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GM loses $9 billion in 2005
That's $9 billion with a "b," boys. $15.13 a share loss in a single year, when the share price is only $22.
The carcasses are stinking up the place...
Yesterday, Bush hinted that a federal bailout would not be forthcoming and that GM and Ford would have to fix themselves. (You probably already well know my position on this.)
The carcasses are stinking up the place...
Yesterday, Bush hinted that a federal bailout would not be forthcoming and that GM and Ford would have to fix themselves. (You probably already well know my position on this.)
GM Posts Massive Loss for Year
Amid North America Struggles
Shares Slide After Rallying Earlier in Week
By LEE HAWKINS JR.
Staff Reporter of THE WALL STREET JOURNAL
January 26, 2006 2:46 p.m.
DETROIT -- Calling 2005 "one of the most difficult years" in its history, General Motors Corp. reported a fourth-quarter loss of $4.78 billion, or $8.45 a share, saying the results are preliminary, pending the outcome of a previously disclosed internal accounting review of how it booked supplier credits in the past.
The massive losses were led by a poor performance in GM's flagship North American automotive operations and restructuring charges related to restructuring and other charges.
The past year was "was a year in which two significant fundamental weaknesses in our North American operations were fully exposed – our huge legacy cost burden and our inability to adjust structural costs in line with falling revenue," said Rick Wagoner, GM's chairman and CEO.
The company's $4.8 billion loss in the fourth quarter compared with a loss of $99 million, or 18 cents a share, in 2004's final quarter. Excluding "special" items related to plant closings and a $2.3 billion guarantee to United Auto Worker members employed by Delphi Corp., GM said its quarterly losses were $1.2 billion, or $2.09 a share in the fourth quarter, which it compared with adjusted earnings of $726 million, or $1.28 a share, a year earlier.
GM said it could revise the earnings report sometime prior to its filing of its annual 10-K form with the Securities and Exchange Commission. In that filing, GM is expected to report the results of the Delphi-related internal accounting review, which could have an impact on GM's previously reported numbers. GM's review is probing the booking and timing of supplier credits, and the company has said it will adjust its numbers in the coming weeks if necessary.
All told, GM's fourth-quarter special items totaled $3.6 billion after-tax, or $6.36 a diluted share, including an after-tax restructuring charge of $1.3 billion in North America and the preliminary after-tax Delphi-UAW guarantees.
General Motors Vice Chairman & CFO Frederick Henderson2 discusses earnings results, saying there's "not much to be pleased about in our numbers." And WSJ's Gerald Seib discusses3 what the loss means for GM and whether a government bailout is in sight.
Delphi, which is under bankruptcy-court protection, was a GM subsidiary before the car maker sold it in a public offering. As part of the sale, GM made certain pension and health-care guarantees to thousands of unionized workers who transferred to the Delphi payroll.
GM's fourth-quarter losses brought its total 2005 loss to $8.6 billion, or $15.13 a share, compared with net income of $2.8 billion, or $4.92 a share, for 2004.
Auto-Making Losses
GM's losses continued to be driven by weakness in its automotive business, mainly in North America, which recorded an adjusted loss of $1.5 billion in the quarter, compared with $268 million a year earlier. Globally, GM's automotive operations reported an adjusted loss of $1.5 billion during the quarter, compared with adjusted earnings of $268 million a year ago.
Overall, GM's automotive operations posted adjusted losses of $5.3 billion in 2005; they had adjusted earnings of $1.2 billion in 2004. The losses were partially offset by improvements in GM's results in Europe and Latin America.
GM said its quarterly losses in North America were driven by lower production of full-sized sport utility vehicles, increased health care costs, and higher marketing and advertising spending. "GM's top priority is to restore our North American operations to profitability and positive cash flow as quickly as possible," Mr. Wagoner said in a prepared statement. GM said its global capital spending was about $1 billion in 2005, which included investment in its new line of SUVs and trucks and crossover vehicles.
By contrast, General Motors Acceptance Corp., GM's most profitable subsidiary, which sells mortgages and insurance, boosted GM's results with fourth-quarter gains of $614 million, compared to $683 million a year earlier. The quarterly boost brought GMAC's 2005 contribution to $2.8 billion, down from $2.9 billion a year ago. GMAC's strong performance came despite the strong headwinds posed to by GM's junk credit ratings.
GM also cut its long-running losses in Europe nearly in half in 2005 and reported an adjusted fourth quarter loss of $159 million, an improvement from a loss of $345 million a year ago.
In its Asia-Pacific region, GM reported adjusted earnings of $112 million, down from $117 million a year ago, while in Latin America, GM reported quarterly adjusted earnings of $20 million, compared to $47 million a year ago.
Shares of GM slid in early morning trading Thursday, dropping 5.4% to $22.56 on the New York Stock Exchange. The stock had rallied earlier in the week in the wake of Ford Motor Co.'s better-than-expected earnings report.
Problems at GM, Ford
The world's largest auto maker, along with No. 2 U.S. car maker Ford, has been struggling with declining U.S. sales and rising health-care and materials costs.
Mr. Wagoner said earlier this month that GM aims to reduce costs by about $11 billion by the end of 2010 in a sweeping plan that inevitably will lead to more job cuts beyond the 30,000 GM has promised by 2008. Thursday, GM also reiterated that it continues "to explore the possible sale of a controlling interest" in GMAC.
President Bush, in an interview Wednesday, said GM and Ford should develop "a product that's relevant" rather than look to Washington for help with their heavy pension obligations, and hinted he would take a dim view of a government bailout of the struggling auto makers. Asked if he had spoken to GM's Mr. Wagoner or Ford Chairman and CEO William Clay Ford Jr., Mr. Bush replied: "Not about their balance sheets." He added: "And I haven't been asked by any automobile manufacturer about a bailout." (See related article4 and Bush transcript5.)
In trying to get out of its rut, GM also is cutting sticker prices for many of its models, as it tries to wean customers off of a steady diet of incentives. Last summer, amid slow sales and heavy inventories on many models, GM launched a clearance sale, offering vehicles at employee-discount pricing. Although the deal came with slimmer margins, it boosted sales significantly. But GM's sales were sluggish for several months after the promotion, even as Japanese rivals made steady inroads.
In recent months, GM's stock price slumped as investors grew alarmed at the company's inability to turn a profit on auto making. In December, Standard & Poor's downgraded GM's corporate credit rating two notches to a B, with a negative outlook, from a previous rating of double-B-minus, saying GM's prospects for a bankruptcy filing had increased.
The Detroit-based company, however, recently received an endorsement of sorts. Investor Kirk Kerkorian boosted his stake in GM back to 9.9%, paying about $263 million for 12 million shares of the auto maker -- essentially reversing a December sale that had lowered his stake to 7.8%.
Amid North America Struggles
Shares Slide After Rallying Earlier in Week
By LEE HAWKINS JR.
Staff Reporter of THE WALL STREET JOURNAL
January 26, 2006 2:46 p.m.
DETROIT -- Calling 2005 "one of the most difficult years" in its history, General Motors Corp. reported a fourth-quarter loss of $4.78 billion, or $8.45 a share, saying the results are preliminary, pending the outcome of a previously disclosed internal accounting review of how it booked supplier credits in the past.
The massive losses were led by a poor performance in GM's flagship North American automotive operations and restructuring charges related to restructuring and other charges.
The past year was "was a year in which two significant fundamental weaknesses in our North American operations were fully exposed – our huge legacy cost burden and our inability to adjust structural costs in line with falling revenue," said Rick Wagoner, GM's chairman and CEO.
The company's $4.8 billion loss in the fourth quarter compared with a loss of $99 million, or 18 cents a share, in 2004's final quarter. Excluding "special" items related to plant closings and a $2.3 billion guarantee to United Auto Worker members employed by Delphi Corp., GM said its quarterly losses were $1.2 billion, or $2.09 a share in the fourth quarter, which it compared with adjusted earnings of $726 million, or $1.28 a share, a year earlier.
GM said it could revise the earnings report sometime prior to its filing of its annual 10-K form with the Securities and Exchange Commission. In that filing, GM is expected to report the results of the Delphi-related internal accounting review, which could have an impact on GM's previously reported numbers. GM's review is probing the booking and timing of supplier credits, and the company has said it will adjust its numbers in the coming weeks if necessary.
All told, GM's fourth-quarter special items totaled $3.6 billion after-tax, or $6.36 a diluted share, including an after-tax restructuring charge of $1.3 billion in North America and the preliminary after-tax Delphi-UAW guarantees.
General Motors Vice Chairman & CFO Frederick Henderson2 discusses earnings results, saying there's "not much to be pleased about in our numbers." And WSJ's Gerald Seib discusses3 what the loss means for GM and whether a government bailout is in sight.
Delphi, which is under bankruptcy-court protection, was a GM subsidiary before the car maker sold it in a public offering. As part of the sale, GM made certain pension and health-care guarantees to thousands of unionized workers who transferred to the Delphi payroll.
GM's fourth-quarter losses brought its total 2005 loss to $8.6 billion, or $15.13 a share, compared with net income of $2.8 billion, or $4.92 a share, for 2004.
Auto-Making Losses
GM's losses continued to be driven by weakness in its automotive business, mainly in North America, which recorded an adjusted loss of $1.5 billion in the quarter, compared with $268 million a year earlier. Globally, GM's automotive operations reported an adjusted loss of $1.5 billion during the quarter, compared with adjusted earnings of $268 million a year ago.
Overall, GM's automotive operations posted adjusted losses of $5.3 billion in 2005; they had adjusted earnings of $1.2 billion in 2004. The losses were partially offset by improvements in GM's results in Europe and Latin America.
GM said its quarterly losses in North America were driven by lower production of full-sized sport utility vehicles, increased health care costs, and higher marketing and advertising spending. "GM's top priority is to restore our North American operations to profitability and positive cash flow as quickly as possible," Mr. Wagoner said in a prepared statement. GM said its global capital spending was about $1 billion in 2005, which included investment in its new line of SUVs and trucks and crossover vehicles.
By contrast, General Motors Acceptance Corp., GM's most profitable subsidiary, which sells mortgages and insurance, boosted GM's results with fourth-quarter gains of $614 million, compared to $683 million a year earlier. The quarterly boost brought GMAC's 2005 contribution to $2.8 billion, down from $2.9 billion a year ago. GMAC's strong performance came despite the strong headwinds posed to by GM's junk credit ratings.
GM also cut its long-running losses in Europe nearly in half in 2005 and reported an adjusted fourth quarter loss of $159 million, an improvement from a loss of $345 million a year ago.
In its Asia-Pacific region, GM reported adjusted earnings of $112 million, down from $117 million a year ago, while in Latin America, GM reported quarterly adjusted earnings of $20 million, compared to $47 million a year ago.
Shares of GM slid in early morning trading Thursday, dropping 5.4% to $22.56 on the New York Stock Exchange. The stock had rallied earlier in the week in the wake of Ford Motor Co.'s better-than-expected earnings report.
Problems at GM, Ford
The world's largest auto maker, along with No. 2 U.S. car maker Ford, has been struggling with declining U.S. sales and rising health-care and materials costs.
Mr. Wagoner said earlier this month that GM aims to reduce costs by about $11 billion by the end of 2010 in a sweeping plan that inevitably will lead to more job cuts beyond the 30,000 GM has promised by 2008. Thursday, GM also reiterated that it continues "to explore the possible sale of a controlling interest" in GMAC.
President Bush, in an interview Wednesday, said GM and Ford should develop "a product that's relevant" rather than look to Washington for help with their heavy pension obligations, and hinted he would take a dim view of a government bailout of the struggling auto makers. Asked if he had spoken to GM's Mr. Wagoner or Ford Chairman and CEO William Clay Ford Jr., Mr. Bush replied: "Not about their balance sheets." He added: "And I haven't been asked by any automobile manufacturer about a bailout." (See related article4 and Bush transcript5.)
In trying to get out of its rut, GM also is cutting sticker prices for many of its models, as it tries to wean customers off of a steady diet of incentives. Last summer, amid slow sales and heavy inventories on many models, GM launched a clearance sale, offering vehicles at employee-discount pricing. Although the deal came with slimmer margins, it boosted sales significantly. But GM's sales were sluggish for several months after the promotion, even as Japanese rivals made steady inroads.
In recent months, GM's stock price slumped as investors grew alarmed at the company's inability to turn a profit on auto making. In December, Standard & Poor's downgraded GM's corporate credit rating two notches to a B, with a negative outlook, from a previous rating of double-B-minus, saying GM's prospects for a bankruptcy filing had increased.
The Detroit-based company, however, recently received an endorsement of sorts. Investor Kirk Kerkorian boosted his stake in GM back to 9.9%, paying about $263 million for 12 million shares of the auto maker -- essentially reversing a December sale that had lowered his stake to 7.8%.
The cars are crap. 
(in this case)
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