GM said Friday that merger talks with Chrysler were over. Why? Because the company’s too busy trying to figure out how to keep itself from going broke.
The automaker said it was at risk of running out of cash in the first half of 2009 without government aid or improving marking conditions. Are you listening, Nancy Pelosi?
GM also indicated that merger talks with Chrysler LLC had ended, stating that the “possibility of a strategic acquisition” had been set-aside to focus on liquidity.
Without government intervention, a significant increase in auto sales or “substantial” proceeds from asset sales, GM said its cash on hand will reach critical levels by the end of 2008, after burning through another $6.9 billion in the September quarter.
Liquidity would fall below mandatory levels in the first half of 2009, the company warned as it reported a $2.54 billion loss for the quarter. It will look to raise an additional $5 billion in cash, in addition to the earlier $15 billion it previously said it planned to raise…
The company’s cash and liquidity position fell to $16.2 billion at the end of the quarter from $21 billion at June 30. GM has said it must maintain $11 billion to $14 billion in cash.
GM said it is on track to complete $10 billion of its fundraising plans by 2009. But the global financial turmoil has cast uncertainty on GM’s plan to raise $2 billion to $3 billion through capital market activity. GM said it has $20 billion in unencumbered assets to leverage for secured debt, but “inaccessible” credit markets have put that cash out of reach.
Chrysler, meanwhile, is trying to return to profitablity, but it’s also still looking for a dance partner.
Chrysler, which is controlled by Cerberus Capital Managment LLC, said Friday that returning to profitability remains its “key focus” even as it is “significantly challenged” by the weak economy and unprecedented downturn in the automotive industry. In the wake of GM’s statement, Chrysler also said that it will continue to explore strategic alliances or partnerships.
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