Staggering news for US automakers

By Elizabeth Strott

A pair of shocking earnings reports Friday proved that things are still getting worse for the big U.S. automakers.

Quarterly losses at General Motors (GM, news, msgs) came in at $4.2 billion, or $7.35 per share -- roughly twice the consensus estimate for a $3.70-per-share loss -- as revenue slid 13% to $37.9 billion.

And although Ford Motor (F, news, msgs)actually narrowed its loss -- to $129 million, or 6 cents per share, down from a loss of $380 million, or 19 cents per share, in the same quarter last year -- investors were eyeing the automaker's $3 billion quarterly operating loss. At $1.31 per share, that was worse than the consensus estimate of a 94-cent loss for the quarter and far worse than last year's loss of a penny per share.

Ford revenue slumped 22% to $32.1 billion, with revenue from autos falling 23% to $27.8 billion.

Shares of Ford gained 4 cents, or 2%, to $2.02 on Friday. GM shares pared 44 cents on the session, a 9.1% decline, to close at $4.36.

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At both automakers, the bad news follows a series of quarters that could most politely be described as "challenging." Ford has lost $24 billion since the beginning of 2006; GM has lost more than $50 billion over the past three years.

Burning through cash quickly

Analysts have been worried about the rate automakers are burning through their cash -- and Friday's reports bore out Wall Street's concerns. Ford burned through $7.7 billion of its cash in the quarter, nearly 30%, partly due to spending on truck production during the quarter. The rate was much higher than the $2.1 billion Ford used up in the second quarter.

Ford's auto operations were left with $18.9 billion, down $6.3 billion from the start of the quarter. Overall, Ford now has $29.6 billion cash on hand.

GM, meanwhile, burned through $6.9 billion in cash in the third quarter -- more than twice the amount for the second quarter -- and said its cash position is near the "minimum amount necessary to operate."

The situation is grim: GM ended the third quarter with $20 billion in cash on hand; the company needs at least $12 billion a month for day-to-day operations.

Ford said it has enough cash to last through 2009. "With our present assumptions, we are comfortable with our liquidity position," Ford's Chief Financial Officer Lewis Booth told reporters. "I think it goes without saying, forecasting the future at the moment is extremely difficult. Trying to find out just exactly what is happening with the consumer is really tough."

Worst monthly sales since WWII

The automakers' cash worries are compounded by declining auto sales. Automakers sold 838,186 cars and light trucks in October, a 25-year low for the industry, according to an Autodata report earlier in the week.

GM's sales plummeted 45% last month to 166,844, with car sales sinking 34% and light truck sales falling 51%.

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Adjusted for population growth, the figures were even uglier: Sales were the worst since the end of World War II, said GM's executive director of global market and industry analysis, Mike DiGiovanni, on a conference call with analysts earlier in the week.

"This is clearly a severe, severe recession," DiGiovanni said.

The current credit crisis has compounded an earlier sales decline driven by rising gasoline prices. "Until the credit markets open up and consumer confidence improves, the entire U.S. economy, and any industry like autos that relies on financing, will suffer," said Mark LaNeve, GM's head of sales and marketing, during the same call. "In my 27 years, I have never seen a month like this. It was like somebody turned off the lights in the month of October."

Ford saw sales slump 30% in October to 132,248 cars and light trucks.

Chrysler suffered a 35% drop in sales to 94,530 vehicles.

Struggling to cope

The automakers are trying to take steps to deal with the crisis in the industry.

Ford announced several measures to help save money: The company will cut an additional 10% of its North American salaried workers by the end of 2009, as well as 2,600 hourly employees, efforts to help bolster its cash position by $17 billion by 2010.

Continued: Help from Washington?

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