General Motors is in such dire financial straits that it needs to line up a federal aid package before president-elect Barack Obama takes office in January, the automaker's chief executive said Monday.
“This is an issue that needs to be addressed urgently,” Wagoner told Automotive News, adding that now is the time to “overshoot, not undershoot” the level of assistance.
GM is willing to offer the government preferred stock, speed the introduction of fuel-efficient vehicles and set limits on executive compensation in exchange for financial aid, Wagoner said.
But Wagoner did not think it would be “a very smart move” for him to resign.
“It's not clear to me what purpose would be served” Wagoner said. “I think our job is to make sure we have the best management team to run GM.”
GM shares plunged more than 30 percent Monday after an analyst forecast their price would fall to zero, but recovered slightly by the end of trading to 3.36 per share, down 23 percent.
“We are lowering our target on GM equity to zero dollars,” the Deutsche Bank report said.
“Even if GM succeeds in averting a bankruptcy, we believe that the company's future path is likely to be bankruptcy-like,” it said.
“While we believe that GM's secured creditors may get a par recovery, unsecured creditors may get very low recovery. Equity shareholders are unlikely to get anything.”
The shares closed at 4.36 dollars Friday, down from more than 30 dollars a year ago.
On Friday the biggest US automaker warned it would run out of cash in the first half of next year and appealed to the US government for help to save it from collapse.
The company announced a third-quarter loss of 2.5 billion dollars and said it had burned through another 6.9 billion of cash during the three-month period, leaving it with cash reserves of 16.2 billion.
GM has said it needs cash reserves of between 11 and 14 billion dollars to cover the cost of its operations.
Wagoner said that while the company's cash burn in the fourth quarter should ease to one billion dollars a month, it will likely not be able to survive without government help.
GM has developed a turnaround plan which assumes that sales fall to 11.7 million vehicles next year from recent averages of around 15 million a year.
“I'd question whether the US industry as a whole could survive that without support,” Wagoner said, adding that even with government help the automaker will have to do “significantly more restructuring” if industry sales stay that low.
Wagoner and executives from Ford, Chrysler and the United Auto Workers Union asked for the federal government to speed up delivery of 25 billion dollars in loan guarantees for the development of fuel-efficient vehicles.
They also requested another 25 billion in loan guarantees to support operations amid a sharp economic downturn which has pushed vehicle sales to a 25 year-low.
Democratic leaders in the US Congress called Saturday for funds contained in a 700-billion-dollar federal rescue plan for the financial sector to be diverted to the struggling auto industry.
Obama's chief of staff urged swift action Sunday to rescue the US auto industry, but declined to say whether Obama supported the appeal by Democratic House speaker Nancy Pelosi and Senate Majority leader Harry Reid.
“As president-elect Obama has said throughout the campaign and as I think as recently as Friday … the auto industry is an essential part of our economy and an essential part of our industrial base,” Congressman Rahm Emanuel told ABC.
