IE 11 is not supported. For an optimal experience visit our site on another browser.

GM posts $15.5 billion loss as sales sputter

General Motors Corp. said Friday its losses widened to $15.5 billion in the second quarter as North American sales plummeted.
/ Source: The Associated Press

General Motors Corp. said Friday its losses widened to $15.5 billion in the second quarter as North American sales plummeted and the company faced expenses due to labor unrest and its massive restructuring plan.

The loss of $27.33 per share is the third-worst quarterly loss in the automaker’s history. In the same period a year earlier, GM recorded a net profit of $891 million, or $1.56 per share. Revenue for the April-June period was $38.2 billion, down $8.5 billion from a year earlier.

Ray Young, the company’s chief financial, said GM might offer another round of buyout and early retirement offers to its U.S. hourly workers because of production cuts.

Nearly 19,000 manufacturing workers — or about 25 percent of GM’s U.S. hourly work force — signed up for the latest round of buyout offers, which ended July 1. Young said 90 percent of those workers have left the company.

GM said its loss included $9.1 billion in one-time charges, including $3.3 billion for the buyouts of 19,000 U.S. hourly workers, most of whom left at the end of June, as well as $2.8 billion in liabilities related to Delphi Corp., its former parts division.

It also included $1.3 billion worth of write-offs because of a decline in the value of GMAC Financial Services’ portfolio of trucks and sport utility vehicles. GM owns 49 percent of GMAC, which has suffered big losses when leases end and it tries to sell the now-unpopular vehicles at depressed prices.

GM also took a $197 million charge related to the settlement of a nearly three-month strike at supplier American Axle and Manufacturing Holdings Inc., which hurt production at more than 30 GM plants. GM agreed to help American Axle fund worker buyouts as part of the settlement.

Without the one-time charges, GM lost $6.3 billion, or $11.21 per share. Twelve analysts surveyed by Thomson Financial predicted a $2.62 per share loss on revenue of $44.57 billion.

GM’s Young also said GM burned through $3.6 billion in cash during the second quarter, which he attributed largely to reducing the company’s inventory by nearly 90,000 vehicles to less than 800,000.

He said GM does not expect a similar reduction in future quarters, so the cash burn should be smaller for the rest of the year.

“In that respect, the negative cash flow in the second quarter is overstated,” he said.

Young also said GM ended the quarter with $21 billion in cash and $5 billion available through credit lines for total liquidity of $26 billion, which he called a strong position. The company had $23.9 billion in cash at the end of the first quarter.

GM already has announced plans to generate another $15 billion in liquidity in the next 18 months.

“We’re going to get the second quarter behind us and just move ahead,” Young said.

The $15.5 billion loss is less than half GM’s record $38.6 billion loss in the third quarter of last year. That loss was due to a charge for accumulated deferred tax credits. The second-worst loss was $21 billion in the first quarter of 1992.

GM said its revenues outside North America rose by $1.7 billion to $20.8 billion in the quarter, but those gains were more than offset by losses in North America, where high gas prices and the weak economy have wreaked havoc on the auto industry.

North American revenues fell by nearly $10 billion to $19.8 billion for the quarter as sales in the region fell 20 percent. Work stoppages at American Axle and several other facilities in May and June also contributed to the decline, GM said.

On July 15, GM announced a plan to raise $15 billion for its restructuring by laying off thousands of hourly and salaried workers, speeding the closure of truck and SUV plants, suspending its dividend and raising cash through borrowing and the sale of assets.

GM also said it would reduce production by another 300,000 vehicles, and that may prompt another wave of blue-collar early retirement and buyout offers, Young said.

“As our recent product, capacity and liquidity actions clearly demonstrate, we are reacting rapidly to the challenges facing the U.S. economy and auto market, and we continue to take the aggressive steps necessary to transform our U.S. operations,” GM Chairman and Chief Executive Rick Wagoner said in a statement.

GM sold 2.29 million vehicles in the second quarter, down 5 percent compared with the previous year. The company said a record 65 percent of those sales were outside North America.

For the first half of the year, Toyota Motor Corp. outsold GM by 277,532 vehicles. It was only the second time Toyota beat GM in sales for the first six months of a year.