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The nation’s top two car companies posted larger-than-expected losses in the most recent quarter and burned through substantial amounts of their available cash, as the U.S. auto industry struggled to weather a collapse in world auto sales on top of stiff competition from overseas companies.
The Washington Post reported that General Motors said the results left it in a particularly tenuous position, adding urgency to the request by the Big Three automakers for an additional $25 billion in federal assistance.
Both companies announced losses for the three months ending Sept. 30 – GM of $4.2 billion and Ford of $2.98 billion.
Ford’s revenue fell 22% from July through September, to $32 billion, compared with the same period a year ago. GM’s revenue was down 13%, to about $38 billion.
The automakers have painted a grim outlook given the global slowdown. On a day when unemployment hit a 14-year high, Ford announced it would cut its salaried work force by 10%, suspend bonuses and contributions to employee 401(k) retirement plans, reduce capital investment and take other steps to slow spending.
“I think it goes without saying, forecasting the future at the moment is extremely difficult,” said Lewis Booth, Ford’s chief financial officer. “Trying to find out just exactly what is happening with the consumer is really tough.”
Amid a broad industry restructuring, the global downturn in sales has raised the possibility that the Big Three automakers might begin to run out of cash before they complete their efforts to retool union contracts and shift production toward the smaller, more fuel-efficient vehicles that have given Toyota the edge in sales.
The sense of crisis in the auto industry has moved to center stage as President-elect Barack Obama plans his transition. Leaders of Ford, GM and Chrysler have pressed for an additional $25 billion in federal aid to help underwrite an industry restructuring and argued that the collapse of the Big Three could cost the U.S. economy hundreds of thousands of jobs in auto factories and a host of related industries.
Ford president and chief executive Alan Mulally said in a conference call with analysts this morning that the auto executives had raised in a recent meeting with lawmakers the possibility of interim financing geared toward any deeper economic downturn.
In the company’s profit report this morning, Ford said it expects little relief from the dynamics that drove October auto sales down by 32 percent compared with the year before.