What's That Smell? It's GM, Cooking The Books
GM posted better quarterly numbers today than analysts expected. Instead of jumping on the news, the GM share is down at the time of this typing? Why? Analysts and financial reporters quickly caught on to an old trick that has an air of despair: GM delayed spending into the next quarter. Says Reuters:
“General Motors posted a stronger-than-expected quarterly profit as its loss in Europe was not as bad as feared, and its results were boosted by delayed spending in North America.”
GM reported $0.90 earnings per share for the quarter, the consensus estimate expected $0.79. GM’s revenue for the quarter was down 4.6% on a year-over-year basis.
The street quickly caught on to the shifty shifting of expenses and profits. Again, Reuters:
“However, GM, which delayed the spending to the third quarter, said its average profit outlook for the second and third quarters combined in North America would still be the same as previously forecast, suggesting analysts will need to cut their estimates for the third quarter.
GM had previously said its second and third quarter operating profit in North America would be similar to the $1.7 billion it reported in the first quarter. It earned $1.97 billion in the second quarter, implying it will earn about $1.4 billion in the third quarter, analysts said.”
Analysts also don’t buy that things are suddenly peachier in Europe. Said Jefferies analyst Peter Nesvold:
“I feel like Europe will continue to be a black hole until we’re at least able to frame the magnitude of the downturn. They showed some nimbleness in this quarter that they have not shown so far since the new GM went public. People will remain skeptical though before they want to give them any credit.”
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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Many companies delay spending till the next quarter. Hiring freezes till quarter end, shipping more product, getting asset collection done around quarters... these are common business practices. I am sure you would see these same practices in effect at Toyota, VW, Honda, Ford, Hyundai etc.
F - NYQ $8.92 0.12 1.33% Ford Motor Company Common Stock Wow...isn't that interesting...Ford must be cooking the books too...........
GM has to decide if they want to be a large company or a profitable one. Losing more than a billion dollars a year in Europe should not be an option. This is what happens when workers hold more control than the employers. Close shop or sell Opel if anyone is interested. Closing Opel will also benefit other European automakers. Better to have a fewer healthier automakers versus having a bunch of struggling ones. With each country opposing any plant closures or job cuts and the automakers consistently losing money, something has to give soon. If selling Opel isn't an option, then decide if you would rather lose a billion dollars a year for several years or pay a one time severance package. The question is do you wanna pay $2B now to align production/capacity with sales or do you wanna pay the unions $2B after 5 years of losses.
I like GM - unlike this website. But its clear its part work program for the UAW. So the would like to be big and kinda profitable over smaller and very profitable. We are going to have to wait till the government sells it before that changes.