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GM posts loss of $3.3B on weak US auto market, charges
2008-04-30
General Motors Corp. struggled to a $3.3 billion first-quarter loss, due in part to a weak U.S. market, a strike at a major parts supplier and plummeting sales of sport utility vehicles and pickups. The nation's biggest automaker also cut its industrywide U.S. sales outlook for the year. The company disclosed earlier this week it was cutting production of some of its slow-selling trucks and SUVs. GM's loss reported Wednesday for the January-March period amounted to $5.74 per share and also reflected one-time charges. It compares with a profit of $62 million, or 11 cents per share, in the first quarter of 2007. The company said a two-month strike at American Axle and Manufacturing Holdings Inc. has cost it $800 million and 100,000 vehicles. The strike has affected 30 GM plants. In light of the results, GM revised its U.S. sales outlook for the year. The Detroit automaker now expects total U.S. sales in the high 15-million range, down from the low 16-million range at the beginning of this year. "We want to run our business conservatively. We want to be realistic," said Ray Young, GM's executive vice president and chief financial officer. Young said GM expects the second quarter to be a tough one for the industry. He said GM continues to predict a recovery in the second half of the year, although it will not be as robust as the company believed at the beginning of this year. GM's loss included a $1.45 billion charge to reflect a change in the value of GM's interest in GMAC Financial Services and $731 million to increase GM's liability in Delphi Corp.'s ongoing bankruptcy. Excluding the one-time items, GM lost $350 million, or 62 cents per share, beating Wall Street's expectations. Analysts surveyed by Thomson Financial had expected a loss of $1.60 per share. Its shares rose 60 cents, or 2.8 percent, to $21.80 in premarket trading. GM's total revenue for the quarter was $42.7 billion, down from $43.4 billion a year ago. GM said revenues were up 20 percent outside North America thanks to strong growth in China, Russia, Brazil and India. Total revenue was hurt by the slowdown in North America and losses at GMAC. Young said analysts may be underestimating GM's overseas growth. He also said GM is making progress in cutting costs in North America. Young said the company isn't giving any earnings guidance in the near term. "The North American turnaround is occurring," he said. GM lost $276 million in the first quarter due to its minority stake in GMAC, which was hurt by losses in its ResCap residential mortgage division. Young said GM revalued its stake in GMAC because it doesn't expect the mortgage market to recover soon. GM lost $812 million in North America, compared with a loss of $208 million in the year-ago quarter. Its U.S. market share remained flat at 22 percent. The company said earlier this week that it is cutting production of some trucks and SUVs at four U.S. plants, resulting in 3,500 layoffs. GM sold 2.25 million vehicles worldwide in the first quarter, down less than 1 percent from a year ago. GM said a record 64 percent of those sales came outside the U.S. "We continue to leverage our global product portfolio to take advantage of tremendous growth in key emerging markets, while at the same time taking the appropriate actions to deal with the challenging economic conditions in the U.S.," GM Chairman and Chief Executive Officer Rick Wagoner said in a statement.
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