signal of doubt about the company’s future viability. That decision hasn’t been made yet, Chief Financial Officer Ray Young said on a conference call with reporters.

“We don’t know if we’re going to receive additional government funding,” Young said. “That’s the reason we objectively put the statement in the press release.”

Quite why anyone would believe a word coming out of GM these days is an open question. The company’s failed CEO is back at the trough after borrowing your tax money against his “worst case scenario” for all of 2009. Which didn’t even last from December to the end of March.

Closed door session? Of course.

Robert Farago

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Phil Ressler on Feb 27, 2009
Why does GM need an extra 30 models? They don't, but product proliferation and duplication isn't the first order problem depressing revenue at GM. Their lineup should be rationalized but they can also succeed while having more models than Toyota if the first order problems are addressed. Most of us do care. That’s $300/person or something like $1000 per taxpayer. As with RTC, we won't know the cost per taxpayer until we know how much has been recovered through repayment of the loans. And if it's $1,000 per taxpayer but that cost is distributed over many years, the incremental cost is easily born. I'd be happy to see that cost distributed in this case over a few decades. Why would we incentivize people to buy something that they don’t need and which does not increase the productive capacity of the country? Are we going to continue writing loans to 130% of value? What got us into this in the first place? People aren't refraining only from buying what they don't need. They're holding back from buying what they do need. We don't have to write -- and shouldn't -- 130% loans. But we can make funds available to people wherein their access is specifically contingent on a retail or housing purchase. Or we can think more holistically about the problem. The country's largest, most productive, most vital state economy by far, California, cannot uncork its housing market until obstacles to jumbo loan financing and refinancing are removed or lowered. Want to unleash a wave of buying power into the market? Set a 4.5% maximum interest rate for performing home mortages for the next ten years. The banks will make plenty of money on that. Policy makers and private sector parties of influence have to get creative holistically to get ahead of the problem. Mostly, we've been reacting to this crisis with excessive incrementalism. It requires dramatic response. We had a condition of no-vetting of borrowers. Extreme vetting to the point of capital unavailability is equally wrong and more precipitously traumatic and damaging. The Federal government can be an agent for equilibrium when no other influencers of sufficient size are willing or available. Phil

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Geeber on Feb 27, 2009
Phil Ressler: As with RTC, we won’t know the cost per taxpayer until we know how much has been recovered through repayment of the loans. Which is why any bailout should include a REALISTIC assessment of the probability of the loans being repaid. Loaning money without any assurances that it will be paid back is part of what got us into this mess. The last thing we need is the federal government doing the same thing on a large scale. Right now, the probability looks to be very low. GM was a very sick company before 2008. The recent crash in auto sales exposed its weakness. Even worse, GM doesn't just need more money. It needs a wholesale culture change. And it also needs to shed lots of jobs - both blue-collar and white-collar jobs - and dealers and divisions. I doubt that any government loan package will face that reality, because it is too politically unpopular for BOTH parties. Phil Ressler: The country’s largest, most productive, most vital state economy by far, California, cannot uncork its housing market until obstacles to jumbo loan financing and refinancing are removed or lowered. Want to unleash a wave of buying power into the market? Set a 4.5% maximum interest rate for performing home mortages for the next ten years. California's economic problems go far deeper than a depressed housing market. And housing prices in California (and more than a few other states, as well). If anything, housing prices need to fall more in the state to bring them in line with incomes.

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