Wednesday, June 21, 2006

GM delays earnings release

Wednesday, June 21, 2006
GM delays earnings release
Carmaker will report results a week late to count buyouts; Delphi to restate '04 earnings.
Christine Tierney / The Detroit News

General Motors Corp. has alerted investors that it will delay the release of its second-quarter results by a week to tally the responses to buyout offers that the automaker extended to all of its 113,000 U.S. workers.

"We want to allow enough time to finalize the numbers for the quarter, including the special attrition program," GM spokeswoman Gina Proia said. GM is now scheduled to report its second-quarter earnings on July 26.

Separately, the automaker said it planned to revise the terms of a $5.6 billion credit line due to expire in 2008 by extending it and offering assets as collateral.

Debt-rating agencies responded by driving GM's ratings further down into junk territory Tuesday, but analysts said the new terms would make it easier for the automaker to complete the sale of its GMAC finance arm.

GM's results are complicated this year by CEO Rick Wagoner's restructuring efforts entailing asset sales, cost-saving agreements with workers and pensioners, and support for GM's former subsidiary Delphi Corp., now in bankruptcy.

Also on Tuesday, Delphi said it would restate its 2004 earnings.

Investors tend to worry when companies need more time to crunch the numbers, but GM's latest announcement was less unsettling than its previous reporting delays and earnings restatements.

GM restated its full-year 2005 results in March, widening the annual loss by $2 billion to $10.6 billion after increasing charges to restructure its ailing North American operations and help Delphi.

GM also restated earnings for the five prior years after finding accounting errors. The automaker, the object of U.S. Securities and Exchange Commission and Justice Department investigations into its accounts, says it has tightened its accounting procedures.

Last month, GM revised its first-quarter results from a preliminary loss of $323 million to a $445 million profit after coming to an agreement with the SEC about how to record its obligations as part of a health care deal struck last year with its workers.

GM's main problem has been an unrelenting slide in its U.S. market share. It plans to close 12 facilities by 2008 and eliminate up to 30,000 blue-collar jobs to bring its production facilities in line with its smaller market share.

In March, GM offered early retirements or buyouts to all of its 113,000 U.S. union workers to cut its work force. Employees have until June 23 to accept, and then seven days to back out.

GM also is subsidizing similar offers for workers at Delphi.

United Auto Workers President Ron Gettelfinger said last week that 25,000 U.S. union workers at GM had agreed to buyouts ranging from $35,000 to $140,000, and another 8,500 employees had accepted at Delphi.

On the financial front, GM was trying to secure a new source of capital after losing its investment-grade rating last year. In addition, it said in March that the earnings restatements might compromise its ability to draw on the loan.

On Tuesday, GM said most of its bank lenders had agreed to its proposal to revise the facility.

"The amended facility will further strengthen GM's strong liquidity profile and will reposition this source of capital from a standby facility to one that will be drawn on from time to time to fund working capital and other needs," GM treasurer Walter Borst said in a statement.

Rating agencies Moody's Investors Service and Standard & Poor's cut GM's rating again. They said its decision to use collateral to secure the loan means bondholders risk recovering a smaller share of their investment if GM should file for bankruptcy.

But analyst David Healy at Burnham Securities said the new facility would give GM easier access to credit and help close the GMAC deal. "Getting a proper line of credit for GM was one of the conditions of a GMAC sale."

GM hopes to conclude the sale of 51 percent of GMAC to a group of investors in the fourth quarter.

According to Bloomberg News, Delphi said in an SEC filing that it would restate its 2004 results, widening the loss by $65 million to $4.82 billion to correct tax accounting.

The Troy-based supplier is restating earnings for the second time since June 2005, when it revised results for 2000 through 2003 as a result of an internal investigation that led to the ouster of five executives.

Delphi said the restatement will be made when it files its 2005 annual results on July 19 after receiving a filing extension from its creditors.

Bloomberg News contributed to this report. You can reach Christine Tierney at (313) 222-1463 or


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