• Apr 30th 2008 at 10:29AM
  • 24
General Motors announced today that it recorded a net loss of $3.25 billion during the first quarter of 2008, but it looks worse than it is thanks to a $1.45 billion hit from its 49% stake in floundering GMAC. The two-month long American Axle strike also cost GM about $800 million, while further support of bankrupt supplier Delphi's restructuring took $731 million from the corporate coffers. These "headline numbers" don't look good, but GM's performance in the area of actually selling cars wasn't as bad as analysts expected, and the automaker's stock actually rose after these earnings were announced.
GM continued to do well in the business of selling cars in regions like Europe, Asia and Latin America, but the North American market continued to underperform. In North America, GM lost $812 million on revenue from sales of $24.5 billion, compared to a loss of $208 million last year on $28.1 billion of revenue. Aside from selling fewer vehicles, GM also lost 100,000 units of production thanks to the American Axle strike, which helped its market share slip from 22.5% last year to 21.7% in Q1 2008. Clearly the news isn't as good as it was, say, for Ford, but GM is virtually the only automaker being affected by the American Axle strike, and has a number of labor- and supplier-related issues to sort out before it can begin building a steady stream of its most popular models in North America.

[Source: GM, Automotive News - sub. req'd]

PRESS RELEASE

GM Reports Preliminary First Quarter 2008 Financial Results


  • First quarter revenue of $42.7 billion
  • Positive adjusted automotive earnings before tax, with improvement of over $160 million
  • Positive reported automotive earnings before tax, down by $118 million
  • Adjusted net loss of $350 million, reported net loss of $3.3 billion
  • Continued strong results in emerging markets
  • Liquidity position of $23.9 billion

DETROIT – General Motors Corp. (NYSE: GM) today announced financial results for the first quarter of 2008, marked by improved adjusted automotive operating performance, rapid growth in emerging markets, continued cost performance in GM North America (GMNA) operations and liquidity of nearly $24 billion, despite the impact of the American Axle strike on North American operations and weakness in the U.S. auto industry.

"We continue to leverage our global product portfolio to take advantage of tremendous growth in key emerging markets, while at the same time taking the appropriate actions to deal with the challenging economic conditions in the U.S.," said GM Chairman and Chief Executive Officer, Rick Wagoner.

Reflecting several special items noted below, GM reported a net loss of $3.3 billion, or $5.74 per share in the first quarter of 2008, compared with a net loss from continuing operations of $42 million, or $.07 per diluted share, in the year-ago quarter.

Adjusted automotive earnings before taxes were $392 million, up $161 million despite the significant impact of the American Axle strike and weak U.S. auto industry (reported earnings declined $118 million). These positive results were driven by strong combined earnings before taxes of $1 billion in GM Latin America, Africa and Middle East (GMLAAM), GM Asia Pacific (GMAP) and GM Europe (GME), which more than offset a loss at GMNA.

Excluding special items, GM posted an adjusted net loss of $350 million, or $.62 per diluted share in the first quarter of 2008, reflecting losses at GMAC and tax expenses. These results compare to an adjusted net loss from continuing operations of $10 million, or $0.01 per diluted share in the first quarter of 2007.

The reported results for the first quarter of 2008 include unfavorable special items totaling $2.9 billion. The charges include $1.45 billion to record a non-cash partial impairment of our equity investment in GMAC. Based on current market pricing, GM concluded that the estimated fair value of the common and preferred equity interests it holds in GMAC were approximately $1.45 billion less than GM's carrying value.

GM also took a non-cash charge of $731 million to increase GM's liability for estimated net costs associated with GM's support of Delphi's bankruptcy and restructuring efforts. This charge primarily results from updated estimates reflecting uncertainty around the nature, value and timing of GM's recoveries. In addition, GM recorded $394 million in non-cash tax-related valuation allowances related to deferred tax assets in Europe, and $324 million in charges related to previously-announced restructuring actions in North America and Europe. Details on all of the special items are included in the "Highlights" section of this news release.

GM's total revenue for the first quarter of 2008 was $42.7 billion, down slightly from $43.4 billion in the year-ago quarter primarily due to lower North America automotive and financial services and insurance revenues. Automotive revenues outside of North America were up over 20 percent, with strong growth in China, Brazil, Russia and India.

As reported in the fourth quarter of 2007, and reflected in the remainder of this release, GM now reports its automotive operations and regional results on an earnings-before-tax basis, with taxes reported on a total corporate basis.

GM Automotive Operations

Adjusted profits from GM's global automotive operations improved, with first quarter 2008 earnings before tax of $392 million on an adjusted basis (reported earnings before tax of $68 million), compared to $231 million in the year-ago period (reported earnings before tax of $186 million).

GM sold 2.25 million vehicles in the first quarter of 2008, down less than one percent from 2.27 million units in the first quarter 2007, with a record 64 percent of sales outside of the United States. Unit sales outside GMNA were up 8 percent compared with the same quarter last year. Robust sales in the first quarter in GM's GMLAAM and GMAP regions, and improved sales in the GME region helped offset a 10 percent unit decline in GMNA.

GMNA

GMNA revenue for the first quarter 2008 was $24.5 billion, compared to $28.1 billion in the year-ago period. The decline in GMNA first quarter revenue was significantly impacted by the lost production due to the American Axle strike. Other factors include a softer U.S. market and planned actions to maintain lean inventories. With the industry shift toward more fuel-efficient vehicles, GM's most recently launched passenger cars and crossovers, including the Cadillac CTS, GMC Acadia, Buick Enclave and the all-new Chevrolet Malibu continue to perform well in the marketplace.

The decline in GMNA first quarter earnings was more than accounted for by the loss of 100,000 production units resulting from the American Axle strike, which had an estimated impact to earnings of $0.8 billion. Other factors included lower volumes resulting from a softer U.S. market and lower market share, as well as shifts in product mix. Partially offsetting the declines were favorable material and structural cost performance and commodity hedging gains and foreign exchange.

GME

GME Revenue was up 17 percent and adjusted earnings before tax improved by $137 million. GME's improved earnings for the first quarter were driven by improved material cost performance, commodity hedging gains and reduced warranty costs, which were partially offset by negative foreign exchange and unfavorable country mix. GME had record first-quarter sales volumes of 572,000 units.

GMLAAM

Adjusted earnings before tax in the GMLAAM region more than doubled in the first quarter of 2008, driven by continued strong market growth and gains in GM market share in the region. GMLAAM revenue was up over 33 percent and volumes were up 20 percent, setting new first-quarter records for both unit sales and revenue. In addition, Argentina, Egypt and North Africa each set new quarterly sales records.

GMAP

GMAP adjusted earnings before tax increased by 49 percent, driven by strong volume and improvements in material cost performance, which were partially offset by mix and pricing deterioration and increased structural costs incurred to support growth. Revenue and earnings before tax improved significantly due to the overall volume gains, although market share was down slightly primarily due to declines in China, Australia and Korea.

GMAC

On a standalone basis, GMAC Financial Services reported a net loss of $589 million for the first quarter 2008, primarily due to significant declines in the international mortgage operation of Residential Capital, LLC (ResCap). The company's global automotive and insurance businesses posted profits. GM reported an adjusted loss before taxes of $276 million for the quarter attributable to GMAC, as a result of its 49 percent equity interest and preferred dividends. While continued volatility in the capital and credit markets put pressure on first quarter results, GMAC continues to take actions to reduce risk, streamline its cost structure and preserve liquidity in an effort to protect franchise value.

Cash and Liquidity

Cash, marketable securities, and readily-available assets of the Voluntary Employees' Beneficiary Association (VEBA) trust totaled $23.9 billion on March 31, 2008, down from $24.7 billion on March 31, 2007. The change in liquidity reflects adjusted negative operating cash flow of $3.6 billion in the first quarter 2008. The decrease was driven largely by lower production in GMNA, including the impact of the American Axle strike. Including undrawn, committed U.S. credit facilities of approximately $7 billion, GM has access to more than $30 billion in liquidity.

Looking Forward

In light of the current state of the U.S. economy and automotive industry, GM has revised its 2008 U.S. total industry seasonally adjusted annual rate (SAAR) outlook to the mid to high 15 million unit range, down from the low 16 million unit range. As a result of the anticipated softer automotive industry, GM announced earlier this week that it will eliminate a shift of production at four assembly plants: Janesville, WI; Pontiac and Flint, MI and Oshawa, Ont.

"We remain focused on taking the actions necessary to assure GM's long-term success – product excellence, leadership in advanced propulsion technology, growth in emerging markets, and accelerating the restructuring of our U.S. business to achieve sustainable profitability," said Wagoner.

Results for the first quarter of 2008 are preliminary and may be revised prior to the filing of GM's first quarter report on Form 10-Q in May.


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    • 1 Second Ago
  • 24 Comments
      • 7 Years Ago
      After reading that article-o-spin, I was going to publicly berate John Neff for more of his crappy "journalism". Lo and behold, everyone else already did it for me.
      • 7 Years Ago
      Chrysler is also dealing with the overbloated engine line and transmission issues.

      They have a CVT available only behind the 2.4L I4s in the Patriot/Compass/Caliber, and they have an auto 6spd in the Sebring & Avenger w/ the 3.5L (they completely skipped 5spd autos in the FWD cars).

      Chrysler is coming out with the Phoenix engines in 2010, where is will be 3 or 4 V6s, all based on the same architecture to keep costs down, and hopefully the 6spd will start gettting used accross the board and the 4spd will get dropped. They are also starting to use dual clutch autos in Europe, so hopefully those will get here also.

      Hopefully GM will get a clue. GMAC wouldn't be hurt as much if they didn't do subprime mortgages. Even in a recession, mortgages make you money as long as people don't default. It's all a matter of how greedy you are, and how willing you are as a lender to turn away questionable credit buyers.
      • 7 Years Ago
      I think if you look at it, trying to do business as a car manufacturer in the U.S. isn't an easy business to be in. It's alot like gambling. You have to gamble that the car you designed and decided to build three years ago, still has the consumer interest when it rolls of the line 36 months after concept. Then you have to gamble on the price of fuel-that it stays at a rate that people will be able to afford to fuel your new car, not to mention the economy in general-that it stays strong so people buy your cars. More gambling on your employees--that they are productive and happy so they don't strike and shut down a production line limiting your ability to manufacture your product--let alone adding thousands to the price of a new car because they want to make an hourly wage that is out of line with other auto manufacturer's line workers. Gamble on your suppliers too that they keep providing safe components produced at the highest possible quality for the lowest possible price and are happy about it and don't decide to strike and you're supply line is shut down preventing you from being able to assemble and sell your product. Geez---and I thought farming was a gamble. With these odds, Vegas seems like a cakewalk at times.
      • 7 Years Ago
      I'll be the first to admit that I don't appreciate the intricacies of major-league accounting, but I'm often puzzled and amused by big-time quarterly losses quickly followed by "...but it looks worse than it is" spin.

      I might have been daydreaming in math class, but I'm fairly certain a loss of three-thousand two-hundred and fifty MILLION dollars looks pretty "worse". Save the popping champagne corks for when GM makes some money instead losing less than expected.
        • 7 Years Ago
        It's not as bad as it looks because it's a one-time charge, and not something they expect to repeat. It's also not one year's losses, so it doesn't reflect operational effectiveness.

        That said, it is worse than GM is spinning it to be because they've been hiding these losses in prior years. It means that the picture hasn't been as good as they've let on.
      • 7 Years Ago
      Does anyone know if GM has paid the VEBA fund for it's workers healthcare? I can't remember when its due but its a one time payment between $30 to $35 billion and if they haven't paid it this could get worse.

      If they haven't it has to be due within the next quarter or so.
        • 7 Years Ago
        thats actually a good point, because Ford did pay a significant portion towards their VEBA and STILL posted the profit.
        I do not believe GM has yet.
      • 7 Years Ago
      Odd that GM is loosing money and Ford is making money. For the life of me I couldn't figure out what Ford's plan was, especially with the dull cars they've been putting out, but it seems to be working for them. GM, on the other hand, is making some awesome cars, but can't seem to profit from it. Weird how that works.
        • 7 Years Ago
        LOSING, not "loosing". Jesus H Christ
        • 7 Years Ago
        Though Ford doesn't have GMAC they (because it's GM) they do have Ford Credit. No home mortgages from Ford Credit, they defer thous out to banks. Smart move.

        How stupid is GM for being anti-diverse! Think about this for a moment. You make cars and trucks. Then you finance homes! Yeah it makes money for a while but when a recession (Now) hits, you're bleeding until the day the recession is over. By that time, the compounding effects of the poor diversification of the company have taken a stronghold and you're up for the highest bidder!

        • 7 Years Ago
        Well, ford doesn't have GMAC which will continue to drag GM into the red as long as the current economic 'it's not a recession cuz we haven't passed the six month period where the board meets and says "we've been in a recession"' ends.

        Also, Ford, smartly, has been selling of marques which aren't a part of their core business, which is allowing them to focus on their core products and inject their numbers with large positive sales of said firms.
      • 7 Years Ago
      Well, if GM had Sync instead of OnStar, they could sell more cars.

        • 7 Years Ago
        Or better yet, Sync + OnStar. That might be a deal maker for someone like me.
      • 7 Years Ago
      Ford Credit does not do subprime loans, GMAC does.
      Ford Credit does not do mortgages, GMAC does.

      GM is really smart/lucky to have sold 51% of GMAC when it still had value.
      • 7 Years Ago
      A lot of this is due to GM, ahem, not stating losses in previous years due to anticipated profit that never happened. Accounting regulations didn't allow them to continue doing this; they had to disclose said losses now.

      There's debate as to how good/bad this is :good in that it's a one-time thing, bad in that it means GM was camouflaging how bad things really have been for the past several quarters.

      GMAC's position is painful, but it's important to note that GMAC's profits had been floating GM through the last decade. It's not like GMAC has been an albatross for years; they're probably the reason GM is still viable now, and yes, dumping large chunks of them prior to the subprime mortgage crisis was smart.

      GM's operational issues are the problem here; they've been losing money in North America for years and it's only an issue now because they haven't been able to hide it any longer. Despite decent product (the Malibu, Cadillac, the GMT900s and Lambdas) they still have too many divisions and models, and they still have a lot of mediocre cars that just aren't moving, especially in the economy market. Ford isn't hurting as badly because Ford seems to understand that they have to have a balanced product mix (Ford is, on the whole, better than average; GM has serious weaknesses) and that it's better to be small and profitable than huge and money-losing. GM doesn't seem to "get" that it doesn't have 50% of the market anymore, and can't waste resources on flashy crap and needless rebadges.
        • 7 Years Ago
        RE: "good in that it's a one-time thing"

        It's _ALWAYS_ a one time thing. There was a one time thing last Q and there'll be a one time thing next Q. And the Q after that. And the Q after that. Etc, etc, etc...
      • 7 Years Ago
      Good thing GM gave the execs their high $$$ salaries back last week. Pay for performance?? Ummm, yeah....

      http://www.autoblog.com/2008/04/26/gm-increases-exec-salaries-to-normal-levels/
        • 7 Years Ago
        A) people inside the company almost surely knew these results before upping the execs salaries.

        B) 1 million = 0.001 Billion. Even if their pay had gone up $50 million, it would be a $3.2B loss without said raises. Any difference?
      • 7 Years Ago
      Ugh, somebody in the autoblog team needs to clamp down on John Neff's enthusiastic spinning that verges on blatant fanboyism.

      Factoring out the strikes, one-time deals etc etc, GM still lost $812 million in North America. I don't care how Neff chooses to twist that, it's a horrible figure, and shows that in spite of GM's product-centered approach that the company still has quite a ways to go.
      • 7 Years Ago
      GM has too much baggage, and is way to heavy with modles etc. GM has at least 6 different engines for cars,vans and small SUV's.
      Malibu-2.4,3.6 engines
      Aura-2.4,3.5, or 3.6
      G6 2.4,3.5,3.9
      Impala-3.5,3.9
      Torrent-3.4,3.6,
      Buick, Grand Prix 3800
      Then there is some with 4 speeds some with 6 speeds.
      All other manufactures have offered 5 and six speed auto s, and a manual with the 4 cyl,and engine for several years now. GM is still pushing the 4 speed auto with no manual option on all 4 cylinder engines. I do not think GM will turn around until they deal with some of these issues first. It will continue to float along like some dying bloated whale.
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