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GM warns will run out of cash without rest of govt loan

GM warns will run out of cash without rest of govt loan
AFP
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First Published: Wed, Jan 21 2009. 02 04 PM IST
Updated: Wed, Jan 21 2009. 02 04 PM IST
Detroit: US automaker, General Motors Corp. (GM) has said that it will run out of cash if it does not get the second part of the federal bridge loan next month.
GM President Fritz Henderson said that the the situation was dire for the troubled carmaker, which received a $4 billion emergency loan last month and is due to collect another installment of the bridge loan in February.
“If we don’t get our second installment of funding, we’ll run out of cash. It’s just that simple,” Henderson said.
“We have finalized the documentation with the second draw and frankly we anticipate receiving it,” Henderson said.
“But it’s critical we receive it,” he added, noting that GM would run out of cash well before 31 March when it supposed to deliver the final draft of its plan outlining the steps it is taking to become financially viable.
“We’d run out of cash in the near term. Certainly well before 31 March,” he said adding: “It’s critical in our case.”
He said that halting government support could trip GM into bankruptcy.
Henderson also said that he was not concerned about Toyota passing GM in unit sales.
“I actually noticed they passed us in market (capitalization), cash flow and profitability a long ago,” he said adding: “Honestly, this is not a measure I pay a lot of attention to. What much more important to me is how we make GM successful.”
Henderson said that the company has kept the Buick brand alive largely because it is popular in China, which has emerged as a key market for GM over the past decade.
“In that sense the Buick brand benefit immensely from the investment we are making in China,” he said.
Henderson also said that GM remains commited to bringing out electric and hybrid vehicles despite its financial difficulties.
“If gas prices stay low, we know it’s going to be much more difficult to sell any kind of alternative propulsion vehicle. Our view is oil is still a scarce commodity,” he said.
“We think demand will pickup and take oil to a much higher level. We’re planning the business around $130 to $160 per barrel oil over the next 5-10 years,” Henderson said.
“In that environment, we think we can successfully sell GM’s Volt,” Henderson said.
The US Treasury loans are part of a $13.4 billion rescue package that the US government approved this month for GM and Chrysler to stave off collapse amid tight credit and dismal sales.
GM was to be eligible for a further $4 billion from February pending congressional action. Treasury has also provided $6 billion in aid to GMAC, GM’s financial arm.
Under the agreement, the automakers will have to prove their viability by 31 March or the government could require the funds to be repaid within 30 days.
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First Published: Wed, Jan 21 2009. 02 04 PM IST