GM Cites North American Sales in 4th-Quarter Loss

By Sharon Silke Carty

DETROIT — Even as sales go gangbusters overseas, General Motors posted a fourth-quarter loss as North American operations continued overshadowing the rest of the company.

GM’s 2007 losses of $38.7 billion, the largest for any U.S. automaker ever, primarily reflect a third-quarter tax adjustment that shaved $37.4 billion off the books.

Separately, GM announced Tuesday that it is offering a second round of buyouts to all of its 74,000 United Auto Workers employees in an attempt to move higher-wage workers off plant floors. The buyouts will let GM take advantage of concessions in the new contract that allow it to hire lower-wage workers for some jobs.

The move is an attempt by GM to further reduce bloated North American costs, something it has been trying to do for more than two years since the first round of buyouts were announced. More than 30,000 workers left the company in 2006 buyouts, and GM was able to cut its workforce by 35%.

Although GM wouldn’t say how many people it hopes take the new buyout, UAW President Ron Gettelfinger told a local Detroit radio station that he expects about 20,000 jobs to be eliminated.

Fourth-quarter results underscore GM’s need to get North American costs under control. It posted a fourth-quarter net loss of $722 million, a wide swing from the $950 million it earned a year earlier, as sales weakened in the USA and commodity prices continued to rise.

“North America is obviously the most difficult place for them to turn a profit because it’s where all the costs are,” says Kevin Tynan, an analyst with Argus Research.

The loss came even as GM posted record automotive revenue of $178 billion for 2007, helped by what the company called “explosive growth” in emerging markets.

GM CEO Rick Wagoner has said he’s pushing the company to aggressively diversify outside the USA, where markets are growing and consumers don’t have the same negative feelings towards the company’s brands as many do domestically.

For the third year in a row, almost 60% of all GM’s sales volume has been outside the USA.

“Our North America turnaround remains on track despite the weak U.S. economy and continued high commodity prices,” Wagoner said. “The actions we’ve taken to further reduce structural costs and strengthen our product lineup … are fundamentally improving our ability to compete in the U.S. and around the world.”

GM says it expects to see improvements in cash flow and earnings in 2010 and 2011.

At home in North America, automotive operations posted a pretax loss of $1.1 billion in the fourth quarter, which couldn’t be offset by strength in other markets. In Latin America, Africa and the Middle East, sales grew 18% in the fourth quarter, raking in $424 million in pretax income. Asia Pacific earned $72 million in the quarter, with annual sales up 18.5% in China and up 74% in India. Europe lost $524 million.

“Emerging markets are going to continue to be the driver of our revenue growth,” says Fritz Henderson, GM’s chief financial officer, on a conference call with analysts. That’s in part because it’s easier to control costs in growing markets where labor is cheaper and where many products are imported. (c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.