General Motors on Monday reported a huge loss of $US1.1 billion, or $1.92 per diluted share, in the third quarter of 2005, excluding special items and a tax-rate adjustment. This compares with net income of $315 million, or $0.56 per share, in the third quarter of 2004.
Revenue, however, rose more than 5% to $47.2 billion.
Including special items, GM reported a loss of $1.6 billion, or $2.89 per share in Q3. The special items include a non-cash charge of $805 million for asset impairments primarily in North America and Europe and restructuring charges at GM Europe of $56 million. These were partially offset by a tax-rate normalisation totalling $311 million.
GM lost $318 million, or $0.56 per share, in Q2 2005, excluding special items and a tax-rate adjustment. That compared with net income of $1.4 billion, or $2.42 per share, in Q2 2004.
“Today we are announcing a significant update on our plan to address our health-care burden, which is the cornerstone of our efforts to reduce structural costs by a $5 billion run rate by the end of next year,” GM chairman and chief executive officer Rick Wagoner said. “These actions represent an acceleration of the pace and scope of our North American turnaround plan.”
GM’s global-automotive operations reported a loss of $1.6 billion in the third quarter of 2005, as profitable results in GM’s Asia-Pacific and Latin America/Africa/Mid-East regions were more than offset by losses in North America and Europe. GM’s global-automotive operations lost $219 million in the prior-year period.
GM North America (GMNA) reported a loss of $1.6 billion in the third quarter of 2005, compared with a loss of $88 million a year ago. Results were adversely affected by lower production volumes, continued increases in health care costs, higher material costs, and a shift in vehicle mix away from full-sized sport utility vehicles. The year-ago period also included a favourable one-time adjustment for product-liability reserves.
GM’s market share in North America was 25.6% in the third quarter of 2005, compared with 28.5% a year ago. Dealer inventories ended the quarter at 818,000 units, down 319,000 units or 28%, from the year-ago period. For the first nine months of 2005, GM’s market share in North America was 26.1%, compared with 27% in the year-ago period.
Results improved at GM Europe (GME) which reported a loss of $150 million in the third quarter of 2005, compared with a loss of $236 million in the year-ago quarter, as continued improvement in structural and material costs more than offset lower production volumes and higher start-up costs associated with the launch of the redesigned Opel Zafira and updated Vectra/Signum family. GM’s market share was down slightly in the third quarter of 2005 to 9.3%, but for the first nine months of 2005, GM’s market share in Europe was up slightly to 9.6%.
It was much better at GM Asia Pacific (GMAP) which earned $176 million in the third quarter of 2005, more than double the $78 million earned in the year-ago quarter. GM’s market share in the Asia-Pacific region rose to 5.9% in the third quarter from 5.1% a year ago, led by gains in China and Thailand.
On Oct. 11, 2005, GM completed the sale of its 20% equity interest in Fuji Heavy Industries (FHI). As a result, it will book cash proceeds of approximately $800 million in the fourth quarter of 2005 and report a gain of approximately $70 million in the same period.
Has GM revised its second-quarter 2005 results to include a $788 million write-down associated with the reduced carrying value of the FHI investment.
GM Latin America/Africa/Mid-East (GMLAAM) earned $25 million in the third quarter of 2005, compared with net income of $27 million a year ago. The results reflect strong improvements in revenue and profitability in most countries in the region, slightly offset by the unfavourable effect of a strengthening currency on export profitability in Brazil.
General Motors Acceptance Corp. (GMAC) reported record third-quarter net income of $675 million, up from $620 million in the third quarter of 2004, as strong results from mortgage operations more than offset lower earnings from financing and a modest decline in insurance earnings. In addition, losses from Hurricane Katrina reduced GMAC’s third-quarter earnings by approximately $161 million, with the majority related to credit losses in GMAC’s auto-finance and mortgage-lending businesses, with less significant losses in the insurance business.
GM is exploring options to further enhance GMAC’s liquidity position and its ability to support GM/GMAC synergies.
“These potential actions are intended to restore GMAC’s investment-grade credit rating and to renew its access to low-cost funding,” Wagoner said. “In addition, these actions are designed to preserve and to grow the synergies between GM and GMAC, especially cost-effective auto financing, and sustaining GMAC’s diversified earnings growth.”
GMAC’s financing operations earned $178 million in the third quarter of 2005, down from $259 million a year ago, reflecting the unfavourable effect of financing losses related to Hurricane Katrina and lower net interest margins as a result of increased borrowing costs. These factors were somewhat offset by improved used vehicle prices on terminating leases and favourable consumer credit provisions primarily as a result of lower asset levels in the third quarter of 2005.