GM's Wagoner: A Solid 'No' To Bankruptcy
Rick Wagoner, chief executive of teetering General Motors, just wrapped up an interview on CNBC following his company's troubling earnings this morning, in which he said the company has "no plans whatsoever" to declare bankruptcy.
"We don't think anything positive would come out of that kind of reorganization," Wagoner said. "You can't sell cars to people under those circumstances."
During the third quarter of this year, GM burned through its cash at a rate of $2.3 billion per month, more than twice the number from the second quarter, when GM spent $1 billion per month. The company, like all automakers, has been hammered by declining vehicle sales in this recessionary economy.
But in the CNBC interview, Wagoner said the burn rate in the fourth quarter of this year will be "more like the first two quarters of this year."
Still, the math doesn't look promising: GM said it has about $16 billion cash on hand. Wagoner said he doesn't want that number to go below $11 billion. If it does, then bankruptcy does become an option.
If GM can reduce its burn rate to $1 billion per month, that buys the former American auto titan about half of a year.
But GM needs to make it to 2010, when union concessions kick in and remove $3,000 to $4,000 from the cost of producing each new vehicle.
Wagoner said he hopes Congress will hold a lame-duck session and approve an additional $25 billion in direct loans to help the Detroit Three retool their operations to make more fuel-efficient vehicles. A similar sum was approved last month, but because of red tape, the cash may not reach the automakers for months.
Wagoner and other auto and union leaders were making their case in Washington yesterday.
Wagoner also said that the merger under discussion with Chrysler has been put on hold for now as GM concentrates on raising cash. He said the merger would offer medium- and long-term benefits, but no short-term cash help for GM.
-- Frank Ahrens
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November 7, 2008; 1:09 PM ET
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