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Business

GM says it needs federal money to stay afloat

Latest update : 2009-01-21

US car giant General Motors said it would run out of cash if it did not receive the second part of an emergency loan in February. Under a deal reached with federal authorities, carmakers eligible for loans have to prove their viability by March 31.

AFP - The largest US automaker, General Motors Corp., said Tuesday it will run out of cash if it does not get the second part of the the federal bridge loan next month.
  
GM President Fritz Henderson said the the situation was dire for the troubled carmaker, which received a four-billion-dollar 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 at a conference sponsored by the trade publication Automotive News.
  
"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 March 31 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 March 31," he said. "It's critical in our case," added Henderson, who said halting government support could trip GM into bankruptcy.
  
Henderson also said 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. "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," he said.
  
Henderson also said GM 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 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.
  
"We think demand will pickup and take oil to a much higher level. We're planning the business around 130 dollars to 160 dollars per barrel oil over the next five or 10 years," Henderson said.
  
"In that environment, we think we can successfully sell a vehicle like the Volt," which is GM's electric vehicle, Henderson said.
  
The US Treasury loans are part of a 13.4-billion-dollar rescue package 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 four billion dollars from February pending congressional action. Treasury has also provided six billion dollars in aid to GMAC, GM's financial arm.
  
Under the agreement, the automakers will have to prove their viability by March 31 or the government could require the funds to be repaid within 30 days.

Date created : 2009-01-21

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