G.M. Cut Loss in Quarter, but Increased Its Inventory April 21, 2006
The results provided a much-needed breakthrough for a company battered by accounting missteps and doubts about the its fate and that of its chief executive.
Investors pushed G.M. shares higher Thursday, but analysts expressed concern about G.M.’s inventories, which are at higher-than-normal levels, and about the impact that rising fuel prices could have on the automaker’s new sport utility vehicles and pickups, whose success is critical to its turnaround.
G.M. reported a first-quarter loss of $323 million, or 57 cents a share, compared with a loss of $1.25 billion, or $2.22 a share, in the period a year ago. The year-ago loss, originally $1.1 billion, was restated earlier this year, along with G.M.’s loss for all of 2005 and its results for several other quarters.
Rick Wagoner, G.M.’s chief executive, called the performance “a significant milestone” in G.M.’s restructuring efforts.
Earlier this month, G.M.’s board issued an unusual statement of support for Mr. Wagoner, after a number of analysts questioned whether he should remain in his job.
The first-quarter improvement sent G.M. stock up 10 percent, to $22.64, in regular trading; shares fell 4 cents in after-hours trading.
The shortfall was G.M.’s sixth consecutive quarterly loss. The company cautioned that the first-quarter numbers were preliminary and could be adjusted later this year as it takes other charges and adjustments for issues like its retiree health care program.
G.M., which lost $10.6 billion in 2005, its biggest loss since 1992, has been on a push to revamp its operations. Late last year, G.M. said it would close all or part of a dozen plants and eliminate 30,000 jobs.
To hasten the cuts, G.M. has offered a sweeping buyout plan to all 113,000 of its hourly employees in the United States, as well as 13,000 employees at Delphi, the auto parts supplier that G.M. spun off in 1999. G.M. is liable for pension and health care costs for former G.M. workers at Delphi, which filed for Chapter 11 protection last fall.
On Thursday, G.M. officials declined to project how many workers would choose the buyouts, which range from $35,000 to $140,000, depending on how many years the person has spent at G.M. or Delphi.
During the first quarter, G.M. said it took a pretax charge of $1 billion, or $681 million after taxes, reflecting health care expenses for its retired hourly workers.
The company and the United Automobile Workers union agreed last year on a program that will require workers to pay more for their medical coverage.
Long term, the plan will reduce G.M.’s health care spending by about 25 percent, to $45 billion, but the company is required to contribute to a health care benefits fund in 2006, 2007 and 2011. Including a portion of the health care charge, G.M. said it lost $946 million on its North American automotive business.
That was down from a $1.5 billion North American loss last year. General Motors credited the improvement to strong early sales of new versions of its S.U.V.’s, which it said were selling for up to $7,000 more than the vehicles they replaced.
G.M. also said it was spending $1,100 less per vehicle on incentives, in large part because it cut prices on about three-quarters of its vehicles in January.
But G.M.’s auto sales fell 5.2 percent during the first quarter, when its share of the car market in the United States dropped by 1.6 percentage points, to 24.1 percent, according to statistics from Autodata Inc.
Several analysts said they were concerned that General Motors ended the first quarter with an 85-day supply of cars, well above the industry average of 67 days, according to Autodata.
That is a higher supply than General Motors had on hand at this time last year, when it started a program offering its employee discounts to consumers. Though the program helped empty G.M. showrooms during the summer, sales fell sharply during the fall once the special deals went away.
“Watch out for production cuts,” John Murphy, an auto analyst with Merrill Lynch, said in a research note.
- Posted in : Uncategorized, GM
- Author : arnold
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