General Motors puts up dismal show, posts worst annual loss since 1992

General Motors puts up dismal show, posts worst annual loss since 1992

	Published : Fri, 27 Jan 2006 17:05 By : Amy Watts Print this Story

DETROIT: General Motors Corporation, the global car major that is cutting jobs and closing down plants to ward off bankruptcy, said it has incurred losses amounting to $4.8 billion in the fourth quarter of fiscal 2005 and as much as $8.6 billion for the full year. While it had performed well elsewhere, including Asia, Europe, Latin America and Africa, unprecedented losses and charges in its North American division led to this dismal show.

This is the fifth consecutive quarterly loss for the world's No 1 automaker and its worst annual loss since 1992. The North American operations alone had adjusted losses of $1.5 billion for the quarter and $5.6 billion for the year, as unit sales declined 3 per cent.

The automaker's chairman and chief executive officer Rick Wagoner said 2005 had been the most difficult year in the company history. He attributed the show in North America, signified by its huge legacy cost burden and its inability to adjust to structural costs in line with falling revenue, as cause for the debacle.

The company's revenue stood at $51.2 billion for the quarter and $192.6 billion for the full year, both marginally down from respective 2004 figures.

The fourth quarter loss is comparable with a loss of $99 million in the fourth quarter of 2004. It amounts to $8.45 per share for the quarter, which is compared with a loss of 18 cents per share in the fourth quarter of 2004.

Excluding special items -- including one-time restructuring cost of $1.3 billion in North Americana operations and $2.3 billion charge in connection with benefits for Delphi Corporation, its erstwhile spare parts division -- Wagoner said the company lost $1.2 billion, or $2.09 per share. The company is expected to incur between $3.6 billion and $12 billion on benefits promised to Delphi workers.

Excluding special items, the losses for the full year were $3.4 billion or $5.99 per share. Analysts had predicted a loss of 16 cents per share in the fourth quarter and $4.19 per share for the year.

The company is going ahead with its restructuring plans including 30,000 job cuts and closure of 12 plants by 2008. It is also implementing a plan to cut down its structural costs by $4 billion in 2006 with an agreement on healthcare with the United Auto Workers and rationalising manufacturing operations. .

GM had sold 9.2 million vehicles worldwide during the year, the company said, which is the second-largest volume in the company's history. It had sales records in Asia, Latin America, Africa and the Middle East, but the show in North America was disappointing. Its worldwide market share fell to 14.2 per cent from 14.4 per cent in 2004.

Foreign automakers, especially Toyota and Nissan had made major gains in the North American market, holding over 43 per cent of the total market in 2005.

GM said its financial arm General Motors Acceptance Corp. earned $2.8 billion in 2005, down 3 per cent from record earnings in 2004.

Meanwhile, there is disturbing news for the company's management. Billionaire U.S. investor Kirk Kerkorian has upped his stake in the company to nearly 10 per cent when he reacquired 12 million shares he had sold in December for tax reasons, making him the largest single stakeholder in the company. Analysts say it will not be surprising if Kerkorian stakes claim for management control.

President Bush. touching upon the performance of the U.S. automobile companies in a newspaper interview, said he might not support a bailout if the two companies -- Ford and General Motors -- approach the government. He said it is important for the market to function. Companies need to manufacture products that are relevant.

Wagoner has made it clear that the company is not seeking any bailout.

The disastrous result of GM came in three days after rival Ford announced a profit of $2 billion for 2005. It too had to struggle in the home market, losing $1.6 billion in North America. The company too plans to cut 30,000 jobs and close down 14 facilities by 2012.

GM's shares, which had already fallen about 36 per cent since July, slumped another $1.26 Wednesday's to close $22.59.