GM posts record $38.7 billion loss for 2007
02-12-08, 06:37 AM
#1
Super Moderator
Thread Starter
GM posts record $38.7 billion loss for 2007
GM posts record $38.7 billion loss for 2007
Posted on Tuesday 12 February 2008
GM’s financial results for 2007 have finally been revealed and as predicted its net loss for the period amounted to a whopping $38.7 billion, a new record for the General. Of course, most of this figure is the result of a tax write down undertaken in the second half of last year but GM’s continuing operations were still in the red. The carmaker’s adjusted net loss came in at $23 million, down from an adjusted net gain of $2.2 billion just one year prior.
Sales were up 3% last year to 277,000 units, the second best result in GM’s 100 year history, but revenues were down on last year’s result. GM made $181 billion in revenue in 2007, compared with $206 billion in 2006. Officials blamed the lackluster result on the carmaker’s GMAC financial services unit, which remained unprofitable last year, reports Automotive News.
This year’s result is expected to be significantly better as GM is set to offer buyouts or early retirements to all 74,000 U.S. hourly workers represented by the UAW, which would then allow the carmaker to start hiring lower-cost replacements.
Posted on Tuesday 12 February 2008
GM’s financial results for 2007 have finally been revealed and as predicted its net loss for the period amounted to a whopping $38.7 billion, a new record for the General. Of course, most of this figure is the result of a tax write down undertaken in the second half of last year but GM’s continuing operations were still in the red. The carmaker’s adjusted net loss came in at $23 million, down from an adjusted net gain of $2.2 billion just one year prior.
Sales were up 3% last year to 277,000 units, the second best result in GM’s 100 year history, but revenues were down on last year’s result. GM made $181 billion in revenue in 2007, compared with $206 billion in 2006. Officials blamed the lackluster result on the carmaker’s GMAC financial services unit, which remained unprofitable last year, reports Automotive News.
This year’s result is expected to be significantly better as GM is set to offer buyouts or early retirements to all 74,000 U.S. hourly workers represented by the UAW, which would then allow the carmaker to start hiring lower-cost replacements.
02-12-08, 08:59 AM
#5
NEW YORK (CNNMoney.com) -- In an effort to shave ongoing losses, General Motors offered lucrative buyouts Tuesday to 74,000 employees - its entire U.S. hourly workforce.
The nation's largest automaker announced the latest round of buyouts as it reported another loss on its core auto operations in the fourth quarter, which combined with charges taken earlier in the year left GM (GM, Fortune 500) with a company-record $38.7 billion net loss for 2007.
To try to stem automotive losses that have dogged the company since 2005, the company is making a range of offers, up to cash payments of $140,000 to the remaining 74,000 GM workers represented by the United Auto Workers union.
The goal is not to reduce headcount but rather to bring in new workers at a lower cost.
About 46,000 of the GM employees are eligible to retire today and they can take pension incentives worth between $45,000 to $62,500 to retire.
In addition there are inducements for those who are within five years of retirement to leave early and receive benefits.
Those who leave and agree to sever all ties with the company - including giving up lucrative pension and health care coverage - will receive a lump sum of $140,000 if they have 10 years of service. They will receive $70,000 if they have less than 10 years of service.
"We've worked with our UAW partners to ensure our employees have a variety of attractive options to consider," GM Chairman and CEO Rick Wagoner said in a statement. "The special attrition program is an important initiative that will help us transform the workforce."
The savings GM is likely to see with this offer are substantial. The Center for Automotive Research estimates that by 2011 GM's hourly workforce will be only 8% smaller than current levels - but more than four out 10 of those workers will be new hires being paid a lower wage rate.
The current veteran UAW member at GM today has an average base wage of $28.12 an hour, but the cost of benefits, including pension and future retiree health care costs, nearly triples the cost to GM to $78.21, according to the Center for Automotive Research.
By comparison, new hires will be paid between $14 and $16.23 an hour. And even as they start to accumulate raises tied to seniority, the far less lucrative benefit package will limit GM's cost for those employees to $25.65 an hour.
Lucrative buyout packages are not new at GM (GM, Fortune 500) and rival U.S. automakers Ford Motor (F, Fortune 500) and Chrysler LLC. GM offered similar deals to all its U.S. workers in 2006. That package helped it pare U.S. hourly employment by nearly 40,000 in the past two years.
Ford and Chrysler also have the provision in their new contracts to pay new hires less in salary and benefits. But their workforces are not nearly as old as the UAW membership at GM, so they may end up seeing less turnover in their hourly staff.
Ford has its own buyout offer out to all its remaining 54,000 hourly U.S. workers. The proposal was announced last month when the company reported a fourth-quarter loss. Privately owned Chrysler has offered buyout packages to hourly employees at targeted plants, but has not make a companywide offer.
Fourth-quarter results
GM unveiled its latest cost-cutting moves as it reported a narrow profit of $46 million, or 8 cents a share, excluding special items, in the fourth quarter.
The adjusted earnings were far better than the loss of 54 cents a share that analysts surveyed by earnings tracker Thomson First Call had forecast, but worse than the year-ago result of a $180 million profit, or 32 cents a share.
But the profit in the most recent quarter was due primarily to a $1.6 billion tax benefit. GM would have otherwise lost about $2.75 a share in the period excluding items, although First Call and analysts are not likely to exclude that gain when comparing results to forecasts.
Including special items, the company reported a quarterly net loss of $722 million, or $1.28 a share. That compares to net income of $950 million, or $1.68 a share, it posted in the year-ago period.
Concerns by traders that the company's actual performance was worse than it seemed at first blush sent shares down 1.7% in pre-market trading. But shares swung to a gain of 1.5% in late-morning trading after the company's call discussing its results and outlook in more detail.
The company saw strong vehicle sales, as automotive revenue hit a record $46.7 billion, easily topping forecasts of $44.4 billion. But the company's automotive profit-loss performance took a step backwards most of its regions around the globe.
The company posted a $803 million fourth quarter pretax loss in its auto unit, compared to a narrow $8 million profit on that basis a year earlier. The worsening performance was due to its core North American operations, where industrywide sales were weak in the period. North American plants lost $1.06 billion in the period on that basis, compared to only a $129 million loss a year earlier.
The company also saw pretax losses grow in its European operations and profits decline in the Asia-Pacific region that has become increasingly important for the company's fortunes. But improved pretax profits in GM's Latin America-Africa-Middle East region more than balanced out the worsening performance in the other overseas regions. To top of page
The nation's largest automaker announced the latest round of buyouts as it reported another loss on its core auto operations in the fourth quarter, which combined with charges taken earlier in the year left GM (GM, Fortune 500) with a company-record $38.7 billion net loss for 2007.
To try to stem automotive losses that have dogged the company since 2005, the company is making a range of offers, up to cash payments of $140,000 to the remaining 74,000 GM workers represented by the United Auto Workers union.
The goal is not to reduce headcount but rather to bring in new workers at a lower cost.
About 46,000 of the GM employees are eligible to retire today and they can take pension incentives worth between $45,000 to $62,500 to retire.
In addition there are inducements for those who are within five years of retirement to leave early and receive benefits.
Those who leave and agree to sever all ties with the company - including giving up lucrative pension and health care coverage - will receive a lump sum of $140,000 if they have 10 years of service. They will receive $70,000 if they have less than 10 years of service.
"We've worked with our UAW partners to ensure our employees have a variety of attractive options to consider," GM Chairman and CEO Rick Wagoner said in a statement. "The special attrition program is an important initiative that will help us transform the workforce."
The savings GM is likely to see with this offer are substantial. The Center for Automotive Research estimates that by 2011 GM's hourly workforce will be only 8% smaller than current levels - but more than four out 10 of those workers will be new hires being paid a lower wage rate.
The current veteran UAW member at GM today has an average base wage of $28.12 an hour, but the cost of benefits, including pension and future retiree health care costs, nearly triples the cost to GM to $78.21, according to the Center for Automotive Research.
By comparison, new hires will be paid between $14 and $16.23 an hour. And even as they start to accumulate raises tied to seniority, the far less lucrative benefit package will limit GM's cost for those employees to $25.65 an hour.
Lucrative buyout packages are not new at GM (GM, Fortune 500) and rival U.S. automakers Ford Motor (F, Fortune 500) and Chrysler LLC. GM offered similar deals to all its U.S. workers in 2006. That package helped it pare U.S. hourly employment by nearly 40,000 in the past two years.
Ford and Chrysler also have the provision in their new contracts to pay new hires less in salary and benefits. But their workforces are not nearly as old as the UAW membership at GM, so they may end up seeing less turnover in their hourly staff.
Ford has its own buyout offer out to all its remaining 54,000 hourly U.S. workers. The proposal was announced last month when the company reported a fourth-quarter loss. Privately owned Chrysler has offered buyout packages to hourly employees at targeted plants, but has not make a companywide offer.
Fourth-quarter results
GM unveiled its latest cost-cutting moves as it reported a narrow profit of $46 million, or 8 cents a share, excluding special items, in the fourth quarter.
The adjusted earnings were far better than the loss of 54 cents a share that analysts surveyed by earnings tracker Thomson First Call had forecast, but worse than the year-ago result of a $180 million profit, or 32 cents a share.
But the profit in the most recent quarter was due primarily to a $1.6 billion tax benefit. GM would have otherwise lost about $2.75 a share in the period excluding items, although First Call and analysts are not likely to exclude that gain when comparing results to forecasts.
Including special items, the company reported a quarterly net loss of $722 million, or $1.28 a share. That compares to net income of $950 million, or $1.68 a share, it posted in the year-ago period.
Concerns by traders that the company's actual performance was worse than it seemed at first blush sent shares down 1.7% in pre-market trading. But shares swung to a gain of 1.5% in late-morning trading after the company's call discussing its results and outlook in more detail.
The company saw strong vehicle sales, as automotive revenue hit a record $46.7 billion, easily topping forecasts of $44.4 billion. But the company's automotive profit-loss performance took a step backwards most of its regions around the globe.
The company posted a $803 million fourth quarter pretax loss in its auto unit, compared to a narrow $8 million profit on that basis a year earlier. The worsening performance was due to its core North American operations, where industrywide sales were weak in the period. North American plants lost $1.06 billion in the period on that basis, compared to only a $129 million loss a year earlier.
The company also saw pretax losses grow in its European operations and profits decline in the Asia-Pacific region that has become increasingly important for the company's fortunes. But improved pretax profits in GM's Latin America-Africa-Middle East region more than balanced out the worsening performance in the other overseas regions. To top of page
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02-12-08, 09:38 AM
#10
Lexus Fanatic
Part of it is that GM is finally, after many years of building junk, are starting to put some quality into their cars, though there is still a long way to go. Their paint jobs and interiors are both showing notable improvement...that, of course, costs money. But in the long run, it can only help...it will help bring back potential GM shoppers who long ago defected to other brands.....mostly European and Asian.
02-12-08, 10:04 AM
#12
Lexus Fanatic
GM, if it wants to get back customers from Toyota and Honda, simply has to build better vehicles than it has been doing. And, with the new Chevy Malibu and Cadillac CTS, they at least have a foot in the door now.
02-12-08, 04:34 PM
#15
Well, when you think about it; they are paying on avg $58k/year not including all the extras for each worker. Paying a $70k buyout for an employee that has been there less than 10 years (the majority I'd imagine), isn't such a bad deal. They are kind of investing in cost reduction; it would mean paying an avg employee their salary of 1.2 years over the span of a year. After the 1.2 years of equivalent time, they then gain $58k/year plus the pension cost since the employee cuts all ties.
For over 10 year emplyees, they are most likely getting paid a lot more so they get $140k. It may take longer to make that back up; but in about 2-3 years with this program, GM can save A LOT of money.
$28/hr is WAY WAY too much money to be paid for the work autoworkers do. You come in completely unskilled and then make the avg salary of a normal Engineer with a BS degree. And you learn how to bolt a door on a car frame quickly or install a bumper support. Servers at restaurants do 4x the work with no breaks and no incentives and don't make anywhere near as much. I have no sympathy for those that are losing UAW jobs; snap back to reality.
For over 10 year emplyees, they are most likely getting paid a lot more so they get $140k. It may take longer to make that back up; but in about 2-3 years with this program, GM can save A LOT of money.
$28/hr is WAY WAY too much money to be paid for the work autoworkers do. You come in completely unskilled and then make the avg salary of a normal Engineer with a BS degree. And you learn how to bolt a door on a car frame quickly or install a bumper support. Servers at restaurants do 4x the work with no breaks and no incentives and don't make anywhere near as much. I have no sympathy for those that are losing UAW jobs; snap back to reality.