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GM revises earnings over pending GMAC sale

General Motors Corp. lost $3.2 billion in the second quarter as it absorbed heavy charges for its massive restructuring program.
/ Source: The Associated Press

General Motors Corp. is revising its second-quarter earnings to reflect an additional net loss of $200 million tied to estimated after-tax charges from the pending sale of a 51 percent stake in its finance arm.

GM, in a document filed Tuesday with the Securities and Exchange Commission, said its previously announced adjusted earnings of $1.2 billion, or $2.03 per share, were not affected by the changes.

The world’s largest automaker said last week it lost $3.2 billion in the second quarter as it dealt with major charges in its large North American restructuring program. With the revisions, the net loss for the quarter has been increased to $3.4 billion, or $5.97 per share.

GM said it increased the estimated after-tax charge for the General Motors Acceptance Corp. deal to $690 million from $490 million.

The company expects to receive about $14 billion during the next three years from the GMAC deal, which was announced in April. The stake is being purchased by a group of investors led by Cerberus Capital Management LP, a private investment firm.

GM hoped to complete the sale in the fourth quarter of 2006, but said it was working with GMAC and the investors to avoid delays in the transaction because of a recent moratorium by federal regulators on the approval of certain bank transactions.

The Federal Deposit Insurance Corp. last week halted for six months any new approvals of industrial loan corporations, or ILCs. GM said the consortium of investors have sought approval tied to GMAC’s ILC, the GMAC Automotive Bank.

GM said in a statement “it appears that the timing of any approval of the notices is likely to be affected by the moratorium” and it was working to try to avoid delaying the closing date until 2007.

The FDIC said last week the moratorium, which extends until next Jan. 31, will give the regulators time to decide whether changes in law or regulation are needed.

GM, which lost $10.6 billion last year, launched a major restructuring in November that called for closing 12 plants by 2008, slashing its work force and cutting structural costs by $4 billion this year.

GM is currently in talks with Nissan Motor Co. of Japan and Renault SA of France about the possibility of joining their global alliance. Wagoner has said that while he believes it makes sense to examine whether there are potential benefits from a linkup, he does not want to get distracted from the turnaround plan.

The proposal to join the alliance came from billionaire investor Kirk Kerkorian, who holds a 9.9 percent stake in GM. It has fueled speculation that Kerkorian is dissatisfied with the pace of the turnaround under Wagoner and wants to carve out a role for Nissan and Renault CEO Carlos Ghosn, a legendary turnaround specialist in the industry. Analysts had said strong second-quarter results would bolster Wagoner’s position.