GM Loss From North America Unit May Exceed Analysts#39; Estimates
GM Loss From North America Unit May Exceed Analysts; Estimates
By Jeff Green
Feb. 12 (Bloomberg) — General Motors Corp. today will
report a fourth-quarter loss in North America that;s wider than
analysts; estimates as costs such as rebates rose, two people
familiar with the results said.
The world;s largest automaker increased incentives to keep
pace with Toyota Motor Corp. rebates on pickup trucks, said the
people, who asked not to be named because the figures haven;t
been disclosed. GM;s vehicle sales in the region fell 5 percent
during the quarter.
The average analyst;s estimate is for a North American
pretax loss of more than $400 million, Chris Ceraso, a New York-
based Credit Suisse analyst, wrote in a Jan. 31 report. He
estimated GM may have lost $575 million.
The performance would set back Chief Executive Officer Rick
Wagoner;s plan to revive North American operations. Through the
first three quarters, GM cut operating losses in North America
by more than half, to $400 million, while boosting profit
overseas, where the Detroit-based automaker now gets 59 percent
of its unit volume.
GM doesn;t provide earnings forecasts. Spokesman Randy
Arickx declined to comment. The company lost $14 million in
North America in the year-earlier period.
For GM;s North American unit, “higher incentive spending
outweighed better than expected volume and mix,;; Ceraso wrote
in his report.
Including international operations, GM is forecast to
report a loss of 64 cents a share, excluding one-time costs or
gains, the average of 14 analyst estimates compiled by
Bloomberg. GM earned $180 million, or 32 cents a share, in the
fourth quarter of 2006.
Shares Rise
GM rose $1.32, or 5.1 percent, to $27.12 yesterday in New
York Stock Exchange composite trading. The shares have dropped
25 percent in the past 12 months. They have gained 9 percent
this year, the most in the Dow Jones Industrial Average.
Chief Financial Officer Fritz Henderson told reporters Jan.
29 that the automaker sees more “risk;; than “upside;; for the
next year to 18 months. He declined to discuss fourth-quarter
results at the time. GM cut North American production 6 percent
in the quarter, and automakers book revenue when a vehicle is
built, not when it;s sold.
Lehman Brothers Holdings Inc. analyst Brian Johnson also
predicted in August that GM;s incentive costs would be as much
as $500 million higher in the second half of 2006 because of
competition for light-truck sales. Toyota spent about $6,400 a
vehicle on rebates for its new Tundra pickup last year, compared
with about $6,000 for GM pickups, according to CNW Market
Research in Bandon, Oregon, which tracks automakers; incentives.
Annual Losses
GM lost $10.4 billion in 2005 and $1.98 billion in 2006 as
it ceded U.S. market share to Toyota and health-care costs rose.
Wagoner, who cut $9 billion from expenses from 2005 through
2007, last year won a cost-saving contract with the United Auto
Workers union that will trim another $5 billion annually by
2011.
In the meantime, GM is relying on a $30 billion cash hoard
to help it pay for capital spending that exceeds $8 billion a
year. Wagoner said Jan. 4 that the automaker will need more
funds than it can generate this year, the third straight year of
net cash drain.
—Editor: Dave Versical, Joe Winski
To contact the reporter on this story:
Jeff Green in Southfield, Michigan at
