GM Posts Loss on North America; Overseas Profit Rises (Update9)
GM Posts Loss on North America; Overseas Profit Rises (Update9)
By Jeff Green and Greg Bensinger
Feb. 12 (Bloomberg) — General Motors Corp., the world;s
largest automaker, posted a fourth-quarter loss on shrinking
sales in North America while overseas revenue rose.
GM reported a loss of $722 million, or $1.28 a share, after
a year-earlier net income of $950 million, or $1.68. The Detroit-
based company had a profit after excluding one-time items, and
automotive revenue rose 7 percent to $46.7 billion, helped by
gains in China and Brazil.
The results suggest Chief Executive Officer Rick Wagoner is
delivering on his goal to lift overseas sales while cutting
expenses at home. He said he;ll offer buyouts to speed the hiring
of lower-paid new workers in the U.S., where industrywide sales
are projected to fall to a 10-year low in 2008.
“Wagoner is doing the right things; he;s just doing them at
a time when the economy might be masking some of the favorable
benefits,;; said Pete Hastings, a Morgan Keegan %26amp; Co. fixed-
income analyst in Memphis, Tennessee. Buyouts for up to 74,000
United Auto Workers members would be “money well spent,;; he
said.
Not counting costs and gains the company considers one-time,
GM reported an adjusted profit of $46 million, or 8 cents a
share. On that basis, analysts estimated a loss of 64 cents. In
North America, GM lost $1.1 billion, excluding some costs,
compared with analysts; expectations of a $400 million loss on
that measure.
Contrast
The automaker;s forecast of rising sales outside its home
market contrasted with analysts; forecasts of earnings
“pressure;; in North America as consumers rein in spending. “We
remain comfortable with our expectation of a large operating loss
in North America in 2008,;; said Lehman Brothers analyst Brian
Johnson in a note today.
GM lost 52 cents, or 1.9 percent, to $26.60 at 4:01 p.m. in
New York Stock Exchange composite trading, after rising as much
as 2.6 percent earlier. The shares have advanced 6.9 percent this
year, leading the Dow Jones Industrial Average with DuPont Co.
The adjusted profit stemmed mostly from a $1.6 billion tax
benefit, Chief Financial Officer Fritz Henderson said. The tax
gain came from the sale of the Allison transmission unit and a
$7.7 billion reduction in GM;s overall pension and retiree
health-care liabilities, he said.
“It was a tough quarter in North America,;; Henderson told
reporters today in Detroit. “Volumes were down, and there was
tougher pricing because we had a full incentive load for our
pickups.;;
2007 Loss
The full-year deficit was a record $38.7 billion and
included a $39 billion expense in the third quarter related to a
tax-accounting change. In 2006, GM lost $1.98 billion, or $3.50 a
share, bringing the automaker;s losses in the three years since
it last turned an annual profit to more than $51 billion.
The third quarter included the $1.6 billion tax benefit and
$768 million in one-time expenses.
GM had $27.3 billion in cash, readily available assets and
funds from a retirement fund at the end of December, a decline
from $30 billion at the end of September. The automaker ended
2007 with a negative adjusted automotive cash flow of $2.4
billion, a $2 billion improvement from 2006.
“Where they will get growth obviously is overseas, but this
is a mature market in the United States and Europe,;; and they
need to maintain market share there, said Mirko Mikelic,
portfolio manager at Fifth Third Asset Management in Grand
Rapids, Michigan.
In its regions outside North America and Europe, GM tallied
$496 million in profits. Europe reported a fourth-quarter deficit
of $445 million.
`Weak Germany;
Sales of GM;s Opel Vectra sedan aren;t meeting expectations
in Europe, GM said today. “In Europe, we didn;t have a great
quarter; that;s a lot about a relatively weak Germany,;; said
Wagoner in an interview on Bloomberg Television.
“In total, our automotive earnings globally should continue
to improve,;; in 2008, said Wagoner. New products, such as the
Cadillac CTS sedan, may help GM lift its U.S. market share.
The automaker today announced details of a buyout plan for
its remaining 74,000 UAW employees in the U.S. The offers would
provide payments of as much as $62,500 for the most-skilled
workers with at least 30 years service.
UAW members with 10 or more years service can also opt for a
one-time payment of $140,000 to leave the company and forgo
future benefits. Workers with less than 10 years may take a
$70,000 buyout.
GMAC
GMAC LLC, the auto and home lending company that;s 49
percent owned by GM, posted a $724 million fourth-quarter loss
last week as more than one of every 10 homeowners fell behind on
their mortgage payments. GM reported a $394 million pretax loss
related to GMAC in the fourth quarter and an $872 million deficit
for the full year.
Wagoner, who cut $9 billion from expenses from 2005 through
2007, last year won a cost-saving contract with the UAW that will
trim another $5 billion annually by 2011.
Henderson told reporters on Jan. 29 that the automaker sees
more “risk;; than “upside;; in the U.S. economy for at least
the next year. GM cut North American production 6 percent in the
quarter.
“It;s going to be difficult for GM to make a profit in 2008
in spite of all the restructuring they;ve already done,;; said
Bradley Rubin, an analyst at BNP Paribas in New York.
Analysts project U.S. auto sales may fall to 15.5 million
this year, around 8 percent below the annual average this decade.
The U.S. automaker fended off a surging Toyota Motor Corp. last
year to kept its 77-year reign as the world;s largest automaker
by a margin of about 3,000 cars and trucks.
GM;s 8.375 percent note due July 2033 rose 0.5 cent to
81 cents on the dollar, yielding 10.53 percent, according to
Trace, the NASD;s bond-price reporting service.
Credit-default swaps on GM debt rose 10 basis points today
to 902 basis points, according to CMA Datavision in New York.
The contracts are designed to protect bondholders against
default. A rise in the price indicates a decrease in the
perception of a company;s credit quality.
To contact the reporters on this story:
Jeff Green in Southfield, Michigan at
