GM Posts Biggest Annual US Auto Loss

DETROIT — General Motors Corp. reported a $38.7 billion loss for 2007 on Tuesday, the largest annual loss ever for an automotive company, and said it is making a new round of buyout offers to U.S. hourly workers in hopes of replacing some of them with lower-paid help.

The earnings report and buyout offer came as GM struggles to turn around its North American business as the economy weakens.

But GM Chairman and Chief Executive Rick Wagoner said that the company made significant progress in 2007, reducing structural costs in North America, negotiating a historic labor agreement and growing aggressively in Latin America and Asia.

During a conference call with analysts and media, Chief Financial Officer Fritz Henderson said 2008 will be difficult, but the company sees the potential for significant earnings increases by 2010 or 2011 once it reduces its work force and labor costs and transfers its retiree health-care costs to a new UAW-run trust.

The Detroit-based automaker said it was offering a new round of buyouts to all 74,000 of its U.S. hourly workers who are represented by the United Auto Workers.

GM won't say how many workers it hopes to shed, but under its new contract with the UAW, it will be able to replace up to 16,000 workers doing non-assembly jobs with new employees who will be paid half the old wage of $28 per hour.

Ford Motor Co. and Chrysler LLC already have announced similar buyout offers.

Henderson said GM's offer is "reasonably attractive," and the company raised the amount it was offering to match Ford and Chrysler. He said GM wants to implement lower wages as well as lower its overall worker headcount.

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"We have a substantial amount we can do in terms of transformation of the work force," he said.

GM shares rose 20 cents to $27.32 in afternoon trading.

GM's annual loss of $38.7 billion largely was due to a third-quarter charge related to unused tax credits.

The 2007 loss topped GM's previous record in 1992, when the company lost $23.4 billion because of a change in health care accounting, according to Standard & Poor's Compustat.

Excluding the tax charge and other special items, GM lost $23 million, or 4 cents per share, for the year, compared with a net income of $2.2 billion in 2006, beating Wall Street's expectations. Analysts polled by Thomson Financial expected GM to post a full-year loss of 95 cents per share.

For the fourth quarter, GM posted a loss of $722 million, or $1.28 per share, in the fourth quarter, compared with a net income of $950 million in the year-ago quarter. Fourth-quarter charges included $622 million to Delphi Corp., GM's former parts division, for its restructuring efforts, and a gain of $1.6 billion because of tax credits related to GM's pension liabilities and the sale of GM's Allison Transmission unit.

GM reported $181 billion in revenues for the year, down from $206 billion in 2006. Its automotive business saw record automotive revenues of $178 billion in 2007, up $7 billion from a year ago thanks to growth in emerging markets and favorable exchange rates.

GM was profitable in every region outside North America. GM's Latin America, Middle East and Africa division reported a record $1.3 billion in earnings, more than double that of 2006. GM's Asia Pacific division earned $744 million, up from $403 million in 2006, while GM Europe reported a profit of $55 million, down from a profit of $357 million in 2006.

But GM's North American division continued to struggle, posting a $1.5 billion loss for the year, nearly identical to its $1.6 billion loss in 2006. GM's North American division also reported a loss of $1.1 billion in the fourth quarter, compared with a loss of $129 million in the year-ago quarter.

Wagoner said the weak U.S. economy and high commodity prices hurt turnaround efforts in North America. He said GM's decision to reduce low-profit sales to daily rental companies by 110,000 in 2007 also affected U.S. sales.

"We're pleased with the positive improvement trend in our automotive results, especially given the challenging conditions in important markets like the U.S. and Germany, but we have more work to do to achieve acceptable profitability and positive cash flow," Wagoner said in a statement.

GM's results also were dragged down by its 49 percent stake in GMAC Financial Services, which lost $2.3 billion in 2007. GM reported a $1.1 billion loss attributed to GMAC.

GM barely retained its title as the world's largest automaker in 2007, selling just 3,000 more vehicles than Toyota Motor Corp. GM sold a total of 9,369,524 vehicles worldwide, up 3 percent from the year before.

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On the Net:

General Motors Corp.: http://www.gm.com

Comments

[realitytrumpsbull]

Government owns the roads, oil companies own the government, what's a car company to do? Go into real estate?

LOL

[askmeificare]

Maybe because GM continued to try and sell large vehicles when the consumer did not want them.

[FrictionSoul]

It all comes down to gas mileage. Remember, these American auto companies have done this to themselves by remaining anti-competitive for so long. I still don't get why rednecks flip off my American made fuel efficient Toyota from their Mexican made Ford F150 that sucks up tons of gas.

[dgscol]

The government will not let Michigan compete with foreign investments utilizing cheap labor. The Chinese are stealing US secrets, and politicians will not protect our trade to the Orient - it is a one way street.

The imbalance will have to be addressed to improve our economy. Forces in the country and abroad need to resolve the US role in China, hopefully without destabilizing China.

[sassafra]

the automakers conspired with cheney to deep six the cafe standard changes needed to halt themselves from being forced into becoming competitive.
no bail outs for the automakers none. let them go down. they don't deserve to live.

[elkabong]

I remember my uncle telling me when I was little and the second generation of Japanese cars were coming to America that they would wipe American cars off the roads because Detroit would refuse to retool and rethink.

Why are they such idiots?

[WIpatriot]

Short-term thinking syndrome.

[dogman44]

The US turned down the Maxim machinegun and the
Holland submarine. Both technologies were very
effectively used against us in WWI. Then between the wars we rejected the Cristy suspension system for tanks. The Soviets bought
it. As a result they produced the best tanks of
WWII. We are slow to accept new ideas. Had it
not been for Einstein's letter to Roosevelt we
would have probibly lost the race for nuclear
weapons. We are slow to adapt.

[robbor]

hey GM, wake up, re-introduce the EV-1, the electric car you heartlessly, stupidly, greedily killed.
The writing is on the wall, internal combustion cars are walking dinosaurs, get with the future and go electric or else people will soon fondly think of you just like they do horse drawn carriages !!!

[HowietheScreamer]

How does a company lose THAT much money and NOT replace all it's Board of Directors and CEO, COO, CFO (for SURE).

My god, that's MONUMENTAL incompetence.

[WIpatriot]

I take it you haven't looked at the goings-on of this administrtation yet, Howie....

[EVILDOERSCONS]

AS GOES GM SO GOES THE NATION

SO TRUE

[mmckinl]

The way Chrysler is going GM will have one less competitor.

Looks like Robert Nardelli is going to help business at Chrysler like he helped Home Depot!

[ErnestineBass]

At least he landed a job commensurate with his abilities.

"Hemi-heavy" Chrysler's a loser, and so is Nardelli.

[Steambomb]

...and how much bonus did the CEO's get last year? Oh.. nevermind.

[ReelBusy]

Since they have enabled the Oil Companies for years maybe Exxon can share some profits with them.

[reno 77]

Call me a pessimist, but this is just one more sign of America"s steady decline from superpower status. We"re witnessing the beginning of a "foreclosure society" in this country unless something is done. It remains to be seen if we will ever get the political leadership required to reverse our problems.

[WIpatriot]

OK, you're a pessimist.
Hey, you said....

[adamsmith]

This is the end result of unions controlling the Democrats and vice versa. Detroit is a fine example of unions being extremely corrupt. South Carolina has a booming auto industry-no unions. Detroit is as democratic as it gets, and is a harbinger for America once it get too far with the union promises of work less and less efficiently, for more money than what you're worth to an employer. That's why American cars have sucked for years. As far as a "foreclosure society", the one statistic you don't get from MSM is what percentage of foreclosures are primary residence vs. investment property. As a realtor, all of my short sale(pre-foreclosure)listings are investments by people that got left holding the bag when "what goes up must come down" kicked in. Political leadership isn't desirable in making investments.

[ChristianEcon.com]

How long did it take for some parrot to blame it on the union?

Lessons for "AdamSmith":

1. Unions are not a government entity. They are a free-market entity.

2. Japanese car-makers and CEOs credit their unions for their success.

3. Turn off Rush Dumbaugh and generate some thought of your own sometime.

[MajorKong]

Too bad. GM was actually starting to get their act together and build some decent cars for a change.

[Dendroica]

Read more than the headline. This loss was posted three months ago. The real critical number is based purely on AUTOMOTIVE sales, the company earned 8 cents per share last quarter. Admittedly not great, but it is profit.

[ErnestineBass]

WOW!!!

Meaning if you owned 1,000 shares, you made $80.

TIME TO CALL MY BROKER...LOL!

[mmckinl]

Actually GM is in pretty good shape ... Ford and Chrysler, especially Chrysler are looking pretty shaky ...

Even the engineers at GM say battery electric vehicles are the future. It won't matter that people can't go hundreds of miles. They won't be able to afford it. The middle class is being downsized.

Look for gas prices over $4 this summer.

[Mark701]

It's always amazing to observe how the US automotive industry faults workers salaries and benefits when they are losing money. Yet there is no mention of the avarice and sheer stupidity of their board of directors and CEO who directed those workers to make large trucks and SUVs in a market with rising gasoline costs. To say that the American Automotive industry is shortsighted is an understatement. Toyota is already planning to turn all their vehicles into hybrids by 2015 or 2020. Do you think our titans of industry have ever shown that kind of foresight?

[Dendroica]

GM has more hybrid models now than Toyota. Most of Toyota's hybrids have been a failure- the Camry and Lexus 600h have been a bomb. Take away the Prius (a vehicle which makes less mileage than almost all of the Eurodiesels of the same size class) and they've really done relatively little. And the Prius is a "generation one" hybrid- it has almost no range on battery alone, whereas some of the new GMs can do dozens of miles.

[nevergiveup]

Where do you get your information. You much watch a lot of TV--because your comments have no factual basis.

GM wishes it were Toyota. Toyota delivers cars people want and can afford to drive--that don't require serious repairs after 30,000. Dendroica--you're delusional.

[Paul]

Maybe when GM is bankrupted by subsidizing the healthcare costs of its workers will corporate America finally understand that single-payer universal healthcare is the way to go.

As it is now, GM workers get buyouts while insurance company barons pocket millions.

What a waste.