When a company has already reported losses of $8.6B in a single year, what’s another $2B? We expect that Wall
Street will be answering that question tomorrow, as GM has decided to “revise” its 2005 earning report, now
showing a grand total of $10.6B flushed down the drain.
The automaker says that additional restructuring costs, liabilities related to the Delphi bankruptcy, and a
goodwill impairment charge at GMAC are the reasons for the additional losses. As a consequence, GM will delay filing
its 10-K form with the SEC, and financial results from 2000 to 2004 will be restated as well. To a certain extent, the
restatement of its 2005 results would seem to be an attempt to pull ahead costs from future years in an attempt to
improve profitability going forward (a strong clue to this is the additional $300M taken to cover “costs
it expects to pay during periods after the current labor contract expires”). The company’s commitment to Delphi
represents the most significant portion of the additional losses, and yet the company continues to cling to the
expectation that it is “more possible” that its liabilities will be “near the low
end of the range.” The latter statement appears to be an interesting way to state that the cumulative distribution function works as
expected in this situation.
This brings GM’s full-year losses to $18.69 per share (as a reference point, GM shares closed today at $22.22). So,
just out of curiosity, what does this do to the oft-stated claim that GM has “plenty of cash”? We’ll be
anxiously awaiting an explanation from The Rick.
[Hat tip: Chris]