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: GM posts $15.5 billion loss as sales sputter



SobeSVT
08-01-2008, 07:25 AM
Reuters

GM posts $15.5 billion loss as sales sputter


http://img134.imageshack.us/img134/3829/picture2gc2.png

Friday August 1, 8:49 am ET
By Kevin Krolicki and David Bailey

DETROIT (Reuters) - General Motors Corp (NYSE:GM - News) posted a $15.5 billion quarterly loss on Friday, as North American sales dropped by 20 percent and plunging prices for SUVs prompted deep charges for its auto finance business.

GM shares tumbled 6 percent in reaction to the automaker's announcement of the deeper-than-expected loss, the third-largest quarterly loss in its history.

The No. 1 U.S. automaker also burned through $3.6 billion in cash in the quarter as it reduced inventory of slower-selling vehicles in its slumping home market.

GM ended the second quarter with $21 billion in cash and $5 billion in credit facilities. It said it had provided notice in July that it would draw down $1 billion under a secured revolving loan facility.

The struggling automaker's cash position has become an increasing concern for investors and analysts, who have begun to question whether and when GM's liquidity could fall below the levels needed to run its cash-hungry global operations.

Chief Financial Officer Ray Young said GM's second-quarter cash position was slightly better than the automaker had forecast and said GM was on track with a plan to free up $15 billion in liquidity through 2009 with a combination of cost-cutting, asset sales and new borrowing.

Charges for a planned reduction of about 15 percent of GM's salaried work force in the United States and Canada will hit third-quarter results, Young said.

"From my perspective, we are going to get the second quarter behind us and just move ahead with our restructuring and liquidity plans that we announced over the last 60 days," Young told reporters.

Erich Merkle, an automotive consultant with accounting and consulting firm Crowe Chizek, said GM's loss underscored the need for it to shed more brands outside Chevrolet and Cadillac, a step the automaker has so far resisted.

"Do they have the resources to make all those different divisions competitive at the same time? I don't think so," Merkle said. "You have got to take a hard look at GMC, Saturn, Buick, Pontiac -- anything really outside of Chevrolet and Cadillac."

LOSS DEEPER THAN ESTIMATES

GM's net loss was equal to $27.33 per share, compared with a profit of $891 million, or $1.56 per share a year earlier, reflecting a sharp drop in demand for the light trucks that represent about 60 percent of its sales.

GM took $9.1 billion in charges against second-quarter results, including $3.3 billion for buyouts of U.S. factory workers, $2.8 billion for its exposure to bankrupt former parts unit Delphi Corp. (Other OTC:DPHIQ.PK - News)

Revenue fell to $38.2 billion from $46.7 billion.

Excluding charges, GM posted a loss of $6.3 billion, or $11.21 per share. The loss on that basis was more than four times Wall Street expectations for a loss of $2.67 per share, as tracked by Reuters Estimates.

After losses totaling $51 billion over the previous three years, and a $3.25 billion loss in the first quarter, GM faced a battery of problems in the second quarter, including a slide in U.S. sales that sent its shares to a 54-year low.

GM's global auto sales dropped 5 percent and it lost $4 billion on its auto operations before charges in the second quarter as record gas prices sank demand for trucks and SUVs.

The automaker was also hit by some $2 billion in pretax losses from a strike by the United Auto Workers union at a key supplier and some of its own plants during the quarter.

Then the market for financing leases on big SUVs collapsed, saddling both GM and its smaller rival Ford Motor Co with large losses.

On Thursday, GMAC LLC, GM's former financing arm, was forced to write down the value of the GM's lease contracts because of the slumping value of the carmaker's big SUVs.

Under lease contracts, automakers and their finance companies rent vehicles to consumers and sell the used vehicles when the leases expire at wholesale auctions.

But the collapse in demand for SUVs this year has been accompanied by a steep drop in their resale value as consumers flock to more fuel-efficient passenger cars.

The resulting drop in resale values on SUVs prompted a $717 million charge by GMAC and bigger subsidies by GM, which retains 49 percent of the finance company after spinning off the remainder to Cerberus Capital Management.

for more CLICK HERE (http://biz.yahoo.com/rb/080801/gm.html?.v=7)

Z0mg Seth
08-01-2008, 09:57 AM
Geez, that's a lot.

mchicha
08-01-2008, 10:07 AM
Erich Merkle, an automotive consultant with accounting and consulting firm Crowe Chizek, said GM's loss underscored the need for it to shed more brands outside Chevrolet and Cadillac, a step the automaker has so far resisted.
I always suprised at how ignorant automotive analysts are. They complain about divisions, call for their elimination, yet they do not propose on how to replace their revenue or how to pay for their shutting.

If GM cuts divisions, especially Buick, Opel, GMC, Holden, Pontiac, etc, they will be loosing significant revenue accross the globe without a way of spreading development cost.
Cadillac has no beach head anywhere outside North America and Chevy cannot compare to even the Suzuki brand in Global reach.
Ignoring the GM business Model is what these folks do.

GM can work as is, the only thing they need is to pour money into product and advertising.
New Vehicles coming from GM are stunning. I bet you this guy probably drives an import.

2b2
08-01-2008, 11:19 AM
imho
the very idea of divisions is antiquated.
Which "division" has its own factories? engines & platforms? etc?*
The parent corp. can't sell them because there's there's nothing separate about them to sell except the rights to the name (in NA) &
(Yes, just like Mercury (OR Lincoln)(OR Ford < nothing separate about that either, just be biggest of the 3 - - except outside NA where -historically/previously- they didn't think it was worth bothering with multi-personas - that's changing))

They're just sales channels & nameplates & need to be treated as such
(perhaps like in the Integration thread I started at GMI (http://www.gminsidenews.com/forums/f19/my-your-ideal-gm-i-lineup-gm-integrated-bpgmc-65895/))
but

that doesn't mean that any should be dumped without trying to re-align & re-market them.
Brand recognition is too valuable and takes too much time & $$,$$$,$$$,$$$ to establish,

it's just that GM went thru years where the suits didn't understand the legacy that they were converting into one-dimensional catch-phrases
& now the general public is almost as clueless about what differentiates the Names as the suits 'were'(are?)


*edit
realized the only place "division" has meaning is like in 'The Truck Division'

SobeSVT
08-01-2008, 12:07 PM
I always suprised at how ignorant automotive analysts are. They complain about divisions, call for their elimination, yet they do not propose on how to replace their revenue or how to pay for their shutting.

If GM cuts divisions, especially Buick, Opel, GMC, Holden, Pontiac, etc, they will be loosing significant revenue accross the globe without a way of spreading development cost.
Cadillac has no beach head anywhere outside North America and Chevy cannot compare to even the Suzuki brand in Global reach.
Ignoring the GM business Model is what these folks do.

GM can work as is, the only thing they need is to pour money into product and advertising.
New Vehicles coming from GM are stunning. I bet you this guy probably drives an import.
The problem is that GM's business model is over 80 years old. When Alfred Sloan envisioned a brand for every pocket and the two-car garage, there was no Toyota, Honda, VW, BMW, Mecrdes-Benz, Lexus, Infiniti, Hyundai, Kia, Nissan, Mazda, Volvo or anything of the sort and the gas was cents per gallon, not $4.

Today Ford and Chryslers are the least of GM's concerns. All those redundant divisions do nothing but to compete with each other and duplicate bureaucracy. All it takes is an economic downturn and see what happens.

Someone please explain to me why they need a Traverse, an Acadia and an Outlook (I don't include the Enclave because it is truly different from its corporate siblings). Why is there a Malibu, a G6 and an Aura? This strategy does nothing more than hurt Chevy, divest resources and dilute the model recognition.

I agree, analysts are usually wrong but this time the are right on the money. And I don't see how after these loses that double those of Ford, anyone can validate GM's business model and Wagoner's vision. They need to get rid of both, and fast.

Allan Mulally has acknowledge this and Mercury will have a roll that will no longer be that of dressed up Fords and there will be no longer redundancy in Ford's domestic stable. Ford's business model wasn't any better but at least they are doing something about it in Dearborn.

mchicha
08-01-2008, 12:34 PM
The problem is that GM's business model is over 80 years old. When Alfred Sloan envisioned a brand for every pocket and the two-car garage, there was no Toyota, Honda, VW, BMW, Mecrdes-Benz, Lexus, Infiniti, Hyundai, Kia, Nissan, Mazda, Volvo or anything of the sort and the gas was cents per gallon, not $4.

Today Ford and Chryslers are the least of GM's concerns. All those redundant divisions do nothing but to compete with each other and duplicate bureaucracy. All it takes is an economic downturn and see what happens.

Someone please explain to me why they need a Traverse, an Acadia and an Outlook (I don't include the Enclave because it is truly different from its corporate siblings). Why is there a Malibu, a G6 and an Aura? This strategy does nothing more than hurt Chevy, divest resources and dilute the model recognition.

I agree, analysts are usually wrong but this time the are right on the money. And I don't see how after these loses that double those of Ford, anyone can validate GM's business model and Wagoner's vision. They need to get rid of both, and fast.

Allan Mulally has acknowledge this and Mercury will have a roll that will no longer be that of dressed up Fords and there will be no longer redundancy in Ford's domestic stable. Ford's business model wasn't any better but at least they are doing something about it in Dearborn.all you need to do is look to what happened when they closed Olds or when Chrylser killed its Plymouth division.
The problem is not divisions, its product.
A Buick Enclave is nothing like a GMC, neither was the Rainier a Trailblazer.. Just drive them back to back.

On Ford Vs. GM, remember GM is almost twice the size of Ford. I hate making a case for GM while I am a Ford fan. Where is megeebee?

SobeSVT
08-01-2008, 12:47 PM
all you need to do is look to what happened when they closed Olds or when Chrylser killed its Plymouth division.
The problem is not divisions, its product.
A Buick Enclave is nothing like a GMC, neither was the Rainier a Trailblazer.. Just drive them back to back.

On Ford Vs. GM, remember GM is almost twice the size of Ford. I hate making a case for GM while I am a Ford fan. Where is megeebee?
That is just plain denial. The Envoy, Trailblazer, Bravada, Isuzu whatever, Rainier, Saab 9-7X where old the same ol truck, and not a very good one. And like I said above the Enclave is the only distinctive vehicle of the Lambda family.

GM is making great cars which appeal get diluted in a sea of name plates and brands.

GM loses where double of Ford's because the company is bigger, Ford can and has both out-loss and out-gained GM many many times. GM loses were huge because GM is in worse shape than Ford. The really bad part is that Wagoner seems to be in denial.

nsap
08-01-2008, 08:04 PM
GM loses where double of Ford's because the company is bigger, Ford can and has both out-loss and out-gained GM many many times. GM loses were huge because GM is in worse shape than Ford. The really bad part is that Wagoner seems to be in denial.

Can you honestly say GM is worse off?

GM's Situation:


Still owns part of GMAC (BAD)
Globally sales are excellent (GOOD)
Most debt is unsecured (GOOD)
Has taken a hit from many strikes (BAD)
UAW still unrealistic (BAD)
Bad US economy (BAD)
Too many divisions in the US (BAD)
Making money on everything from Aveo up (GOOD)


Ford's Situation:


Doesn't own part of a mortgage company (GOOD)
Globally, sales are up, but not like GM's (NEUTRAL)
All debt is secured by assets (BAD!)
Has taken a hit from the strikes (BAD)
UAW still there (BAD)
Bad US Economy (BAD)
Realistic brand structure (GOOD)
Making money on cars, but lacks competitive products in midsize segment (BAD)


I don't see either company as in a better position than the other. Actually, it is ludicrous to see it that way as either company could easily fall with a false move in this market. GM has a huge disadvantage of owning GMAC when the mortgage market is a mess, but that disadvantage is countered by the scary fact that the bank literally owns every piece of Ford Motor Company. So while GM could fall from GMAC and the poor market, Ford could easily be closed by the bank because of their condition and the fact they are severely in debt. I'm no expert, but lets get real, the chances for these two companies are equally as crappy.


As for GM, I think we are going to see the board cut another brand this month. Maybe not, but I will be surprised if they do not. It'll be GMC or Pontiac, or both. Saab could be pulled off of the North American market too.

GM's long-term business model is interesting. If they can turn profitable by 2009 (which they supposedly will be), things will get interesting. Their plan involves Ford too.;)

mchicha
08-02-2008, 09:04 AM
It really doesn't seem that way from what I have seen you write so far. You write of ignorant journalists ..... I see lots of that in this forum every week.I want truth to be told. Whether I like GM Toyota or Not.

SobeSVT
08-04-2008, 10:23 AM
Can you honestly say GM is worse off?
Yes. (http://fomoconews.com/forums/showthread.php?t=2400)

wingsnut
08-04-2008, 01:29 PM
GM is in trouble.
So is Ford. ALthough I think Ford is better off currently.

Mbukukanyau
08-04-2008, 01:40 PM
^^^ I think this situation is sort of chomical. Its like two death row prisoners in a communist camp trying to decide who is worse off. Ha ha, they will soon get shot anyways. if the guns do not get em, the gas will.

SobeSVT
08-04-2008, 01:50 PM
^^^ I think this situation is sort of chomical. Its like two death row prisoners in a nazi camp trying to decide who is worse off. Ha ha, they will soon get shot anyways. if the guns do not get em, the gas will.
That iswasnot a very uplifting thought, a bit crude and definitely not funny (or comical) Mbuku. My apologies to anyone of Jewish descent.

Ford being the smaller company and definitely having the best corporate team is in a much better chance for survival. The speed to which Mullaly and his team are responding to the current and growing crisis caught everyone by surprise, a good one that is. The contrast with the staleness of the Wagoner-(the octogenarian) Lutz team is almost painful.

I hope GM survives but the chances of such survival are far from encouraging at this particular moment.

Mbukukanyau
08-04-2008, 02:31 PM
That iswasnot a very uplifting thought, a bit crude and definitely not funny (or comical) Mbuku. My apologies to anyone of Jewish descent.

Ford being the smaller company and definitely having the best corporate team is in a much better chance for survival. The speed to which Mullaly and his team are responding to the current and growing crisis caught everyone by surprise, a good one that is. The contrast with the staleness of the Wagoner-(the octogenarian) Lutz team is almost painful.

I hope GM survives but the chances of such survival are far from encouraging at this particular moment.
I changed it to communist, I apologise for not being sensitive to anyone offended.

1931Chevy
08-05-2008, 12:20 AM
GMs biggest problem has been not merging the global operations faster,

Chinese Buicks = US Buicks
Pontiac = Holden
Chevrolet= a combination of Vauxhall and Opel Vehicles
Saturn make this the green brand just like Toyota is planning with the Prius by making it its own brand
Cadillac keep it the way its going
Saab and Hummer sell them

lets see GM brings the korean aveo (http://en.wikipedia.org/wiki/Image:2009_Chevrolet_Aveo5_front_DC.JPG) for the US instead of bringing the European Corsa (http://en.wikipedia.org/wiki/Image:2007_Opel_Corsa_D_01.jpg) and the same goes with the Malibu and the Opel Insignia, GM needs to understand that they cannot keep producing 4 or more different vehicles for the same segment for the different markets if they plan to survive