GM Reports Huge Loss, Suspends Chrysler Talks

General Motors posted a worse-than-expected $4.2 billion operating loss and burned through $6.9 billion in cash in the third quarter as the top US automaker struggled with a deepening sales slump that has forced it to seek a federal bailout.

Meanwhile, GM said it has suspended talks about a possible merger with Chrysler to focus on its immediate financial problems.

GM's stock was halted briefly before the earnings announcement. When trading resumed, it fell sharply.

Earlier Friday, Ford posted a worse-than-expected $2.98 billion quarterly operating loss and told investors that it would look to cut salary expenses by 10 percent, a move that follows a 15 percent cut earlier this year.

The grim results come as GM, Ford, Chrysler and the United Auto Workers union in pressing for a US government rescue package that backers say is needed to keep the industry from collapse at a time when sales have plunged to 25-year lows.

GM said it would cut white-collar jobs and cut $2.5 billion in capital spending next year as part of a revised restructuring plan now aimed at freeing up $20 billion in liquidity through 2009.

The struggling automaker posted a third-quarter net loss of $2.5 billion, or $4.45 per share, compared with a loss from continuing operations of $42.5 billion, or $75.12 per share, a year earlier. Revenue fell to $37.9 billion from $43.7 billion a year earlier.

GM Chief Executive Rick Wagoner said while the U.S. government had taken an important step to stabilize the economy, more needed to be done to help the battered auto industry.

"The U.S government's actions to help stabilize the credit markets and eventually ease the credit crunch are an essential first step to the economy's and the auto industry's recovery but further strong action is required," he said in a statement.

The pain is not limited to Detroit. Japan's Toyota , now the world's No. 1 automaker, saw its shares plunge on Friday after it warned this year's profits would be the lowest in 13 years. 

GM said improving its liquidity position remains a top priority for the company.

In response to changing conditions, GM has taken steps to improve its liquidity by $20 billion through 2009. To date, $10 billion in internal operating actions have been completed or are on track for completion or are on track for completion by the end of next year.

(GM and Ford both report dismal earnings this morning. Watch the accompanying video for more...)

However, the company said that even with these actions, its liquity for the remainder of this year "will approach the minimum amount necessary" to operate its business.

Looking into the first half of next year, even with these plans, the company's estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions "significantly improve."

GM said it needs receive substantial proceeds from asset sales, take more aggressive working capital initiatives, gain access to capital markets and other private sources of funding, receive government funding under one or more current or future programs, or some combination of these.

© 2008 CNBC