General Motors seeks state aid to avert collapse

The largest US automaker General Motors is all set to seek federal aid to circumvent a collapse. The company said that it might not have enough cash to keep operating this year and would fall short of the cash required to keep it going till end of June. This could be avoided only if the auto market improved or it raised more capital.

The slump in car sales has raised questions about the future of the US auto industry with General Motors and Ford Motor showing far deeper-than-expected quarterly losses, which have resulted in their rate of cash burn to accelerate, putting the companies in a crisis situation for survival.

GM has reported a $US4.2 billion third-quarter operating loss and stated that its available cash from $21 billion at the end of June fell to $16.2 billion on 30 September.

The depletion of available cash component fell by almost 21 per cent, reflects the fall in auto sales this quarter in the US with the deepening of the credit freeze. The results reflect the desperation of the US automakers repeated request for aid from the government to help them stay afloat.

GM has said that its cash preservation has become crucial and that its cash holdings would fall short of the minimum needed to run its business without new funding or other drastic action or improvement in vehicle sales.

The auto giant CEOs have a formed a group to put their case before US House and Senate leaders in Washington. GM CEO Richard Wagoner Jr, Ford CEO Alan Mulally, Chrysler CEO Robert Nardelli had met Senate leaders in Washington with the intention of seeking $50 billion in fresh aid, and had also been in contact with the staff of President-elect Barack Obama