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GM posts $6B 1Q loss, spends $10.2B in cash

DETROIT — General Motors Corp. posted a $6 billion first-quarter loss and said it spent $10.2 billion more cash than it took in during the first three months of the year as revenue plummeted by $20 billion.

Chief Financial Officer Ray Young said talk of the company going into Chapter 11 bankruptcy protection appeared to have scared some consumers away from buying GM vehicles. GM faces a June 1 government deadline to finish a restructuring plan or go into bankruptcy protection.

GM's loss for the quarter amounted to $9.78 per share, compared with a loss of $3.3 billion, or $5.80 per share in the year-ago period.

Revenue dropped sharply — 47 percent — from $42.4 billion to $22.4 billion in the quarter because of declining sales worldwide, mainly in North America and Europe, the company said.

Although the company cut structural costs by $3 billion, Young said that wasn't enough to offset plunging revenue.

"We cannot cut costs fast enough to offset that revenue loss," he said. "People are concerned about bankruptcy, and that's the reason why we want to avoid it if at all possible."

Young said a U.S. government guarantee of GM and Chrysler warranties was not revealed by the Obama administration until March 30, so during most of the quarter, consumers were afraid that GM would not be around to honor its warranties.

He said people should be reassured by the warranty guarantee, but it might take time to get the word out.

"I think it takes time for the news to get out to consumers," he said.

GM's cash burn for the quarter was offset by $9.4 billion in U.S. government loans GM received in the first quarter. GM got another $2 billion in April and received $4 billion in December, bringing total government loans to $15.4 billion.

As bad as the results look, analysts were expecting worse. Excluding special items, GM's fourth-quarter adjusted loss was $5.9 billion, or $9.66 per share, beating Wall Street's expectations. Analysts surveyed by Thomson Reuters predicted a quarterly loss of $11.05 per share on revenue of $20.2 billion.

The company reported an operating loss of $3.2 billion from its North American operations alone.

GM posted an operating loss of $2 billion in Europe while it squeezed out a small profit in Latin America. Sergio Marchionne, the chief executive of Italy's Fiat SpA, is in talks to take over GM's operations in Europe — Germany's Opel, Britain's Vauxhall and Sweden's Saab, and Fiat confirmed Thursday that it is also interested in the Latin American operations.

Young would not comment on Fiat's interest in GM's European or Latin America units. Fiat will have a 20 percent stake in Chrysler when that automaker emerges from bankruptcy protection.

GM faces an almost impossible list of restructuring tasks to complete before the June 1 deadline. It must get new cost-cutting agreement with its unions, complete a debt-for-stock swap with 90 percent of its bondholders, close factories and cut jobs to prove to the government it can repay the loans.

The largest U.S.-based automaker also is trying to cut 2,600 dealerships and is in the process of selling or phasing out the Saturn, Saab and Hummer brands. GM has already decided to get rid of Pontiac.

GM shares were up 10 cents to $1.76 in premarket activity.

GM shares were up 9 cents, or 5.4 percent, to $1.75 in premarket activity.

Young said production during the quarter was down 900,000 vehicles from the year-ago period, a 40 percent decline as GM temporarily shuttered factories to stop its inventory from burgeoning.

"That's why we saw the revenue implosion, a combination of weakness and global volumes," he told reporters Thursday.

The company intentionally cut low-profit sales to fleet buyers such as rental car companies during the quarter, Young said.

Young said GM is continuing to simultaneously prepare for bankruptcy as well as its preferred option of restructuring out of court.

GM has made an offer to the holders of roughly $27 billion in debt to swap 225 shares of stock for every $1,000 GM owes. The deadline for the swap is May 26, and Young would not comment when asked if the offer might change.

CEO Fritz Henderson said Monday that the Treasury Department will not allow GM to offer more than 10 percent of the company's stock to the debtholders.