General Motors improved the numbers generated by its automotive operations in the third quarter but was clobbered down to a $US39bn net loss by special charges of $37.4bn related largely to a previously announced valuation allowance against its deferred tax assets, as well as lower reported GMAC Financial Services income, down $630m year-on-year as a result of continued pressures in the mortgage industry.
Go deeper with GlobalData
On the bright(er) side, the net loss, equivalent to $68.85 per share, was better than the net loss of $147m, or $.26 per share a year ago and third quarter automotive revenue was a record $43.1bn, thanks to “continued strength in emerging markets”.
“We continue to implement the key elements of our North America turnaround strategy, and these initiatives are driving steady improvement in our financial results, despite challenging North America market conditions. In addition, we are very encouraged by our performance in emerging markets,” said GM chairman and chief executive officer Rick Wagoner in a statement on Tuesday.
Special items included a net non-cash charge of $38.6bn due to a valuation allowance against deferred tax assets related to operations in the US, Canada and Germany and a favourable $3.5bn after-tax gain on the sale of the Allison Transmission business in August 2007, for which GM received $5.4bn. The automaker also booked special charges of $1.6bn in pension service costs related to prior labour agreements, $0.4bn associated with restructuring actions and $0.4bn related to an adjustment to the Delphi reserve.
Excluding special items, GM had a 2007 third-quarter adjusted net loss of $1.6bn, or $2.80 per share, compared to net income of $497m, or $.88 per share a year ago.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataIt blamed a significant decline in net income at GMAC, hit by the US sub-prime mortgage default crisis, as well as increased corporate expense related to legacy cost, foreign exchange and various 2006 tax benefits, partially offset by improved performance in automotive operations.
Automotive
Those global automotive operations posted net income of $122m from continuing operations on an adjusted basis in the third quarter of 2007 (reported net loss: $40.6bn), an improvement of $577m compared to an adjusted net loss from continuing operations of $455m (reported net loss of $401m) in the same quarter 2006.
GM generated record third quarter automotive revenue of $43.1bn and also achieved record global third quarter sales of 2.39m cars and trucks, up 4% year on year, driven by exceptionally strong demand in emerging markets and improved performance in developed markets.
GM also set a number of third quarter sales records around the globe, including a 22% increase in GMLAAM, 16% increase in the GMAP region, and 15% gain in GME.
GM North America had an adjusted net loss from continuing operations of $247m in the third quarter 2007 (reported net loss from continuing operations of $38.2bn, which includes charges of approximately $36.5bn for a valuation allowance against its deferred tax assets and $1.3bn for pension service costs related to prior labour agreements), compared to an adjusted net loss of $660m a year ago (reported net loss from continuing operations of $667m). This reflected favourable mix, pricing and better warranty performance, partially offset by lower volume and increased material costs.
GM Europe posted an adjusted net loss of $90m in the third quarter (reported net loss of $2.9bn, which includes charges of $2.5bn for a valuation allowance against deferred tax assets in Germany and restructuring charges of $262m), compared to $39m loss a year ago (reported net loss of $126m). This reflects the softness of the German market and unfavourable currency exchange, which was partially offset by improved pricing and higher volume.
GME achieved record third quarter sales of about 524,000 units, aided by continued momentum of GME’s multi-brand strategy during the period. Chevrolet is amongst the fastest growing global vehicle brands in Europe, posting record third quarter sales of 113,000 vehicles. GM gained further ground in the growing Russian market, with sales up by 75% to a record 65,700 vehicles.
GM Asia-Pacific recorded adjusted net income of $138m in the third quarter (reported net income also $138m), compared with $57m a year ago (reported net income of $205m, which included $148m in favourable tax-related items). This was due largely to strong export growth at GM Daewoo, continued strong sales and profitability in China, and improved earnings in India and Australia.
GM achieved 16% sales growth in the Asia Pacific region, resulting in record third quarter sales of 327,500 units. GM China sold 230,000 vehicles, up 21%. Sales were also aided by the strong performance of GM Daewoo products, including the Chevrolet Captiva SUV.
GM Latin America achieved all-time record earnings and quarterly sales in the third quarter, posting adjusted earnings of $340m (reported net income also $340m), up 86% compared with strong earnings of $183m a year ago (reported net income also $183m) due primarily to volume growth, favourable pricing and vehicle mix.
GMLAAM set a third quarter sales record of over 329,000 vehicles, up almost 22% year-over-year. All-time sales records were achieved in Brazil, Colombia, Venezuela, Argentina and Egypt. The successful launch of the Captiva in South Africa, Venezuela, Colombia and the Middle East helped drive strong sales in the region.
GMAC
As a standalone company, GMAC Financial Services reported a net loss of $1.6bn for the third quarter 2007, compared to a net loss of $173m in 2006. The Q3 included a $455m goodwill impairment charge at Residential Capital, while a goodwill impairment charge of $695m related to GMAC Commercial Finance was reflected in results for the Q3 2006.
Results were dominated by the effects of the “dislocation” in the mortgage and credit markets on the real estate finance business, which more than offset the continued strong performance at GMAC’s automotive finance, insurance and other operations.
GM recognised $757m of the net loss attributable to GMAC as a result of its 49% equity interest and accrued preferred dividends (reported net loss of $803m).
