Friday, February 23, 2007

GM turns up $200M in earnings

Saturday, February 17, 2007
GM turns up $200M in earnings
Carmaker, which is working to straighten out accounting issues, restates finances after reviewing '02, '06 statements.
Sharon Terlep / The Detroit News

General Motors Corp. has turned up an additional $200 million in earnings previously unaccounted for between 2002 and 2006 in a review of its financial statements that is almost complete, according to a Friday filing with the Securities and Exchange Commission.

The automaker, which has restated results seven times in the past two years, said it may request a 15-day extension of the March 1 SEC filing deadline. GM was initially expected to announce its 2006 results on Jan. 30.

Previous financial statements "should no longer be relied upon," GM said in its filing, attributing the issues to tax accounting adjustments. The review "is substantially complete," the automaker reported.

Meanwhile, GMAC, GM's former finance arm, said Friday it also will have to restate financial results back to 2001, attributing similar accounting complications.

GM has been working to straighten out accounting problems that, in addition to delaying its earning news, have made the automaker the subject of a half-dozen investigations by the SEC.

Investors seem undaunted and more focused on GM's expectation that it's on track to post a significant improvement in financial results for 2006 compared to 2005, including a profitable fourth quarter with record revenue.

GM's stock price has nearly doubled from a year ago, closing at $36.34 on Friday compared to just more than $18 in December 2005. Shares fell 10 cents, or 27 percent, in Friday trading.

"I don't think it's making people feel negative," said Frank Khoshnoud, a Southfield-based principal in the automotive practice of consulting firm Capgemini Group. "Looking at a company the size of GM and given the complexities we have dealt with, it's not what I would call an indication of any malpractice on their part."

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

Analysts have been expecting strong results from GM for 2006, a year in which the automaker pared its work force and cut production costs.

The GMAC sale has complicated matters for the automaker, as the former finance arm was not able to supply information on time that GM needed for its fourth-quarter report, GM has said. The automaker sold 51 percent of GMAC on Nov. 30 as part of an effort to raise cash.

GMAC, in a filing with the SEC, said the restatement will have a "material impact" on net income for most of the periods between 2001 and 2006.

The changes are expected to add up to a decrease of about $230 million, but will not affect GMAC's liquidity or cash flow, according to the filing.

You can reach Sharon Terlep at (313) 223-4686 or

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