Growing fear that General Motors Corp. will be forced to file for bankruptcy is scaring away buyers, a reality evident Thursday when the automaker reported a $6 billion first-quarter loss. Revenues plunged nearly 50 percent and the company burned through $10.2 billion in cash.
GM is negotiating on multiple fronts as it races a June 1 federal deadline to hammer out a restructuring plan with key stakeholders and avoid following Chrysler LLC into bankruptcy.
President Barack Obama's auto task force held separate meetings Thursday at the Treasury Department with GM President and CEO Fritz Henderson and United Auto Workers President Ron Gettelfinger in advance of face-to-face negotiations, people familiar with the meetings said.
Talks between the UAW and GM on wage and work rule concessions, along with how to fund a trust to pay for retiree health care, have been pushed back to Monday from today and moved to Detroit. It is not clear who will participate from the task force.
The union is pushing GM to change its plan to close 13 assembly plants and cut 21,000 jobs. Sen. Carl Levin, D-Detroit, said Thursday the issue will be on the table Monday.
"They have to be negotiated with the UAW, and that's now clearly part of the process," Levin said. He said he had been assured by Ron Bloom, a key auto adviser to the task force, that the UAW's concerns are relevant.
Also Thursday, Canadian officials said GM and the Canadian Auto Workers must start over and devise deeper cuts.
At the same time, bondholders, who hold $27 billion in unsecured GM debt, are still pushing for a majority stake in GM in exchange for their debt, which the U.S. Treasury has said it won't support.
And it is unclear how negotiations will play out involving GM's European and Latin American operations. Italy's Fiat SpA, in line to buy Chrysler's assets, wants to create a company that would consist of Fiat's auto operations, Chrysler and pieces of GM.
With so many moving parts, analysts increasingly believe a GM bankruptcy may be unavoidable, especially since it burned through $10.2 billion in the first quarter. That was better than GM forecast, but still more than $3 billion a month.
"Results were awful, as expected," auto analyst Kip Penniman of KDP Investment Advisors wrote in a note Thursday. "However, GM's cash burn was even worse than we were expecting,"
Analyst Himanshu Patel of JPMorgan, pegged the odds of a GM bankruptcy at 60 percent to 80 percent, though it could emerge as a stronger company if it can exit relatively quickly.
GM's quarterly loss showed that while it is making progress toward eliminating $44 billion in structural costs, it is hamstrung by bankruptcy speculation.
"Once you start losing revenue you can get into a vicious circle from which you cannot recover," said GM Chief Financial Officer Ray Young. "We need to get the bankruptcy speculation rumor behind us. It clearly is having an impact in terms of sales."
While the Obama administration has said it will guarantee the warranties of Chrysler and GM vehicles in bankruptcy, that move, announced March 30, came too late to allay consumer fears during the first quarter.
GM faced a new challenge Thursday in Canada, where its operations will be liquidated if the CAW does not reach a new cost-cutting contract by May 15, CAW President Ken Lewenza said.
The news came a day after CAW leaders met with GM and the Canadian and Ontario governments and were told to negotiate a new deal. GM and the CAW ratified concessions in March.
It is expected that GM will file for bankruptcy in both the U.S. and Canada, Lewenza said, but government officials said a new union agreement would be protected in bankruptcy.
The Canada and Ontario governments are committed to providing financial loans and debtor-in-possession financing in the event of bankruptcy. GM received C$500 million ($427 million) in Canadian assistance Wednesday.
GM revenues fell 47 percent to $22.4 billion, down from $42.4 billion in the first quarter last year, with declines around the world as global production fell 40 percent.
The loss of $9.78 per share, GM's eighth-straight quarterly loss, compares with a $3.3 billion loss, $5.80 per share, a year ago.
There were some bright spots. Incentives in Germany and Brazil that give consumers cash to turn in older vehicles for new models helped sales. House Democrats this week reached agreement on a "cash-for-clunkers" bill that could provide similar incentives in the United States.