• Oct 25, 2006
The business world has always confounded us for being a place where one can celebrate with champagne after not posting a profit for three months, if only for the fact that you didn't lose as much money as people thought you would. Such is the case with General Motors, which today announced that it had lost "only" $115 million this quarter. Those pesky "special items" in the ledger amount to $644 million for GM and include money that's been spent to aid the reorganization of Delphi and "goodwill impairment" on GMAC (from what we gather, it's a reevaluation of the finance company's worth). Excluduing special items, GM actually posted a net income of $529 million on revenue of $48.8 billion, which is a marked improvement over last year's adjusted loss of $1.1 billion and comes mainly from the good old fashioned practice of selling cars and trucks. General Motors also was able to fine tune the amount of money it expects to spend on Delphi, which previously was thought to be between $5.5 and $12 billion, but now looks to be between $6.0 and $7.5 billion.

On the auto side of things, GM's global market share was 13.9 it recorded in Q3 2005. In the all important North American market, however, GM captured 25.1% of consumers' hearts and wallets, the best quarter it's had this year. GM North America still reported a loss of $367 million in Q3, but again, it's an improvement of $1.3 billion over last year this time and was acheived despite producing 96,000 fewer vehicles (likely the result of lower rental and fleet sales).

You can check out GM's full press release for more details after the jump.

[Source: GM]


PRESS RELEASE:

Gm Reports Preliminary Third-Quarter Financial Results

• Reported net loss of $115 million, or $0.20 per share
• Adjusted net income of $529 million, or $0.93 per share diluted
• Record third-quarter revenue of $48.8 billion
• Upper end of estimated Delphi exposure reduced by $4.5 billion

DETROIT – General Motors Corp. (NYSE: GM) today reported significantly improved preliminary financial results for the third quarter of 2006. The company posted a profit on an adjusted basis, excluding special items, and generated its third consecutive quarter of record revenue.

GM reported a net loss of $115 million, or $0.20 per share, for the third quarter of 2006, compared with a loss of $1.7 billion, or $2.94 per share, for the year-ago quarter. The net loss for this year's third quarter included $644 million, or $1.13 per share, in charges for special items, including goodwill impairment at GMAC and an increase to the charge associated with Delphi's reorganization.

GM reported 2006 third-quarter adjusted net income, excluding special items, of $529 million, or $0.93 per share diluted, on revenue of $48.8 billion. These results represent a $1.6 billion improvement from the year-ago loss of $1.1 billion. GM's global automotive operations almost fully accounted for the improvement, while lower GMAC results were more than offset by benefits associated with certain tax matters.

As a result of progress in ongoing discussions regarding the bankruptcy filing by Delphi Corp. and updated estimates related to certain benefit guarantees, GM has significantly narrowed the range of its estimated potential exposure related to this filing. The new range is between $6.0 and $7.5 billion pre-tax, as compared to a previously disclosed range of $5.5 to $12 billion. GM believes the more likely amount of the liability is at the lower end of this new range. Reflecting these updated estimates, GM has also increased the reserve for its contingent liability for Delphi by $500 million in the third quarter, bringing the total charges taken to date to $6 billion pre-tax. In addition to these charges, the final agreement with Delphi may result in GM agreeing to reimburse Delphi for certain labor expenses to be incurred upon and after Delphi 's emergence from bankruptcy. The initial payment in 2007 is not expected to exceed approximately $400 million pre-tax, and the ongoing expenses would be of limited duration and estimated to average less than $100 million pre-tax annually. GM expects these payments to be far exceeded by anticipated reductions in Delphi material cost premiums.

"Our third quarter results again reflect significant progress in our fast-paced initiatives to turn around our business and create a company that is leaner, faster and positioned for long-term sustainable growth," said Chairman and Chief Executive Officer Rick Wagoner. "Our turnaround efforts in North America and Europe are well underway, and having a large impact on the bottom line, as evidenced by the $1.6 billion improvement for the quarter. This improvement in North America and Europe, combined with the strong sales growth and earnings performance we see in Asia and Latin America, confirm that our plan is on track. We have more work to do, and we remain focused on continuing progress in the quarters to come.

"In addition to the automotive turnaround, our near-term priorities include the successful resolution of the Delphi negotiations and closing the GMAC transaction," said Wagoner. "While a number of important issues still remain to be resolved, we are encouraged by the progress we have made on Delphi, and remain optimistic that we can achieve a consensual agreement. Regarding GMAC, we have completed several key milestones in the process and continue to work toward a fourth-quarter close."

GM Automotive Operations
Net income from global automotive operations improved by $1.5 billion year-over-year, posting a loss of $116 million on an adjusted basis, excluding special items (reported net loss of $62 million). This improvement is due primarily to significant improvement in North America, along with continued strong performance in other regions.

GM's global market share in the third quarter was 13.9 percent, up slightly from the second quarter market share of 13.7 percent, but down from 14.4 percent in the third quarter of 2005. The change in market share is largely attributable to the company's strategy of reducing sales of low-margin daily rental vehicles in North America and Europe. GM share in the U.S., however, set a stronger pace in the third quarter at 25.1 percent, its highest quarterly result in 2006.
GM North America posted an adjusted net loss of $367 million in the third quarter of 2006 (reported net loss of $374 million), a $1.3 billion improvement year-over-year, despite a decrease in production of 96,000 units. This significant progress largely reflects improvements in structural costs, as the company executes the pension, health care and manufacturing cost reduction initiatives related to its North American turnaround plan. The structural cost reductions, which are on track to total $6 billion in 2006, far offset the impact of the lower production for the quarter.

"There continues to be excellent progress in North America, with over $3.4 billion of net income improvement in the first nine months of the year. We are encouraged by the results, but we recognize that there is still more work to be done," Wagoner said. "We are on track to meet the structural cost reduction target of $9 billion on an average annual running rate basis by the end of 2006. Just as important, our aggressive new product launch program, a result of our increased capital spending, continues this fall with the introduction of our all-new Chevrolet Silverado and GMC Sierra pickups and the Saturn Outlook and GMC Acadia crossovers."

GM Europe posted an adjusted net loss for the quarter of $16 million (reported net loss of $103 million) reflecting an improvement of $105 million from the prior year's loss of $121 million. The results reflect continued execution of the GME restructuring plan, emphasizing both structural cost reductions and improved quality of sales.

"Our turnaround in Europe is in full gear. The region continues to make strides in cost reduction, augmented by pricing improvements arising from a focused sales and marketing strategy including lower rental fleet volume," Wagoner said. "We are seeing strong results from our Chevrolet brand, which posted record sales in Europe for the quarter. And, the newly launched Opel/Vauxhall Corsa is on track to exceed its 2006 objectives, with approximately 130,000 orders already placed in Europe."

GM Asia Pacific posted adjusted net earnings of $83 million for the third quarter (reported net earnings of $231 million), down from last year's earnings of $188 million. The difference primarily reflects the loss of income from Suzuki following the reduction in GM's equity interest in Suzuki and costs associated with launching the important all-new Holden Commodore and Statesman models in Australia. Strong sales performance in the region continued as market share increased to 6.2 percent from 5.9 percent, driven primarily by growth in Korea and China. GM products continue to gain strong acceptance in the fast-growing China market, with record third quarter sales of 192,000 units, up 17 percent over the same period last year. GM's global sales of GM Daewoo products exceeded 276,000 units in the third quarter, up 21 percent over third quarter 2005.

GM Latin America, Africa and Middle East posted strong adjusted and reported net earnings of $184 million for the third quarter, which reflects an improvement of $153 million from the year-ago period. The results primarily reflect an increase in volume generated by new product launches throughout the region. Market share in the region increased to 17.3 percent from 16.7 percent in the year-ago period as a result of strong sales in Brazil, South Africa, Colombia and the Middle East.

"Our Latin America, Africa and Middle East region posted their best quarterly financial results in nine years," said Wagoner. "We are seeing strong performance and growth in virtually every market in the region - - a great example of leveraging our global product portfolio in key growth markets."

GMAC
GMAC Financial Services earned adjusted net income of $346 million in the third quarter of 2006, as compared to record net income in the year-ago period of $654 million. GMAC's reported net loss for the quarter totaled $349 million, which included non-cash goodwill impairment charges of $695 million after-tax related to GMAC's Commercial Finance business.

GMAC's financing operations earned $136 million for the third quarter, as compared to $139 million earned in the year-ago period. These results include an expense of $135 million related to GMAC's successful third quarter offer to repurchase $1 billion worth of certain zero coupon bonds, which will result in improved earnings in future quarters. Auto Finance results otherwise benefited from an increase in net financing revenue as a result of strong retail financing penetration as well as lower provisions for credit losses.

ResCap's net income was $76 million in the third quarter of 2006, down from $282 million earned in the third quarter of 2005. The decrease in earnings was attributable to the challenging U.S. mortgage market which has negatively impacted margins and credit performance despite year-over-year increases in production. Mortgage originations totaled $51.5 billion for the quarter, representing a slight increase from $51.3 billion in the same period in the prior year.
GMAC's Insurance operations generated record quarterly net income of $191 million in the third quarter, up $102 million from earnings of $89 million in the year-ago period, primarily attributable to a combination of favorable loss performance and higher capital gains.

Excluding the goodwill impairment charge, GMAC's Other segment, which includes the Commercial Finance business unit and GMAC's equity investment of approximately 22 percent in Capmark Financial Group Inc. (Capmark), incurred an adjusted loss of $57 million (reported net loss of $752 million including the goodwill impairment charge), compared to $144 million earned in the same period last year. This decline results partially from GMAC's reduction in ownership interest of Capmark as a result of the first quarter sale. In addition, it includes the negative impact of higher credit provisions at Commercial Finance.
GMAC paid GM a $500 million dividend in the third quarter, resulting in 2006 year-to-date cash dividends of $1.9 billion.

GMAC continues to maintain adequate liquidity, while prudently reducing its excess levels of cash to more moderate levels with cash reserve balances at Sept. 30, 2006 of $14.1 billion, including $9.1 billion in cash and cash equivalents and $5.0 billion invested in marketable securities. This compares with cash balances of approximately $23 billion at June 30, 2006.

Cash and Liquidity
Cash, marketable securities, and readily-available assets of the Voluntary Employees' Beneficiary Association (VEBA) trust totaled $20.4 billion at Sept. 30, 2006, down from $22.9 billion on June 30, 2006, but up from $19.2 billion on Sept. 30, 2005. GM withdrew $2 billion from the VEBA trust in the third quarter to fund health care.


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    • 1 Second Ago
  • 14 Comments
      • 8 Years Ago
      Let me be the first to say, I am very excited about the General's financial report. To all ye nay sayers, don't write off the General yet. Yes they will continue to have problems with the Unions and Retirees etc. The product line is getting better everyday. Can't wait for the for the new CTS.

      The funny thing is, they are doing this and did not have to sell their soul to anyone.

      Speaking of soul, I like it that their products did not morph into just another one of those unidentifiable little pieces of forgettable cars that Asia and Europe seems hell bent on shoving down our throaths. There are statement makers up and down the product line.

      Yes, you can be another lemming and limit your motoring experience to the likes of the Accord, Camry or Civic, or you can drive a car that has character, soul even.

      The Corvette - Nothing needs to be said.

      The Kappa Cars - Head turners everywhere go, can you say "Hot Cakes".

      The Hummers - Love 'em or hate 'em, they do make a statement. The brand is now going into new markets globally, and the H3 is kicking a$$

      The CTS/CTS-V - The "old" one is still a fresh well liked design, and for everyone who said that they couldnt survive in that market segment, these cars are going head to head with the likes of Acura, Infiniti,BMW, Audi etc. The new one could become the killshot, stealing customers from each of them.

      The upcoming Camaro - Will stomp the be-jesus out of your Solara and Accord coupe.

      The Lucerne - Why would you name a car after a city in Switzerland? That said, the Northstar powered Lucerne is not to be sneezed at, gives the geriatric set a really sweet ride, and the sales numbers bear that out.

      The SRX, time for a revision, but still one of the better CUV's out there. I read an article in Car and Driver magazine, the editor was commenting on owning the SRX. He said the more than a year into owining it, he and his wife out on a drive, are still congratulating each other (according to him high-fives included) on what a smart purchase it was.

      Last time I checked, Impalas, Escalades and Cobalts are more than holding their own in their market segments.

      Come on General, keep taking the fight to them.
      • 8 Years Ago
      I want to see how well the Saturn Aura succeeds. It's the best moderately priced mid-sized sedan GM has produced in decades IMO.
      Haven't driven it, but sat in one and if the Aura drives the way it looks, it'll be a winner.
      gbh
      • 8 Years Ago
      Mr_Oak,

      Apparently you missed the last several quarters of GM's financials. (And the last 30+ years of their junk cars).

      They sold their soul *long* ago - GM paper sells at junk-bond rates. No one lends them unsecured cash anymore - they have signed away the titles to many manufacturing facilities, and a host of other 'assets'.

      GM has no product in the pipeline that is even close to last-gen Toyonda product. Toyonda is already working on the next gen. Are they perfect? No. But thousands of people every day compare, then go buy something other than 'big 2.5' product.

      GM's overhead costs have not been reduced to the point where this Q's tiny paper 'profit' will continue. GM, just like Ford will eventually have no option but CH 11 to get out of it's ridiculous UAW contracts. Sorry, screwing together cars requires less skill than working at McDonalds - nobody can keep paying educated-skilled worker rates for assembly work.

      They also have a beyond stupid number of layers of white collar mgmt. Most of whom are no more productive for the company than the bums collecting a paycheck for playing cards at a "jobs bank".

      Here's the best part, GM is SO FAR in the hole, they would need to make at least 40 BILLION just to get back to BEING BROKE.

      As Rastus says, (save for the 'Vette) soul? Junior high school design, crap plastics, crap build quality, crap handling, noisy rough crap pushrod engines? If that's soul, GM has it by the bucket.

      All those 'great' high demand cars like the Aveo and Cobalt are currently flooding dealer lots and are heavily tv advertised at $7995 and $9995 respectively.

      They still can't push those turds out of the big, stinky, brown hole that is the average Chevy dealership.

      Even funnier is the hundreds and hundreds of those "new, best ever" GM pickups I see littering lots evrywhere. They can't move those either. Oh yeah, GM's future looks bright indeed.

      Just remember to 'duck and cover' when when you see the final flash.

      Oh yeah, Cadillac (the one division I thought just might have escaped the GM corporate cluster) sales are beginning to reflect their sub-par build quality and cheesy interiors once again.

      Hummer in other markets? Uhh yeah, selling an extra 10K units a year of those POS goober-mobiles is definately gonna bring in the billions GM needs just to keep the doors open and the lights on.

      The new Camaro? Highly unlikely GM will get to this one before CH 11. After 11, it will never happen, since somebody will honestly acknowledge that the thing will never sell enough units to break-even. Let alone be profitable.

      Mr_Oak, you are either a shill trying to keep your overpaid GM job going a little longer, or you were foolish enough to buy GM stock and you really think it's a long-term hold. Or perhaps, you just have never driven anything but GM's lower-than-lowest-common-denominator-mobiles all your life and just don't know any better.

      I really don't get it. If you can read a P&L, you know GM cannot survive without a major bankruptcy restructure. Non-optional.

      Yes, there are Wall streeters playing this stock. They are either chuckleheads (a few) or are running game on the chumps. You think special-K is gonna be in GM long-haul?

      Buffett could have bought GM outright and taken it private. It would not have been a big deal to write the check for either him personally, or B-H. He didn't because he knows that GM cannot ever make money until it is completely restructured.
      • 8 Years Ago
      Glad to see that Rastus and gbh could take some time out from their busy schedules at TTAC and grace us with their nonsensical ranting. Cheers mates!
      David in PA
      • 8 Years Ago
      Yeah..Annie and others, you're right. I've done my share of GM bashing, but it is a little boring to rehash the same arguments over a quarter financial report. I'll be the first one to join the bashing when the story is about GM's lastest dumb move, but the financials aren't much of a reason to criticize. They are what they are. While being a long time critic, I'm also hopeful for their success.
      • 8 Years Ago
      Paul, saw you'd been fired from the fast food place by the new Oriental owner. Heard you applied at the other fast food handout a few weeks ago, not at the drive-up window but at the burger assembly station. Sorry to hear you were laid off as the Peoples United Burger Assembly plant in China now does all the work and the fast food place simply reheats.

      • 8 Years Ago
      Everyone on this page besies Mr,oak, get over the past!!!!!!!!

      You guys can't exept that gm's will stay here, and you post information about old gm cars

      You need to move on, and know that totota has recalled 1million cars world-wide.

      I love GM, even though i hate ford.

      so everyone get over the past and light the future bring its light
      gbh
      • 8 Years Ago
      Phil,

      Go drive those "domestic" cars back to back against the "imports".

      You'll quickly learn that the new GM and Ford offerings are still at least a genration behind the "imports".

      As to quality issues, everybody has some, some have more than others. The question is how does it get handled? Good luck being on the receiving end of a GM warranty claim.
      • 8 Years Ago
      Yawn. More GM-bashing. Yawn.
      • 8 Years Ago
      The General improves it's performance, but Rastus just wants to find a way to bash it. Analysts were all over the place on this quarter, from a loss of $560M to a profit of $1.4BILLION. ACTUAL OPERATIONS netted $529 million in the quarter. What's wrong with that, you IRRITATING FREAK????

      You probably bought Monte Carlos and then wondered why you had problems you stupid idiot. No mention from you about the Lexus ES300s whose STEERING WHEELS CAME OFF, as you can read of in Consumer Report's recall histories. WHAT ABOUT TODAY'S CAMRY STALL-OUTS, AND HONDA CRV ENGINE FIRES? Don't let me get started on Nissan and Mitsubishi's quality scandals.

      THE ONLY THINGS JAPANESE IMPORTS ARE BETTER AT IS WORKMANSHIP. AND CAR MILEAGE. NOT TRUCKS.

      THE ONLY THINGS GERMAN IMPORTS ARE BETTER AT IS HANDLING AND MATERIALS.

      OTHER IMPORTS SUCK A BIG STIFF ONE!!!

      RUN OUT AND TEST DRIVE THE NEW OFFERINGS FROM FORD AND GM, BECAUSE THEY ERASE MOST OF THOSE ADVANTAGES!!!!


      • 8 Years Ago
      While you're in a pissing match consider this:

      One year ago today Stock price 18.33 Today: 34.65
      One year ago Junk Status rated NO BUY Today rated BUY Estimated that it will be non junk by end of year.

      Market share up or holding it's own, early part of 2005 slipping. They actually would have been ahead if they had not cut back on fleet sales. The other thing to consider on any decrease from the previous year was the entire "Employee Pricing" sales.

      Some new product in the pipeline

      They actually did post a profit. Read the article



      • 8 Years Ago
      I don't like defending GM, but their quality numbers are the highest they've ever been, and as a corporate average are behind only Honda and Toyota, and only very marginally so. Their 5yr/100,000mi powertrain warranty wasn't *just* a publicity stunt; it was something they could afford to do because the number of issues is down. In an industry with as many players as this, being #3 in quality isn't desirable, but isn't the end of the world.

      I do agree with Rastus's 2nd comment (#3) though.
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