GM investors brace for brutal Q2 results

By David Bailey and Kevin Krolicki

DETROIT (Reuters) - General Motors Corp (GM.N) investors expect the No. 1 U.S. automaker to post a steep second-quarter loss on Friday, reflecting the pressure from a deepening downturn in the U.S. auto industry.

GMAC LLC, GM's former financing arm, on Thursday posted a $2.48 billion loss, including a $716 million write-down on leases from the slumping value of GM's big SUVs.

Analysts said the loss at GMAC, in which GM retains a 49 percent stake, pointed to an additional charge of some $2 billion for GM tied to the sinking resale values of its slow-selling trucks.

That charge would come on top of the $2 billion in pretax losses GM has already detailed from the impact of a strike during the June-ended quarter by the United Auto Workers union at a key supplier and some of its own plants.

GM's cash burn rate and its remaining liquidity at the end of the second-quarter would be a crucial indicator for investors handicapping the automaker's chances of success under its latest turnaround plan, analysts said.

"People are prepared for the worst, but it is still going to be pretty ugly," said Mirko Mikelic, a portfolio manager at Fifth Third Bank. "In this environment, cash is king."

Ratings agency Standard & Poor's on Thursday downgraded GM to "B-minus" and warned the automaker was on track to burn through roughly $4 billion per quarter this year, sending GM bonds to a record low price.

After losses totaling $51 billion over the previous three years, and a $3.25 billion loss in the first quarter, GM's second quarter coincided with a sharp rise in U.S. gas prices that undercut demand for the SUVs and trucks that make up about 60 percent of its current sales.

GM's global auto sales dropped 5 percent in the second quarter as double-digit growth in Asia, Latin America and Brazil was more than offset by a 20 percent drop in sales in GM's home market.

The automaker had been losing market share to transplant automakers such as Toyota Motor Corp (7203.T), a solid No. 2 in U.S. sales behind GM, a situation expected to worsen due to GM's greater reliance on light trucks.

GM unveiled a restructuring plan in mid-July to shore up its liquidity through $10 billion of cost cuts, including thousands of salaried job cuts, up to $4 billion of asset sales and some new borrowing.

GM had about $24 billion of cash and almost $7 billion of undrawn credit at the end of the first quarter.

"The downturn in the economy is really driving their direction right now. They are gong to have to conserve cash wherever they can probably for the next year," said Mikelic, who owns GM bonds.

GMAC RESULTS WORRISOME

GMAC LLC, the former captive finance unit in which the automaker sold a 51 percent stake to Cerberus Capital Management, said GM was liable for another $1.55 billion in payments to offset losses from unprofitable leases.