NEW YORK, November 11 – The global financial crisis closed in on two more victims Tuesday after General Motors said it would need a government rescue and major US electronics retailer Circuit City filed for bankruptcy.,
The news capped another day of gloomy developments in the United States, the world\’s largest economy, undermining hopes that coordinated action by governments around the world could keep the global downturn from getting worse.
Fannie Mae, the US mortgage giant bailed out by the government earlier this year, posted a 29 billion dollar loss. Meanwhile the United States expanded its bailout of insurer AIG to more than 150 billion dollars.
The latest dire reports from the United States triggered more woe for Asian stock markets, which lost ground Tuesday in line with US shares. Tokyo lost 3.0 percent while Hong Kong was off 0.6 percent at the mid-day break.
General Motors CEO Rick Wagoner said the US automaker would need state help before Barack Obama takes over the White House in January, telling industry publication Automotive News that time was of the essence.
"This is an issue that needs to be addressed urgently," he said, calling on the government to "overshoot, not undershoot" the level of assistance.
His call for support came as GM shares lost 23 percent Monday after analysts at Deutsche Bank said they expected the stock eventually to be worth nothing at all.
"Even if GM succeeds in averting a bankruptcy, we believe that the company\’s future path is likely to be bankruptcy-like," the bank said.
Wagoner said the entire US auto industry was suffering, with sales expected to be down by more than three million vehicles next year in the face of the global economic downturn.
"I\’d question whether the US industry as a whole could survive that without support," he said.
US electronics retailer Circuit City said Monday it had filed for bankruptcy protection and obtained a 1.1 billion dollar credit lifeline to battle a sharp decline in sales.
Just a week after announcing it would close 155 stores and take other restructuring measures to fight a cash crunch, the firm became the first major US retailer to file for bankruptcy protection since the crisis began.
Canadian telecommunications equipment provider Nortel Networks posted a third-quarter loss of 3.4 billion US dollars and announced 1,300 job cuts.
"We have seen worsening economic conditions, together with extreme volatility in the financial, foreign exchange and credit markets globally," Nortel president and chief executive Mike Zafirovski said in a statement.
The latest gloomy company news came ahead of emergency talks among the leaders of the G20 group of largest developed and emerging nations in Washington on Saturday aimed at restoring market confidence and stability.
US officials have said the summit is likely to result in an "action plan" including short-term steps to help fix the global economy, while other countries, notably France, have pushed for the talks to agree concrete steps.
Ahead of the summit, British Prime Minister Gordon Brown said the current turmoil represented an opportunity to rebuild the global financial system.
Coordinated international action on interest rates and ailing banks in October showed the potential for wider cooperation, he said.
"While I see a world that is facing financial crisis and still diminished by conflict and injustice, I also see the chance to forge a new multilateralism that is both hard-headed and progressive," Brown said.
He said the G20 "must use the power of multilateralism to establish a global consensus on a new, decisive and systemic approach to strengthening the global economy."