GM global sales drop, merger talks progress

[Mrs. Sharon B. Hodge]

GM global sales drop, merger talks progress

DETROIT (Reuters) – General Motors Corp (GM.N) on Wednesday reported an 11 percent drop in third-quarter global auto sales and said it is reviewing upcoming vehicle production plans as it aims to conserve cash in the face of mounting pressure in the United States and other key markets.
GM, the largest U.S. automaker, continued to push forward with talks aimed at a GM-Chrysler merger amid a report that GM had also reached out to arch-rival Toyota Motor Corp(7203.T) of Japan for some assistance to support its turnaround.
GM shares were up 10 percent and GMAC bonds were up as well following confirmation that auto and mortgage finance affiliate GMAC LLC had been approved to use the commercial paper funding facility created earlier this month to ease pressure on the corporate credit market.
The sales decline at GM put it squarely behind Toyota in global sales through September, although interest in that benchmark has been overshadowed by the threat that a deepening slump in sales poses to GM and the industry.
GM has been in talks with Cerberus Capital Management (CBS.UL) since September about a merger with Chrysler LLC, the struggling No. 3 U.S. automaker controlled by Cerberus.
Sources familiar with those discussions said on Wednesday that the two sides had agreed on the major issues but that the final form of any deal would depend on how much financing was available -- including U.S. government support -- and what form it would take.
Cerberus also is in its own set of discussions with banks to refinance $9 billion of Chrysler debt, the sources said.
GM has asked the government for some $10 billion to support the merger, including a $3 billion equity stake in the merged operation, according to sources with direct knowledge of the talks who were not authorized to discuss the negotiations.
Meanwhile, GM said on Wednesday that it is reviewing its product plans as it looks to cut spending.
Automotive News reported that planned cutbacks on products in development for 2009 and 2010 could delay the launch of vehicles such as the Chevrolet Cruze, a fuel-efficient, small sedan that GM has touted as crucial to its turnaround effort.
GM spokesman Tom Wilkinson declined to say whether specific vehicle programs such as the Cruze could be delayed as a result.
"We look at our portfolio on a monthly basis," he said. "We are looking at our capital spending in the midst of the industry downturn.
Without new borrowings or asset sales, GM is in danger of running dangerously low on cash in 2009, analysts have said. GM ended the second quarter with $21 billion in cash and has been burning through more than $1 billion per month. It needs a minimum of $11 billion to run its operations, GM has said.
HEADING TO TOYOTA?
Japan's Kyodo news service said GM was planning to reach out to Toyota for possible help as it battles to ride out the sales downturn.
Kyodo quoted unnamed sources as saying GM Chief Executive Rick Wagoner was considering visiting Japan to discuss a range of possible assistance from Toyota, including possibly asset sales. A GM program to raise cash has been slowed by the global credit crunch.
Kyodo said there was strong resistance within Toyota to aiding GM, and the company had turned down a plan floated by GM for Wagoner to go to Japan.
GM declined to comment on the reports, but said in a statement that executives "routinely discuss issues of mutual interest" with other automakers.
"As a policy, we do not confirm or comment publicly on those private discussions, which in many cases do not lead anywhere," GM said in a statement.
FALLING SALES
GM posted sales of 6.65 million vehicles for the first nine months, a drop of almost 6 percent from a year earlier. Including affiliates Daihatsu Motor Co Ltd (7262.T) and Hino Motors Ltd (7205.T), Toyota sales held nearly flat at 7.05 million units.
GM's sales in North America, its largest and most troubled market, dropped 19 percent in the third quarter. Sales in Europe were down almost 7 percent, while sales in the Asia-Pacific region were down almost 3 percent.
Global sales for the industry dropped about 7 percent over the same period, GM said.
GM and Toyota were roughly even in 2007 for the top spot in sales among the world's automakers, with GM slightly ahead if sales from a China business were included.
Separately on Wednesday, U.S. auto parts maker BorgWarner Inc (BWA.N) posted a quarterly net loss and cut its outlook amid the global auto industry downturn, and parts supplier Tenneco Inc (TEN.N) said it would cut jobs and close plants.
GM shares were up 60 cents, or 9.6 percent, at $6.85 Wednesday afternoon on the New York Stock Exchange. The shares had reached as high as $6.94 during the session.
(Additional reporting by Kevin Krolicki in Detroit and Jui Chakravorty Das in New York, editing by Gerald E. McCormick)