GM spinning its wheels at home
North American losses nearly erase black ink.
Published May 4, 2007
DETROIT - By recent Detroit standards, two straight profitable quarters by an automaker is a notable achievement.
But for General Motors Corp., its losses in North America overshadowed Thursday's announcement that it made $62-million in the first three months of the year, a second consecutive quarter of black ink.
Even though the Dow Jones industrial average is in the midst of its longest advance since 1955, GM's stock dropped more than 5 percent Thursday on the New York Stock Exchange, closing at $30.69, down $1.75. Some industry analysts questioned whether the company can make money on its home pavement given that it already has cut billions in costs and rolled out scads of new cars and trucks.
GM's net profit of 11 cents per share for the January-March period was down 90 percent from the year-ago period, when it made $602-million, or $1.06 per share. The company blamed the decline on troubles in the residential mortgage operation at its former financial arm, GMAC Financial Services. The nation's largest automaker sold a 51 percent stake in GMAC to private-equity investors last year but still owns 49 percent of the business.
GM also said its results a year ago were also inflated by a one-time after-tax gain of $395-million due to the sale of its equity ownership of Suzuki Motors.
The company reported record vehicle sales of 2.26-million worldwide and showed improvements in its automotive operations in the latest quarter. Its Asia-Pacific and Latin America, Africa and Middle East regions made an adjusted $351-million, fueling the overall profit.
GM's revenue fell to $43.9-billion for the quarter, down 16 percent, from $52.4-billion in the same period a year ago. GM said the decline was almost entirely due to GMAC revenue no longer being included in GM's consolidated results.
GM is on track to reduce annual costs by $9-billion this year, chief financial officer Fritz Henderson said. By the end of last year, it had achieved an annual cost reduction of $6.8-billion largely through the departure of thousands of hourly workers due to buyout or early retirement offers.