GM plunges into $1bn quarterly loss

[Marc]

Once here in the US it was said something like "What's good for GM is good for the country"? Was that GM?

From: The Guardian

The sense of crisis surrounding General Motors was heightened yesterday when the company reported a loss of $1.1bn (£580m) in the first three months of the year.

The Detroit firm blamed a slump in North American sales and the failure to grapple with the soaring cost of providing healthcare to its US workforce. The loss compared to a profit of $1.2bn last year.

The figure was the biggest quarterly loss recorded by the company since 1992.

GM had warned in March that it would fall into the red during the first quarter but the actual loss was at the top end of Wall Street's expectations. Shares in the company were trading 2.1% lower in mid-day trade at $25.65.

The company said it would not provide any further guidance on full-year earnings after warning last month they would be about 75% lower than previous forecasts. Hi*manshu Patel, an analyst with JP Morgan, said in a note that the lack of additional guidance "will alarm some". Group sales declined 4.3% to $45.8bn.

Chief executive Rick Wagoner seized day-to-day control of the struggling North American business two weeks ago, an acknowledgment of the scale of the problems.

The company's automotive business made a loss of $1.3bn in the quarter, against a profit of $561m last year. The drop was chiefly down to North America, which reported $1.3bn in losses against a $401m profit last year. GM Europe marginally narrowed its losses to $103m.

GM blamed the weaker performance in North America on lower sales and production volumes, intense price competition, an unfavourable sales mix - it sold more cars than trucks - and the health burden.

GM's market share in North America was 25.2% in the first quarter, down from 26.3% a year ago. The company said it expects 17m vehicles to be sold there in the second quarter, flat on first quarter levels.

Mr Wagoner said GM needed to "accelerate" efforts "on the challenging US healthcare situation". The cost of health provision is rattling corporate America, particularly GM with its huge number of current and former employees. Last week it attempted to re-open employee contracts to reduce the burden on GM, a request rejected by labour officials.

As with previous years, losses were offset by the company's finance arm, which delivered profits of $728m, albeit down from $764m a year ago.

The GM earnings figure included $265m of one-off charges related to the restructuring of its European business and job cuts in the US.

GM's Asia Pacific operations reported profits of $60m, down from $275m a year earlier. GM Latin America/Africa/Middle East turned in profits of $46m, up $1m on the first three months of 2004.

[Wes Bucey]

the phrase was related to US Steel!

It might be interesting to note that GM cancelled the planned and announced appearance of some of their people at the Quality Expo today because they froze the travel budget and wouldn't let them come to Chicago on the GM expense account.

[David Hartman]

Mr Wagoner said GM needed to "accelerate" efforts "on the challenging US healthcare situation". The cost of health provision is rattling corporate America, particularly GM with its huge number of current and former employees. Last week it attempted to re-open employee contracts to reduce the burden on GM, a request rejected by labour officials.

To summarize: It's the darn workers!!!! Statements like this will be the death knell of GM. When are they going to learn that a lack of sales has NOTHING to do with the cost of healthcare. It's about the product!

When Lutz took over he made some immediate changes to the product at Pontiac that piqued the interest of the media and the buying public. But as it was in the years before John Z. DeLorian, I have to believe that within that corporate structure there are, and have been, engineers that have struggled for years to deliver exciting products to the market - but bureaucracy stymies many a brilliant idea.

So once again where are the moves to flatten the corporate structure and eliminate some of the bureaucratic malaise that is so predominant in what we so proudly referred to as "corporate America" years ago?

[Randy Stewart]

I guess this means that all suppliers will have to cut their prices to GM again!!!

[Jim Wynne]

Originally Posted by Wes Bucey

the phrase was related to US Steel!

"What's good for the country is good for General Motors, and vice versa."
Charles E. Wilson, President of GM, in 1955.

[Jim Wynne]

Originally Posted by ddhartma

When are they going to learn that a lack of sales has NOTHING to do with the cost of healthcare. It's about the product!

I don't think anyone said that lack of sales is related to the cost of healthcare. Lack of profit is undoubtedly related to those kinds of costs, however, perhaps irrespective of sales volume. In other words, given the same volume of sales, and lower costs--including healthcare costs--profitability will be higher. This is not to say that I disagree with you in principle, however. Another cost that could be reduced is executive salaries, especially in light of dismal performance in the market.

[SteelMaiden]

It's really sad to think that GM might go the way of the Hudson, Studebaker, etc. But, isn't this just typical? Execs getting huge salaries, workers getting more and more benefits negotiated into their contracts without ever wondering if they'd eventually "break the bank". GM has watered down its product line so far, instead of working on getting the buyer into a FEW select really great cars, you can choose from a gazillion trucks or cars and none of them really have much in the line of true brilliance to set them apart from any other model, or brand.

I am a true GM product buyer, I'd prefer to buy GM than anything, and right now, I need a new vehicle. But, I cannot find anything that really excites me enough to go to the dealership to look.

[Jennifer Kirley]

Originally Posted by SteelMaiden

It's really sad to think that GM might go the way of the Hudson, Studebaker, etc. But, isn't this just typical? Execs getting huge salaries, workers getting more and more benefits negotiated into their contracts without ever wondering if they'd eventually "break the bank". GM has watered down its product line so far, instead of working on getting the buyer into a FEW select really great cars, you can choose from a gazillion trucks or cars and none of them really have much in the line of true brilliance to set them apart from any other model, or brand.

I am a true GM product buyer, I'd prefer to buy GM than anything, and right now, I need a new vehicle. But, I cannot find anything that really excites me enough to go to the dealership to look.

Said a mouthful, there.

Notice the surging attention and profits when Chrysler wheeled out the PT Cruiser? Its designer, Bryan Nesbitt, has since moved to GM, which is said to have been working on spiffing up its design. http://www.detnews.com/2005/autosins...A01-102661.htm and http://www.edmunds.com/insideline/do...ticleId=104126 .