GM and Ford losses, cash burn dire

By David Bailey and Kevin Krolicki

DETROIT (Reuters) - General Motors Corp and Ford Motor Co reported far deeper-than-expected quarterly losses on Friday and said their rate of cash burn had accelerated, as an extended slump in car sales raised questions about the future of the U.S. auto industry.

Both companies said they would take aggressive steps to cut costs further. The two largest U.S. automakers reported third-quarter results after the world's No. 1 automaker, Toyota Motor Corp, slashed its profit forecast for the year.

President-elect Barack Obama said on Friday that help for the U.S. auto industry was a high priority and urged the Bush administration to do "everything it can" to accelerate disbursement of $25 billion of loans to the industry previously approved to make fuel economy improvements.

"I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel efficient cars here in the United States," Obama said.

GM shares fell more than 9 percent while Ford rose 2 percent. The two burned through a combined $14.6 billion in cash in the face of deepening global downturn. Chrysler LLC is also burning through cash quickly, sources said.

Ford and GM both expect their rate of cash use to decline in the fourth quarter.

GM also indicated it had set aside consideration of an acquisition of smaller rival Chrysler -- without mentioning the company's name -- saying it was focused on cost-cutting and other steps to free up $20 billion in liquidity through 2009.

Cash preservation has become crucial for GM, which said its cash holdings would fall short of the minimum needed to run its business without new funding or other drastic action. Analysts saw that as presenting two alternatives, a government rescue package, or a potential bankruptcy if a bid for aid fails.

"We're convinced that the consequences of bankruptcy would be dire and extend far beyond GM," Chief Executive Rick Wagoner said. "We are going to take every action we possibly can to avoid it, and we are going to use every source of funding."

The news came the day after the heads of Ford, Chrysler and GM -- once called the Big Three, due to their dominance of the industry -- as well as the head of the United Auto Workers union went to the U.S. Congress seeking $50 billion in federal aid to help them ride out the crisis.

"Today's deeper-than-expected quarterly loss at GM accelerates the need for government help for the sector," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group, of Greenwich, Connecticut.

HEFTY LOSSES, BURNING CASH

The shelving of talks between GM and Chrysler parent Cerberus Capital Management raised more questions about the future of Chrysler, widely seen as the weakest of the Detroit-based automakers.

People with knowledge of the talks said Cerberus has had talks with Hyundai Motor Co about a potential acquisition of Chrysler's Jeep brand and other assets. Cerberus also plans to restart talks with other potential partners, including Renault-Nissan, the sources added.

GM, the largest U.S. automaker, reported a $4.2 billion quarterly loss and said it would cut white-collar jobs and slash next year's capital spending budget by $2.5 billion to try to cope with a sharp sales slowdown.