Chrysler, GM running out of cash fast

Ford has a major stockpile of reserves and says it can survive through 2009.

DETROIT (AP) — When Chrysler was near death and awaiting a government bailout in 1979, then-CEO Lee Iacocca ordered drastic spending cuts and required all checks above $1,000 to be approved by a senior vice president.

Chrysler LLC and General Motors Corp. need to follow the same playbook now, industry analysts and management professors say, as they try to outlast the debate in Washington over whether they will get billions in government loans.

With no hope of getting credit elsewhere and auto sales at a 25-year low, both automakers are perilously close to having only the minimum amount of cash needed to operate.

Today, with GM alone spending $6.9 billion more than it took in last quarter and having operations in 34 countries, Iacocca’s $1,000 limit might not be practical. But industry analysts and bankruptcy experts say both companies must take similar measures to ensure their companies live long enough to use any loans they get.

“You turn the electricity off. You do things like shut the proving grounds down,” said Jim Hall, managing director of 2953 Analytics of Birmingham, Mich.

Top executives of GM, Chrysler and Ford Motor Co. went to Washington this week seeking roughly $25 billion but ran into so much opposition that Congress delayed voting on the bailout until the automakers prove they can be viable.

They must submit a plan to Congress by Dec. 2, followed by more hearings before any vote is taken. That means money won’t be available at least until late December, probably not until early next year.

Meanwhile, the companies face huge expenses and a lack of revenue because car buyers are having trouble getting financing or are delaying big purchases because of uncertainty about their jobs. October was the worst U.S. auto sales month in 25 years, and November is looking only slightly better.

Chrysler CEO Bob Nardelli told the Senate Banking Committee his company had $6.1 billion in cash at the end of the third quarter after burning up $1 billion in cash per month from July through September.

GM fared worse. It burned up $6.9 billion last quarter and about $6 billion in the first half of the year and has warned that it could reach its minimums sometime next month.

Ford, while burning through billions as well, has a big stockpile of borrowed money and says it can last at least through 2009.

But without aid soon, GM and Chrysler will have trouble paying bills and may have to seek bankruptcy protection.