GM loses $15.5B in Q2
General Motors reported its second quarter earnings this morning, and the news was predictably grim. The General lost $15.5B in the quarter, as the Detroit Automaker continues to struggle with brutal market conditions and the costs associated with strikes and downsizing. Among the losses is a $4B hit from automotive operations, as stymied truck sales resulted in an 18% drop in revenue to $38B. GM's credit arm lost another $2.5B from high loan default rates and huge losses from truck and SUV lease residuals. Another $9.1B came from one-time charges associated with GM's massive restructuring and the American Axle strike. Among the charges was a $3.3B write-down to pay for buyouts to the 19,000 UAW members that left by July. Overall, GM lost a staggering $27.33 per share in the quarter, which is even more amazing considering the General's stock is trading at about $10 per share. Among the actions GM took this week to help stem its bleeding balance sheet was ending all leasing in Canada, raising lease costs here in the States, and the announcement of 5,000 white-collar job cuts.
We're no industry analysts and we don't have any insights into the General's balance sheet, but a $15.5B Q2 loss and four straight quarters of red ink doesn't sound good at all. New fuel efficient products like the Chevy Cruze and Volt can't come soon enough, though it will be an even bigger challenge trying to make money off these small and ultra-fuel efficient cars.
[Source: Detroit News]
Reader Comments (Page 1 of 5)
Soccer Mom 10:04AM (8/01/2008)
Cool, in just one quarter the company managed to loose more than it's market capitalization. Right on!
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geo.stewart 10:47AM (8/01/2008)
Yeah have to wonder if they are sitting in the board room asking how they ended up 15B in the hole while the oil industry that benefits largely from the auto industry posts record profits?
cly 10:05AM (8/01/2008)
Years of questionable products and inefficient vehicles finally caught up with them. It's too bad the Malibu came too late to save GM. We may never see the Volt. Even if we do, it will be a POS because it was rushed out of the door.
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Avinash machado 10:07AM (8/01/2008)
Why do you spam your site here so often?
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Vintage 10:09AM (8/01/2008)
That stupid axle strike cost them 9 billion dollars? WTF. Some guy who assembles a god damn axle does not need 50 grand a year. I hate the unions, they are killing the Big 3.
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rwcmick 10:12AM (8/01/2008)
The Amercian Axle business didn't cost $9.1 billion, but rather $197 million related to the 12-week-long strike.
I know the article above kind of makes it seem that way, but if you re-read it says "9.1B came from one-time charges associated with GM's massive restructuring AND the American Axle strike"
Vintage 10:32AM (8/01/2008)
Ah. Okay. Still, that's almost a billion dollars. Unions ARE killing Detroit.
2007RC46SP2 10:56AM (8/01/2008)
$197,000,000 = 1,000,000,000??
Vintage 11:12AM (8/01/2008)
Ack. Can't read. Need coffee. Sorry.
azzo45 11:46AM (8/01/2008)
So Vintage... you think the GM worker deserves to make McDonald's wages making axles while the non-union worker makes the same basic axle for his company earning about the same? Honda & Toyota pay their unskilled labor a competitive wage.
People who blame the UAW for the faults of the Detroit 3 are misinformed or misguided. Bad product planning, bad marketing, very bad dealers have been the former Big 3's problem.
Its amazing how the working middle class has become the whipping boy for the failures of the US economy. Based on talking points barfed out by mostly ultra wealthy conservatives, waving the American flag as their buddies ship their manufacturing base to Taiwan or China & claim their corporate HQ in the tax free Cayman Islands.
henrykrinkle 10:11AM (8/01/2008)
Dear GM,
In light of our record profits this past quarter, we at Exxon would like to thank you for your contribution to our continued success. We recognize and appreciate your valiant efforts of the past 20 years to put a pick-up or SUV in every American driveway, thereby keeping consumption and demand of our product high, benefiting us greatly as prices have increased. During those years we enjoyed watching your company thrive in the days of cheap oil while you produced high profit vehicles with ever-increasing levels of power that “maintained” or only “slightly” lowered fuel economy.
It is with great dismay that we learned of your significant recent losses. We find it ironic that your past success has created a windfall for us which in turn has caused so much trouble for you. Really, how could any of us have foreseen a depleting vital resource going up in price?
If it would make things easier for you, rather than go through all the trouble of losing money through the complicated channels of your business, in the future you could simply write us a check or wire transfer directly to us the amount you expect to lose. I think by now we all know that most of the money lost by anyone nowadays is going to ultimately end up with us so why not streamline things?
Sincerely,
Your Energy Overlords at Exxon
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Steve Shin 10:26AM (8/01/2008)
Amazing, Exxon just yesterday announces $11.7 billion in earnings while today GM announces a $15.5 billion loss.
Unreal how lopsided the profitability of these two giant American companies are.
mk 11:03AM (8/01/2008)
Well....
Oil companies make 8% profit on energy, which everyone needs for almost every part of our industrialized lifestyle. You put fuel into any car, regardless of brand, and gasoline is gasoline, for the most part.
8% is not that high of a profit margin, but they do more volume than just about any other industry. And cars, trucks, trains, ships, the whole military, government, and just about everything needs a *constant supply* of energy.
On the other hand... There are alternatives to GM cars. There is a lot of variance, a fair amount of discretionary spending, and the supply, once in a consumer's hand, has a turnover measured in years, not days or hours.
Oil is a commodity. GM cars are products. THAT is why GM is losing money, but ExxonMobile is making record profits. EM doesn't even set their prices, and when the oil price was below 40$ a barrel, they were certainly NOT making that kind of money, and that was the case for a long time.
GM's turn-around is much more dependent on GM, with some market effects, than the oil company's is on the companies themselves, which are much more market-determined.
mike 11:55AM (8/01/2008)
LOVE YOUR POST.
azzo45 12:21PM (8/01/2008)
MK: I always agree with 99% of what you say & this time the 1% is sneaking in. Exxon Mobil made 12 BILLION in a quarter... even when oil was $40 a barrel, life was good for them & their stockholders.
Big Oil gets tax relief from the USA... much more than GM Ford & Chrysler get.
As I said... a small 1% disagreement with ya!
henrykrinkle 1:05PM (8/01/2008)
MK, I look forward to your thesis on chickens crossing roads.
My commented was posted in jest. To you and those who gave it a 'thumbs down', I suggest you spend a few minutes of your internet time shopping for a sense of humor. Look for a 2 for 1 deal if you can get it.
Flashpoint 10:15AM (8/01/2008)
GM, FORD and CHRYSLER are turning out better products now than they ever had before. And now they are losing more money than ever before because America's government has sold it out to foreign lobbyists, oil greed and special interest.
Meanwhile, Japanese and Koreans sell their cars here easily while ours face huge tariffs that leave them rotting on their docks since no one over there who wants them - except the super rich - can afford them.
When is AMerica going to become protectionist?
If I were President, right now, I guarrantee you Japanese, Korean and German cars would be hit with tariffs and taxes so hard that they'd end up lowering their tarrifs on our cars... or they simply wouldn't be able to sell their cars hear at all.
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Chance 10:46AM (8/01/2008)
Jackass
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TomWilkinsonatGM 10:22AM (8/01/2008)
Don't count us out yet. Our new cars and crossovers are proof that we can compete, and we are well along in creating a whole new family of cars and crossovers, many based on global architectures. (See recent GM spy photos if you don't believe me.) The rapid loss of truck sales and sharp drop in overall sales are tough for everybody. But this is a scrappy company. We are her to stay.
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2007RC46SP2 10:31AM (8/01/2008)
LOL
yeah... OK.