Short on cash and facing bankruptcy rumors, General Motors Corp. said Tuesday that it would suspend its dividend, sell assets worth as much as $4 billion, borrow an additional $2 billion to $3 billion and lay off salaried workers, among other steps.
The struggling automaker said the actions, aimed to "align the business with current market conditions," would raise as much as $15 billion by the end of next year, enough to ensure liquidity, the company said, even if the pace of vehicle sales slows further.
GM also said it expected to report a large loss in the second quarter, although it would not give specifics. In the first quarter, GM lost $3.3 billion, and for all of 2007 the automaker lost $38.7 billion. Its last full year of profitability was 2004, when it made $1.1 billion.
"No one would dispute that this is a pretty challenging time for the U.S. auto industry," GM Chairman and Chief Executive Rick Wagoner said.
GM, arguably more than any other car company, has suffered from the results of a slowing economy and soaring gasoline prices. With a fleet heavy on fuel-guzzling sport utility vehicles and trucks, the Detroit giant has struggled to attract customers.
Through the first six months of the year, GM's U.S. vehicle sales were down 16.1% compared with a year earlier. In the same time span, GM shares have fallen dramatically, to a 54-year low of $9.38 at market close Monday, down from $23.88 on Jan. 2.
On Tuesday, GM shares rose 46 cents to $9.84, a 5% increase.
Wagoner has repeatedly tried to dispel rumors of a bankruptcy, saying that such a filing was not an option. The company's stock has fallen 87% since he took over leadership in 2000; the automaker is currently burning through cash at a rate of $1 billion a month.
GM said this spring that it had $24 billion in cash on hand, as well as $7 billion in available lines of credit, enough to get through 2008.
Hours after the automaker's announcement Tuesday, credit rating firm Moody's Investors Service said it was reviewing GM's debt for a possible downgrade, citing liquidity as a primary concern.
Other carmakers have suffered as well. Truck-heavy Ford, with sales down 14% year to date, has seen its stock fall by nearly half. Toyota last week said it would significantly reduce truck production at its U.S. plants. Overall sales of cars and trucks in the U.S. are down 10.1% through June.
