GM investors brace for brutal Q2 results

General Motors Corp 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 bln loss, including a $716 mln 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% stake, pointed to an additional charge of some $2 bln for GM tied to the sinking resale values of its slow-selling trucks.
That charge would come on top of the $2 bln 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 bln per quarter this year, sending GM bonds to a record low price.
After losses totaling $51 bln over the previous three years, and a $3.25 bln 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% of its current sales.
GM's global auto sales dropped 5% in the second quarter as double-digit growth in Asia, Latin America and Brazil was more than offset by a 20% drop in sales in GM's home market.
The automaker had been losing market share to transplant automakers such as Toyota Motor Corp, 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 bln of cost cuts, including thousands of salaried job cuts, up to $4 bln of asset sales and some new borrowing.
GM had about $24 bln of cash and almost $7 bln 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.