Saturday, November 18, 2006

GM shaves down 3Q loss

Wednesday, November 08, 2006
GM shaves down 3Q loss
But automaker still has a long way to go to catch up to rival Toyota, which made $3.4B in the same period.
Bill Vlasic / The Detroit News

DETROIT -- While its chief rival continued to rack up huge profits, General Motors Corp. had to be satisfied Tuesday with reporting a narrower loss in the third quarter.

The gap between GM and Toyota Motor Corp. was never more apparent than in announcements of financial results by the world's two biggest automakers.

GM said Tuesday that its third-quarter loss was $91 million rather than the $115 million it had reported last month. The change, the No. 1 automaker said, was due to additional loan sales at its financial-services unit.

But Toyota reported a $3.4 billion profit for the same three-month period, illustrating just how far GM has to go in its turnaround to catch up to its Japanese rival.

In its quarterly report filed Tuesday with the U.S. Securities and Exchange Commission, GM said it is "systematically and aggressively implementing its turnaround plan" in North America with a goal of becoming profitable "as soon as possible."

The automaker also said it will pay a stock dividend of 25 cents in the fourth quarter -- unchanged from the previous quarter.

Industry analysts expect GM to post a companywide profit in the fourth quarter, although its key North American operations will still likely fall short of making money.

"I'm forecasting that GM will earn roughly $900 million in net income, with GM North America at virtually break-even," said David Healy of Burnham Securities. "From where they've come from, that's a pretty impressive feat."

Since posting a $10.6 billion loss in 2005, GM has announced plans to shut 12 U.S. plants and cut 30,000 hourly jobs through buyouts and early retirements. The company also negotiated health-care concessions from its unionized workers and cut benefits for its salaried employees and retirees.

More than 34,000 hourly workers at GM and Delphi Corp. -- the automaker's biggest supplier -- have agreed to participate in the "special attrition" program. GM is also looking toward next year's contract talks with the United Auto Workers to further reduce its labor costs.

"GM's management is putting a high priority on negotiating a more competitive collective bargaining agreement with the UAW in 2007," GM said in its SEC filing.

The company also reiterated its goal of reducing its North American structural costs by $9 billion annually.

But the most pressing issue confronting GM remains a resolution of Delphi's bankruptcy reorganization.

GM has already taken charges of $6 billion to cover its potential obligations to Delphi workers, who were GM employees before the parts business was spun off in 1999.

Delphi, which filed for bankruptcy in October 2005, wants to dramatically downsize its U.S. operations. But GM is anxious for a peaceful reorganization process that averts a potentially devastating strike by union workers.

In its SEC filing, GM said resolving "Delphi related issues remains a critical near term priority." In recent comments to reporters, GM Chairman Rick Wagoner said a deal on Delphi could be reached "reasonably soon."

"Delphi has been hanging over their heads for so long now," said Healy. "It appears that a settlement is getting close."

Other issues addressed in GM's federal filing included ongoing SEC investigations into GM's accounting.

GM said it "has been cooperating with government in connection with a number of investigations." The company confirmed that the SEC and a federal grand jury have issued subpoenas to GM in connection with several inquiries -- including a Delphi investigation that resulted last week in civil charges being brought against Delphi's former chief executive officer, J.T. Battenberg III.

You can reach Bill Vlasic at (313) 222-2152 or

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