Friday, August 1, 2008

GM posts $15.5 billion 2Q loss
Robert Snell / The Detroit News

DETROIT -- General Motors Corp. today reported a $15.5 billion loss in the second quarter, the third-largest quarterly loss in the company's 100-year history, which comes amid a weak auto and housing market and costly charges related to strikes at American Axle, massive restructuring and a money-losing financial unit.

The gloomy financial results were followed by word from GM's chief financial officer today that the company might make another round of buyout and early-retirement offers to U.S. hourly workers due to production cuts.

The deficit of $27.33 a share compares with a profit of $891 million, or $1.56 a share in the same period last year. And sales fell 18 percent to $38.2 billion, according to financial results released this morning.

The restructuring and $9.1 billion in one-time, mostly non-cash charges plagued the most recent financial results. GM said the charges included $3.3 billion for the buyouts off about 19,000 U.S. hourly workers and $1.3 billion worth of write-offs because of a decline in the value of GMAC Financial Services' portfolio of trucks and sport utility vehicles. GM owns 49 percent of GMAC, which along with other financial arms, has taken sizable losses on lease turn-ins because the residual values for SUVs and trucks are falling, meaning that the finance arms sell them for less than they anticipated at auction. Cerberus Capital Management LP owns the remaining 51 percent.

Aside from those losses, GM lost $6.3 billion, or $11.21 per share.

The fourth-straight quarterly loss comes amid a sweeping restructuring plan and a shift among consumers from profitable pickups and SUVs to more fuel-efficient -- and less profitable -- cars and crossovers. Since 2006, the company has 35,000 fewer hourly employees and has idled six factories -- three in Michigan -- in the last three years.

"As our recent product, capacity and liquidity actions clearly demonstrate, we are reacting rapidly to the challenges facing the U.S. economy and auto market, and we continue to take the aggressive steps necessary to transform our U.S. operations," GM Chairman and CEO Rick Wagoner said in a statement. "We have the right plan for GM, driven by great products, building strong brands, fuel-economy technology leadership and taking full advantage of global growth opportunities."

The results fared worse than Wall Street estimates, which pegged the automaker's loss at $2.63 per share.

The second-quarter losses eclipsed those of Ford Motor Co., which posted an $8.7 billion second-quarter loss last week -- the worst quarterly results in the Dearborn automaker's 105-year history.

GM's second-quarter loss was huge, but not historic.

In the third quarter of 2007, GM posted a record $39 billion net loss, which included a $38.6 billion charge related to future tax benefits. The charge was an accounting adjustment and did not affect GM's cash flow or long-term prospects for profitability.

In addition to the cost of buyouts and GMAC losses, the automaker recorded the following charges:

• $2.8 billion in costs related to Delphi, the former GM parts division.

• $1.1 billion in restructuring for its North American operations and capacity-related costs.

• $340 million in accounting charges related to the Canadian Auto Workers contract.

• $197 million related to settlement of a 12-week-long strike at American Axle & Manufacturing Holdings Inc. The walkout at least partially idled 30 GM plants due to parts shortages.

Plus, GM posted a $1.6 billion charge related to lower residual values for off-lease vehicles, which had a total $2 billion impact on second-quarter earnings. That total includes impairments of lease assets for both GM and GMAC.

And despite the charges, GM still had $21 billion in cash and other readily-available assets on June 30, down from $23.9 billion three months earlier. Including available credit, GM has access to about $26 billion in liquidity --about $12 billion less than the amount rival Ford Motor Co. announced last week.

The financial news follows a series of cost-cutting measures announced by Wagoner on July 15 that included white-collar job reductions, a suspension of the dividend and cutting health care coverage for Medicare-eligible salaried retirees designed to boost cash flow by $15 billion.

In the last two months, GM has said it would close four truck plants in North America by 2010, cut shifts at two truck plants and added shifts at two other plants. The automaker also has suspended the dividend, and is exploring the sale of its Hummer brand.

North American revenues fell almost $10 billion to $19.8 billion compared to last year as sales fell 20 percent.

Outside North America, however, sales rose 10 percent.

The automaker sold 2.29 million vehicles worldwide, down 5 percent compared to the same period last year.

A record 65 percent of GM sales for the second-quarter came outside the United States, though global market share was 12.3 percent, down 0.9 percent.

There were bright sales spots aside from slumping truck and SUV sales.

Sales of the new Chevrolet Malibu and Cadillac CTS were up 113 percent and 33 percent, respectively compared to last year.