GM posts $286 million second-quarter loss

[Vintalage]

DETROIT -- General Motors posted an unexpected quarterly loss on Wednesday as stubbornly high costs for everything from materials to worker health care outweighed surprisingly strong car sales and good results from its finance arm.

The news capped a nightmarish second quarter for GM, which is struggling to regain market share from Asian rivals and saw its debt cut to "junk" status by the Standard & Poor's rating agency in May.

The world's largest automaker, which triggered alarm bells on Wall Street when it reported a $1.1 billion loss in the first quarter, said its second-quarter net loss was $286 million, or 51 cents per share.

The results, which included several one-time items, compared with a profit of $1.38 billion, or $2.42 per share, in the year-earlier quarter.

Excluding one-time items, GM lost $318 million, or 56 cents per share, in the quarter. Wall Street analysts' average forecast was a profit of 3 cents a share before special items, according to Reuters Estimates.

Earnings forecasts for GM have varied widely since the company withdrew its earnings and cash flow forecast for the 2005 calendar year in April, citing uncertainty about its efforts to resolve a mounting "health-care cost crisis."

GM said its automotive operations lost $948 million in the second quarter. A loss in North America of $1.19 billion offset profitable results in Europe, Asia and the Latin Anmerican/Mideast region. Like cross-town rival Ford Motor Co., GM has been hit hard by this year's dramatic slowdown in sales of mid- and full-sized sport-utility vehicles, its most profitable models.

GM said second-quarter revenue slipped to $48.5 billion from $49.3 billion a year earlier.

General Motors Acceptance Corp., the company's finance unit, had net income of $816 million in the quarter, down from $846 million a year earlier.

'AN EXTREME BURDEN'

GM, which expects its health-care costs to total nearly $6 billion this year, has been in talks with the United Auto Workers union since April to try to slash some of the health-care benefits that Chief Executive Rick Wagoner blames for hurting the company's ability to compete.

UAW President Ron Gettelfinger has questioned the severity of GM's financial problems, however. And there has been no indication that the union will cede any significant ground on benefits that are the gold standard of the manufacturing sector.

"Our health-care cost situation remains an extreme burden on our ability to compete; we continue to work intensely on solutions to this crisis with our labor unions," Wagoner said in a statement.

Apart from higher health-care costs, GM cited lower production volumes, pricing pressures and rising raw material costs for its weak performance in North America.

To offset cash outflow, which totaled nearly $5 billion in the first quarter, GM said it withdrew $1 billion in the second quarter from a fund set up to provide health care for retired U.S. union workers and their dependents. An additional $1 billion was withdrawn from the fund on July 1, GM said.

GM provided no outlook for its financial results in the third quarter. Analysts, on average, expect earnings of just 9 cents a share before one-time according to Reuters Estimates.

Some analysts are far less sanguine about the outlook for the industrial icon, however.

"We see huge losses returning in the third quarter," David Healy, an analyst with Burnham Securities, said in a recent note to clients.

Healy forecast a third-quarter loss of $1.94 per share and a full-year loss of $3.44 per share.

GM closed the second quarter on a rare high note, boosting its U.S. sales by 41 percent in June.

But the auto industry's discount king also boosted its consumer incentives to an average of $4,458 per vehicle in June, according to industry tracking firm Autodata Corp. That was more than any of its competitors and more than four times the incentives offered by its chief Asian rival, Toyota Motor Corp.

http://www.autonews.com/defaultRegis...s?newsId=12823

- Automotive News

[pyro]

yikes

[hotgt]

damn...on one hand, they sold more cars...on the other hand, it didn't mean a damn thing...

yikes is right...

[GregFarz78]

I said it before and I'll say it again UAW needs to go that would solve some of their problems, not all but its a good start...the constant increase in steel prices probably isnt helping either

[AMRAAM4]

dunno if I read it here or somewhere else, but.....Ford and GM bonds were just categorized "Junk Bonds" as well.

[TJGuitarZ]

The major issue is healthcare. GM is spending around 5 billion dollars a year on it. That amount alone would pull them out of their current losing streak. The government has to step in if a turn around is expected to happen anytime soon.

[Braves299]

[action]

GM like most of the domestic manafacturers put its cars into the fullsize trucks. Now people are going back to mid size cars because of the fuel prices. The japs build a much better mid size car them GM so their sales go up!!!

GM should have better forcasted the sales slide of big trucks when the cost of a barrell of oil started to go up. If they played their cards right, the G6 could be better looking and have a reliable DOHC engine and be competitive.

[Vintalage]

Originally Posted by action

GM like most of the domestic manafacturers put its cars into the fullsize trucks. Now people are going back to mid size cars because of the fuel prices. The japs build a much better mid size car them GM so their sales go up!!!

GM should have better forcasted the sales slide of big trucks when the cost of a barrell of oil started to go up. If they played their cards right, the G6 could be better looking and have a reliable DOHC engine and be competitive.

But that is why I believe GM should have dumped Hybrids in their trucks to combat that since their focus is on trucks. But they didn't. They are for the new trucks, but that may be a one or two year delay. And now i'm reading that GM is undecided on whether to put in a 4 speed for the initial launch of the GMT900s or the 6 speed. Appearantly, there is low supply.

[mr_eh]

i cant wait to get in my subaru... soon, i can taste it. gm hasnt made an appealing car in forever

[kubiache]

Unions? A burden? No way!

[GrahamKracka]

its still better than the 1.1 billion dollor loss in the 1st quarter

[Mike3800]

Originally Posted by Braves299

It's the union workers killing their own company. It's probbably been said 100,000 times on here.

Workers that normally anywhere else would make 10$ per hour as an assembler make 50 grand with the best benefits you could imagine, and the cost eventually gets passed down to the products, driving up the prices of the vehicles, it has now become absurd.

Layoffs will help, but, the root of the problem is simply pricing. It's NOT quality or resale, let's face it, average "American" quality and poor resale have not changed since the early 80's for GM, but up untill the past 5 years, they have always offered good value, meaning more vehicle than what the competiton offers for less coin than the competiton charges. There ya have it.

[GrahamKracka]

China's getting ready to introduce their stuff too....from what ive read its lexus quality ****....chinese labor cost's next to nothing...GM is gonna be seriously owned if they dont get thier **** together

[AMRAAM4]

Originally Posted by mr_eh

i cant wait to get in my subaru... soon, i can taste it. gm hasnt made an appealing car in forever

who owns Subaru dipsh1t?

[bigbenSC]

^Fuji Heavy Industries, GM does not have anywhere near a controlling stake. The GM-Subaru relationship goes just a little farther than the GM-Toyota joint venture and hasn't been around nearly as long.

[Ant]

Originally Posted by bigbengt67

^Fuji Heavy Industries, GM does not have anywhere near a controlling stake. The GM-Subaru relationship goes just a little farther than the GM-Toyota joint venture and hasn't been around nearly as long.

the platform sharing, etc between subie and saab would further emphasize bob's point, would it not?

[edit]

Originally Posted by GM's history timeline

General Motors acquires 20 percent equity in Fuji Heavy Industries, the manufacturer of Subaru brand vehicles.

GM has more to do with Subaru then many people will admit to.

[Ajaxus]

despite the over a quarter billion dollar loss on that quarter, its significantly less than the 1.1billion loss on the previous quarter. so props must be given for this great improvement. i personally am doing my best to make friends and family sell imports and buy domestics, so far ive gotten across to a few...

and ofcourse i encourage people to go with GM manufactured cars over daimler-chrysler and others... hehehe

[notsoaveragej0e]

Originally Posted by TJGuitarZ

The government has to step in if a turn around is expected to happen anytime soon.

ya, remember when the government stepped in to help Chrysler? They got taken over by a foreign company which means no $$ for the US...

[digitalballz]

Originally Posted by TJGuitarZ

The major issue is healthcare. GM is spending around 5 billion dollars a year on it. That amount alone would pull them out of their current losing streak. The government has to step in if a turn around is expected to happen anytime soon.

I agree healthcare is a huge pricetag for GM. But why can the asian, and German import companies make a profit with the same healthcare issues?