August 1, 2008
GM Posts $15.5 Billion Second-Quarter Loss
DETROIT _ General Motors announced a staggering $15.5-billion second-quarter loss Friday, much of it from onetime, noncash costs from its sweeping plan to respond to high gas prices and the credit crunch that have produced the worst U.S. auto market in more than a decade.
Just a year ago, the automaker's continuing operations produced a second-quarter net profit of $784 million.
GM's third-worst quarterly loss in almost 100 years of business was riddled with onetime special charges and expenses.
Setting aside those charges, GM still lost $6.3 billion, or $11.21 per share, compared with a profit of $1.3 billion, or $2.29 per share, from continuing operations a year ago.
Revenue for the second quarter was $38.2 billion, down from $46.7 billion a year ago, which is more than accounted for by the decline in North American revenues.
However, GM Chairman and CEO Rick Wagoner pointed out that its recent announced plan to raise and conserve $15 billion in cash, cut truck production and increase the production of cars were made to adjust to the dismal second-quarter economic picture.
"This is all part of the analysis when we announced our liquidity plan a couple of weeks ago," Wagoner said this morning during an interview on CNBC. "The results we announced today were fully comprehended in the liquidity plan."
That liquidity plan calls for cutting $10 billion in costs by cutting GM's U.S. and Canadian salaried costs, reducing truck production, spending less on marketing, delaying a health-care payment to the UAW, suspending the dividend, borrowing money and selling assets. GM has said it is considering the sale of the Hummer brand and several suitors have expressed interested.
"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," Wagoner said.
GM said its losses were driven by a number of factors, including "significant losses" in GM North America due to continuing U.S. industry volume declines and shifts in vehicle mix, the long strike at American Axle and large lease-related charges. GM also recorded special charges associated with the automaker's ongoing restructuring actions; continued losses at partly held finance company GMAC Financial Services and updated estimates regarding recoveries and expectations of assumed benefit obligations in the Delphi bankruptcy.
GM reported $9.1 billion of special items _ many of which were noncash in nature _ including:
_$3.3 billion relating to the North American hourly worker attrition program.
_$2.8 billion in adjustments to Delphi reserves.
_$1.1 billion in North American restructuring costs.
_$1.3 billion reduction in GM's equity in GMAC.
_$340 million in accounting charges related to the Canadian Auto Workers contract.
_$197 million in costs related to the settlement of the strike at American Axle.
In addition, GM reports that its North American net income results reflect a $1.6-billion charge related to lower residual values for off-lease vehicles. GM said the total impact of declining residual values in GM's second-quarter earnings was $2 billion, including impairments at both GM and GMAC.
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