General Motors has reported a net loss of US$15.5bn or $27.33 per share for the second quarter, including “significant charges and special items”, compared with net income of $784m ($1.37 per share) a year ago.
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On an adjusted basis, GM posted a net loss of $6.3bn ($11.21 per share) compared with net income of $1.3bn last year.
The automaker had previously signalled it expected a “significant” second quarter loss, due partly to costs associated with the American Axle and local US plant strikes, charges related to the US hourly employee severance programme, reductions in North American truck capacity and costs associated with parts maker Delphi.
Second quarter results were affected by “significant losses” in GM North America (GMNA) due to continuing US industry volume declines and shifts in vehicle mix, the long strike at American Axle and large lease-related charges; a number of special charges associated with GM’s ongoing restructuring actions; continued losses at GMAC Financial Services (GMAC) and updated estimates regarding recoveries and expectations of assumed benefit obligations in the Delphi bankruptcy.
GM booked $9.1bn of special items, predominantly non-cash, including: $3.3bn relating to the 2008 GMNA hourly special attrition programme; $2.8bn adjustment to the Delphi reserve; $1.1bn GMNA restructuring and capacity related costs; $1.3bn impairment of GM’s equity interest in GMAC; $340m Canadian Auto Workers contract-related accounting charges; and $197m related to settlement of the strike at American Axle.
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By GlobalDataThe GM North America adjusted net income results also reflected a $1.6bn charge related to lower residual values for off-lease vehicles. The total impact of declining residual values in GM’s second quarter earnings was $2.0bn, including impairments of lease assets at both GMAC and GM.
Revenue for the second quarter was $38.2bn, down from $46.7bn a year ago, due to the decline in GMNA revenues. But combined revenues for the GM Europe (GME), GM Asia Pacific (GMAP) and GM Latin America, Africa and Middle East (GMLAAM) regions were up $1.7bn to $20.8bn.
Automotive Operations
The second quarter adjusted automotive loss of $4.0bn ($9.1bn reported) reflected the losses in GMNA due mainly to volume declines including the impact of the American Axle and local strikes as well as adjustments to lease vehicle residual reserves but these were partially offset by strong performance at GMLAAM and continuing, albeit lower, profitability at GME. Automotive operations earned $1bn in the second quarter of 2007 (reported earnings of $803m).
GM sales worldwide fell 5% to 2.29m vehicles in the quarter. North America sales fell 20% while sales elsewhere grew 10%.
GMNA
Revenue for the second quarter was $19.8bn, down from $29.7bn a year ago. The reported loss before tax was $9.3bn compared with a loss of $88m last year.
GME
General Motors Europe posted record second-quarter sales of 590,000 units with 48% growth in Russia and a 19% increase to 137,000 units and record market share of 2.2% for Chevrolet-badged GM-Daewoo models. GME reduced material and structural costs but unfavourable exchange rates and slowing key markets including Spain, Italy and the UK affected earnings.
Revenue rose to $10.6bn from $9.5bn in 2007 but reported pretax earnings fell to $20m from $315m.
GMLAAM
Improved model mix and pricing and material cost cuts combined with strong sales in key markets helped GM Latin America to boost year-on-year earnings before tax over 50% to $445m. Volume was up nearly 18% over 2007. Revenue rose to $5.1bn from $4.3bn.
GMAP
GM said the second quarter loss for its Asia Pacific region reflected a $285m pretax accounting charge related to hedge accounting, partially offset by gains in India and Thailand, and improved operating performance at Holden in Australia. Revenue dipped slightly to $5.2bn from $5.3bn and the pretax reported loss was $163m compared with a $280m profit last year.
GMAC
GMAC reported a net loss of $2.5bn after large losses at Residential Capital related to asset sales, valuation adjustments and loan loss provisions, as well as a $716m pre-tax impairment of lease assets in the automotive finance business as a result of lower used vehicle prices, particularly for SUVs. These were partially offset by profits in the insurance and international auto finance businesses. GM booked an adjusted loss of $1.2bn for the quarter attributable to GMAC, as a result of its 49% equity interest.
It also booked impairment charges of $1.3bn against its interests in GMAC.
GM stessed that the non-cash nature of many of the charges booked in the second quarter meant that it still had adequate liquidity with access to US credit facilities for about $5bn and access to a total of $26bn.
On 15 July it announced various measures to improve cash flow by around $10bn to the end of 2009 and plans to raise about $5bn through capital markets activities and asset sales.
“GM is confident that these initiatives, along with its current cash position and $4-5bn of committed U.S. credit lines, will provide the company with ample liquidity to meet its operational needs through 2009,” it reiterated on Friday.
“The operating and liquidity actions announced on 15 July contemplated weak second quarter results and a continued unfavourable US environment,” GM said in its results statement.
“The company has outlined a strong cadence of product, powertrain, capacity and liquidity actions over the past 60 days, to realign the business with current US economic and auto market conditions, and position the company for profitable global growth.”
“As our recent product, capacity and liquidity actions clearly demonstrate, we are reacting rapidly to the challenges facing the U.S. economy and auto market, and we continue to take the aggressive steps necessary to transform our U.S. operations,” said chairman and CEO Rick Wagoner. “We have the right plan for GM, driven by great products, building strong brands, fuel-economy technology leadership and taking full advantage of global growth opportunities.”
