Bush rules out aid as GM losses soar to $8.6bn

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The Independent Online

The woes of America's car makers came into sharper focus last night after General Motors conceded that losses in its North American manufacturing division reached $5bn (£2.8bn) last year and as President George Bush issued a public warning against either GM or Ford looking for a government bail-out.

Releasing its fourth-quarter numbers, GM said it suffered worldwide losses of $4.8bn. Describing 2005 as "one of the most difficult years in GM's history", it said its global losses for the full year had topped $8.6bn.

Like Ford, which has grave troubles of its own, GM has seen a steady shrinking of its market share in North America against increasingly effective competition, especially from Asian companies making cars abroad and in the US. As petrol prices have risen, customers have fled the fuel-guzzling sports utility vehicles which for years assured a steady stream of revenue.

"It was a year in which two significant fundamental weaknesses in our North American operations were fully exposed," Rick Wagoner, GM's chairman and chief executive, noted. "These were our huge legacy cost-burden and our inability to adjust structural costs in line with falling revenue."

Ford, which is No 2 to GM in the US, said this week it was taking drastic steps to curb capacity as its market share has fallen, by closing 12 North American plants by 2012 and shedding up to 30,000 workers. GM plans to lose about the same numbers of factories and workers.

In an interview in The Wall Street Journal yesterday, President Bush said it was up to the US car makers to make "a product that's relevant". He said that while he has been in contact with the leaders of GM and Ford about other issues, such as fuel-efficient vehicles, the talks were "not about their balance sheets". Mr Bush added: "And I haven't been asked by automobile manufacturers about a bail-out."

Speculation has begun to simmer about possible government assistance as the conditions of the industry steadily worsen. There is a precedent: in 1979, President Carter gave the then staggering Chrysler Corporation $1.5bn in loan guarantees. "I would hope I wouldn't be asked to make that decision," Mr Bush told the Journal.

The scale of the crisis spells hardship for Detroit, traditionally the home of the US car industry, and for communities around the US and also in Canada, where factories face closure.

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