GM posts record loss
General Motors reported a US$38.7 billion loss for 2007 on Tuesday, the largest annual loss ever for an automotive company, and said it is making a new round of buyout offers to US hourly workers in hopes of replacing some of them with lower-paid help. The earnings report and buyout offer came as GM struggles to turn around its North American business as the economy weakens. But GM chairman and ceo Rick Wagoner said that the company made significant progress in 2007, reducing structural costs in North America, negotiating a historic labor agreement and growing aggressively in Latin America and Asia. GM's annual loss of $38.7B largely was due to a third-quarter charge related to unused tax credits. The 2007 loss topped GM's previous record in 1992, when the company lost $23.4B because of a change in health care accounting. Excluding the tax charge and other special items, GM lost $23M, or 4 cents per share, for the year, compared with a net income of $2.2B in 2006, beating Wall Street's expectations. Analysts polled by Thomson Financial expected GM to post a full-year loss of 95 cents per share. For the fourth quarter, GM posted a loss of $722M, or $1.28 per share, compared with a net income of $950M in the year-ago quarter. Fourth-quarter charges included $622M to Delphi, GM's former parts division, for its restructuring efforts.
GM reported $181B in revenues for the year, down from $206B in 2006. Its automotive business saw record automotive revenues of $178B in 2007, up $7B from a year ago thanks to growth in emerging markets and favorable exchange rates. GM was profitable in every region outside North America. GM's Latin America, Middle East and Africa division reported a record $1.3B in earnings, up 140% from 2006. GM's Asia Pacific division earned $744M, up from $403M in 2006, while GM Europe reported a profit of $55M, down from a profit of $357M in 2006. But GM's North American division continued to struggle, posting a $1.5B loss for the year, nearly identical to its $1.6B loss in 2006. GM's North American division also reported a loss of $1.1B in the fourth quarter, compared with a loss of $129M in the year-ago quarter. Wagoner said the weak US economy and high commodity prices hurt turnaround efforts in North America. He said GM's decision to reduce low-profit sales to daily rental companies by 110,000 in 2007 also affected US sales. GM's results also were dragged down by its 49% stake in GMAC Financial Services which lost $2.3B in 2007. GM reported a $1.1B loss attributed to GMAC.
The automaker said it was offering a new round of buyouts to all 74,000 of its US hourly workers who are represented by the United Auto Workers. GM won't say how many workers it hopes to shed, but under its new contract with the UAW, it will be able to replace up to 16,000 workers doing non-assembly jobs with new employees who will be paid half the old wage of $28 per hour. Ford and Chrysler already have announced similar buyout offers. Workers will be given the details of the buyouts over the next several weeks. Most of those who accept are expected to leave by July 1, the company said. The UAW represents 98% of the company's US hourly workers, with smaller unions representing the rest, GM spokesman Dan Flores said. UAW president Ron Gettelfinger said he expects fewer than 20,000 workers to take the buyout. Gettelfinger said the union understood that more buyouts would be coming when it agreed to the contract.
(Associated Press 080212)
Good for them and their lack of vision, clinging onto the larger profit margins of the SUVs and other input price-sensitive vehicles they have brainwashed the North American public into buying for the last ten years. While the Asian manufacturers have swooped in with some vision and appropriate business plans and taken everything away from them. You reap what you sow, Detroit. None of that initiative was good for anyone or anything except the fat cats that got the profit-sharing bonuses.
I guess most of the loss is through accounting losses and write-downs, but even so, the Detroit 3 have been losing market share rapidly to international players, especially from Asia. I doubt their bleeding has ended. So, how to fix? Start attempting to slash the payroll. They have offered buyouts to all 74,000 American employees in the hopes they can re-hire new employees at half the rate. Apparently this is not how things are structured in Canada so no buyouts have been offered here yet. Why not kick out the Executives? No doubt some will be asked to leave as a PR move, yet will receive multi-million dollar severance packages while Joe and Jane Lunchbox get their walking papers off the assembly line. The whole thing is disgusting and ridiculous.