GM: Can You Spare $22.4 Billion?

The automaker said it requires more funding this year from the U.S. Treasury in order to continue operating until sales recover and its restructuring reaps benefits.
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Updated from 7:23 a.m.For more analysis, please see today's opinion piece Lessons from GM's Board of 1992.

General Motors

(GM) - Get Report

executives were scheduled to talk today with President Barack Obama's auto task force, seeking $22.5 billion in aid after reporting a steep fourth-quarter loss as worldwide vehicle sales collapsed.

The company needs federal help beyond the $13.4 billion it has already received, CFO Ray Young reiterated Thursday on an earnings conference call. "The economic situation is having a dramatic impact on our industry," he said. GM expects domestic vehicle sales of 10.5 million units this year, the lowest since 1982, according to J.D. Power and Associates.

An auditor's ruling on whether GM remains a "going concern" is also pending, and will be included in the company's 10-K, which will be delayed for 15 days. "GM and its auditors must determine whether there is substantial doubt about GM's ability to continue as a going concern," the company said Thursday, underscoring its precarious position while reminding that it requires additional federal funds. "We're forecasting cash flow burn of $14 billion in 09," Young said. "We will need additional support."

In every aspect, GM said, the fourth quarter was a disaster. Sales collapsed around the world, credit dried up, and the company incurred downsizing costs with deferred benefits. Revenue plunged 34%, and the loss totaled $9.6 billion. "We really noticed in the fourth quarter the contagion that started in the United States really spreading around the world," Young said.

Excluding special items, GM's loss in the fourth quarter was $5.9 billion or $9.65 a share. Analysts surveyed by Thomson Reuters had estimated a loss of $7.40 a share. A year earlier, excluding items, the company earned $46 million, or 8 cents a share.

Special items in 2008 included a $1.1 billion impairment charge, $1 billion to adjust the value of deferred tax assets outside the U.S., $900 million for restructuring and capacity-related costs, and $660 million to increase Delphi reserves related to future pending obligations.

Revenue was $30.8 billion, reflecting the sharp decline in global industry volumes. Analysts had estimated $35.1 billion. A year earlier, revenue was $46.8 billion.

GM reported an adjusted operating loss of $5.2 billion. "What really changed in the fourth quarter of '08 was the fact that a global industry downturn really impacted a lot of emerging markets," Young said. "We did some fairly sizable production adjustments in December for these markets. You lose the revenue, but you still have supplier payment." Additionally, GM used incentives to offset the lack of credit availability from GMAC.

Worldwide sales fell 11% to 8.35 million vehicles, with 64% of sales outside the U.S., up from 59% a year earlier.

Looking ahead, Young said first-quarter production will be down considerably as the company adjusts inventories. He said credit is more easily available, 2008 restructuring efforts will reduce current-year costs, and GM has reduced consumer leasing, which he termed "a very expensive form of incentive."

As of Dec. 31, GM had $14 billion in cash, marketable securities and available assets of the Voluntary Employees Beneficiary Association, down from $27.3 billion a year earlier. The company said its pension plans are currently underfunded by about $12.4 billion. The full-year loss totaled $30.9 billion.

GM shared were trading Thursday at $2.56, up 1 cent, while shares in

Ford

(F) - Get Report

were up 7 cents at 2.08.