Sunday, February 11, 2007

Errors in accounting embarrass GM exec

Tuesday, January 30, 2007
Errors in accounting embarrass GM exec
Financial officer's memo says internal controls are improving, report will show 'turnaround is accelerating.'
David Shepardson / Detroit News Washington Bureau

The SEC's main GM probe involves how the automaker handled supplier credits and rebates in 2001, especially with former parts unit Delphi.

GM was subpoenaed by the SEC in October 2005 after disclosing its pension liability for Delphi could reach $11 billion.

In October 2004, the SEC asked GM, Ford Motor Co. and Delphi for information to determine whether companies are properly accounting for pension and health care obligations.

WASHINGTON -- General Motors Corp. Chief Financial Officer Fritz Henderson called the automaker's announcement last week that it would have to restate earnings again and delay reporting 2006 financial results a personal embarrassment, as the company struggles to put a series of accounting problems behind it.

In an e-mail to employees Friday, Henderson said the company looks forward to issuing fourth-quarter and full-year financial statements for 2006 by the end of February.

"Errors that require restatements are unacceptable and embarrassing for the corporation and for me personally," Henderson wrote, according to people familiar with the e-mail. "We've taken a lot of steps to improve the internal controls in 2006 and we have more to do."

Henderson also said the financial statements show "a great number of positives and that GM's turnaround is accelerating."

When the need to restate results was announced last week, GM said the changes are mainly due to tax accounting adjustments. Also, GM's former finance arm, GMAC, was not able to supply information on time that the automaker needs for its fourth-quarter report.

GM originally planned to report 2006 results today. Now, it expects to provide an update next week and file its annual report with the Securities and Exchange Commission by the March 1 due date.

The restatement is the latest financial problem at GM, which has restated results in seven of its last eight quarters.

The SEC and the Justice Department, assisted by a federal grand jury in New York, are investigating aspects of GM's accounting, especially its handling of supplier credits and its relationship with its bankrupt former parts unit, Delphi Corp. Delphi settled SEC accounting fraud charges in October, while the SEC charged nine former executives with misconduct, including former Delphi CEO J.T. Battenberg.

Last year, GM reported a $10.6 billion loss for 2005, after restating the result it issued previously.

GM's accounting woes have been embarrassing to a company that has long prided itself on its impeccable recordkeeping.

Mark Oline, a managing director at Fitch Ratings, said the delay in 2006 results "does cause some concern in the case of GM when there have been so many it has become somewhat of a pattern."

"The financial community is very much focused on the turnaround of North America and the success of the restructuring," Oline said. "These earnings restatements, if they play out along the lines outlined, probably will not have a significant impact."

But he also said the uncertainty at GM, including its relationship with troubled Delphi, makes it "very difficult to discern the underlying financial trends."

GM spokeswoman Renee Rashid-Merem said Monday the company is "taking these restatements seriously" and is trying to be more transparent with investors and the public. "When we find these things out, we move quickly."

You can reach David Shepardson at (202) 662 - 8735 or

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