• May 4th 2007 at 7:54AM
  • 5

The good news is that GM posted a profit of $62 million, which is the company's second consecutive quarterly profit. The bad news is that the $62 million represents a 90% decline in profits from the first quarter of 2006, which were $602 million. There is a silver lining: the drop is due to losses at GMAC Financial Services, and not the automotive business. In fact, automotive operations improved and GM had record vehicle sales worldwide.

GMAC's profit issues stem from the subprime lending market for residential mortgages. GM still owns 49% of GMAC, with the other 51% purchased by a private equity group last year. The recent -- and ongoing -- implosion of that market doesn't bode well for GMAC's numbers for the rest of the year.

As for GM, automotive revenue was down by $700 million, but GM sold 3% more cars worldwide. The average transaction price per vehicle rose as well, by $1,000. However, due to GM's efforts to cut back on small margin fleet sales and reduce incentives, production was cut by 192,000 units in North America. While the company lost $85 million on core operations this quarter, 2006 Q1's adjusted loss was $251 million. Analysts and GM are disappointed by the numbers, especially because new products have just been launched that were expected to fare better in the marketplace. All parties are looking to the upcoming labor negotiations with the UAW to see what GM can achieve toward its goal of cutting annual costs by $9 billion this year.

[Source: Breitbart]

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    • 1 Second Ago
      • 8 Years Ago
      Hello GM....Subprime Management:

      OH yes "smart move" at GM as well to sell off 51%
      of GMAC. While inventory sits motionless and GMAC
      collects interest on it why not give the money to
      private enterprise? DAH!

      Can the long term finance plans no longer keep up with the excessive depreciations brought on by the
      Fleet Marketing Programs? DAH! SCARY RIGHT?

      Cut Cost from products for years, now cut costs from
      DEAD WOOD in mangement. DAH!

      A Former GM employee
      • 8 Years Ago
      Bob, people are saying the number of foreclosures is at record highs, which is correct... but only as a number, not a percentage. Home ownership is at an alltime high as well. With more loans originated, more will be foreclosed upon, but the percentages remain about the same.
      • 8 Years Ago
      "The recent -- and ongoing -- implosion of that market"

      I work for the nations leading credit risk management firm (we are an uninterested third party on REMIC's). Things are bad, but not as bad as the media is making it out to be. It is a good time to be a credit risk manager, for sure.
      • 8 Years Ago
      You are a good man Bob.
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