Detroit Singing the Blues: Sales and profits plunge

A fraught week for Detroit's Big Three automakers closed out with General Motors reporting its fifth straight quarterly loss - $4.2 billion adjusted, $2.5 billion net. With little on the horizon to improve near-term performance, the Company is expected to run out of operating capital - currently at $16.2 billion - by mid-2009.

Even implementing planned cuts in production and manpower, GM will be operating for the remainder of this year at a liquidity level near the minimum required to operate, the Company said in a statement accompanying its earnings report. "Looking into the first two quarters of 2009, even with its planned actions," the statement continued, "the Company's estimated liquidity will fall significantly short of that."

One casualty of the current fiscal crisis is the Chrysler acquisition talks between GM and Cerberus. That may put Nissan-Renault, Tata and Fiat back in the picture, although Chrysler CEO Bob Nardelli said in a letter to employees Friday, "… we have concluded that it is more important at the present time to focus on our immediate liquidity challenges, and, accordingly, we have set aside consideration of such a transaction as a near-term priority."

Ford Motor Company's third quarter net loss was a slightly more palatable at $129 million, but Ford did report an operating loss of $2.7 billion, while burning through $7.7 billion in cash during the quarter.

Both GM and Ford have announced production and workforce cutbacks, with GM indefinitely laying off 3,600 hourly workers in the near-term. GM also announced it plans to increase liquidity by $5 billion in 2009 by cutting its manpower by 10 percent and seriously reducing funding for product development and domestic auto operations.

Ford plans to terminate 2,300 salaried employees in North America by the end January 2009. Ford is also suspending matching funds for pension and stock purchase plans for salaried employees in addition to eliminating merit raises.

There is a speck of light at the end of the tunnel. The meeting Friday of automakers with Congressional leaders had positive overtones with discussions over a proposed $25-billion loan guarantee for business operations being at center table.

Also encouraging were assurances by Barack Obama during his first press conference as president-elect that the health of the American auto industry is high on his list of immediate priorities. He said he has instructed aides to brainstorm for new ways "to help the auto industry adjust, weather the financial crisis and succeed in producing fuel-efficient cars here in the United States of America.”