GM North America: Fourth Down and a Long Way to Go
GM is expected to announce greater-than-predicted fourth-quarter losses for their North American unit later today. While the exact figures aren't available yet, experts predict GM will report a loss of 64 cents a share, compared with earning 32 cents a share in the same quarter of 2006. Bloomberg cites "two people familiar with the [fourth quarter] results" who say the losses were due in large part to an upsurge in incentives in the fourth quarter as they tried to keep up with Toyota. Credit Suisse analyst Chris Ceraso concurs. "Higher incentive spending outweighed better than expected volume and mix" in GM's North American operation. They seemed to forget that Toyota had plenty cash on hand to fund the average $6.4k rebates on Tundras while they could ill-afford the average $6k they slapped on the hoods of their pickups to keep them moving. The exact damage to GM's bottom line will be announced later today. Watch this space.
UPDATE: Well, folks, it was far worse than anyone expected. MSNBC reports GM had the largest annual loss ever reported by an auto company: $38.7 billion; GM's previous record was $23.2b in 1992. In the fourth quarter alone, they lost $772m. Part of the loss was from their share of GMAC, which cost them $1.1b. GM also announced today they're following Ford's lead and offering buyouts to all 74k of their hourly UAW workers so they can replace them with lower-paid workers under the new contract.
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Not to be a broken record on anything, as I have pointed out this before, but GMNA has not had positive cash flow out of their automotive operations in literally over a decade. What positive cash flow they enjoyed in NA was due to GMAC. Oh boy, now they own 50% of an entity that is running cash losses. If GM is going to remain a viable company, at some point they are going to have to enjoy positive cash flow out of their NA operations. And that is nowhere in sight. Good luck cutting your workforce to get there when you still have 7000 dealers to feed. Don't worry though, Ricky will not go hungry.
ExxonMobil and GM need to merge (officially, which would then confirm the suspicions of the conspiracy theorists). Problem solved!
GM is taking some truly bizarre losses. How about a charge related to some provisions of old labor agreements in 1999 and 2003? GM describes it as "expense for the remaining portion of unamortized prior service cost from the plan amendments entered into as part of the 1999 and 2003 labor contracts." This arcane topic costs them 1.5B loss in 2007!
What a shock, GM is STILL failing. The same old game plan since the late 1990's of investing in your fullsize truck and SUV programs at the expense of your same old rebadged and tired FWD car lineup while tossing in the occasional "niche" car has failed again. And just today I read NO TRANS AM for Pontiac, way to fail GM!