1 hole bigger then the other. GM loss = US$39 bln

[Apollo]

GM Reports $39 Billion Loss on Deferred Tax Charge (Update3)

 

By Jeff Green and Greg Bensinger

 

Nov. 7 (Bloomberg) -- General Motors Corp., the world's largest automaker, reported a record $39 billion quarterly loss after three money-losing years forced the company to write down the value of future tax benefits.

 

GM fell as much as 5.6 percent in New York trading after the size of the loss surprised analysts. Excluding the tax writedown, the deficit was $2.80 a share, more than 10 times the 22 cents estimated by 15 analysts surveyed by Bloomberg. Mortgage-related losses at GM's finance unit overwhelmed improved automotive results.

 

"This has been a challenging year, for sure,'' Chief Financial Officer Fritz Henderson told reporters in Detroit.

 

GM is writing down the tax assets because it may not be able to generate enough earnings to use the benefits. The move reflects a darkening outlook for the U.S. economy, as GM cited defaults on subprime mortgage loans at its partly owned GMAC LLC finance unit and "more challenging'' auto-market conditions in the U.S. and Germany.

 

GM's third-quarter loss of $68.85 per share widened from a deficit of $147 million, or 26 cents, a year earlier. The non- cash charge is related to deferred tax assets in the U.S., Canada and Germany, the Detroit-based company said in a statement today.

 

Its results also reflected an after-tax gain of $3.5 billion from the sale of its Allison Transmission unit, $1.6 billion in pension-service costs related to prior labor agreements, and $350 million in charges connected to its former Delphi Corp. subsidiary.

 

Record Auto Revenue

 

Automotive revenue rose 8.9 percent to $43.1 billion, a third quarter record, and automotive operations excluding the tax cost had a net income of $122 million. The automotive loss a year earlier was $455 million.

About $700 million of GM's adjusted loss of $1.6 billion was related to the tax changes, Henderson said on a conference call.

 

"Most of the decision for the write-off is driven by history, the fact that we've had a three-year cumulative loss,'' said Chief Executive Officer Rick Wagoner in an interview.

 

GM fell $1.48, or 4.1 percent, to $34.68 at 9:59 a.m. in New York Stock Exchange composite trading after dropping to $34.14 earlier.

 

Henderson said the losses at GMAC's mortgage unit and a strengthening Canadian dollar against the U.S. dollar were significant factors in the wider-than-expected loss. The Canadian currency has risen 28.3 percent against the U.S. dollar this year.

 

The automaker attributed the charge to a "three-year historical cumulative loss'' in the U.S., Canada and Germany.

 

GM had a net loss of $757 million related to its 49 percent stake in GMAC, which posted a $1.6 billion third-quarter loss on Nov. 1. GM sold 51 percent of GMAC last year to a group led by Cerberus Capital Management LP.

 

Accounting Matter

 

Under U.S. accounting rules, GM assesses the need each quarter for a so-called valuation allowance against the deferred tax assets. In 2005, GM took a valuation against tax assets in South Korea that it reversed last year when the outlook for profits improved. The automaker also took a similar charge in Brazil in 2005 that it reversed in 2006.

 

Henderson said he couldn't estimate when GM might be able to use the deferred tax assets again and declined to forecast when the automaker might return to profit.

 

"Certainly having ResCap turn into the red, then bringing GMAC into the red, has an impact on us,'' he said.

 

Outlook Changed

 

GM said it previously had determined it wouldn't need the allowance for the U.S., Canada and Germany because losses over the three-year period were caused by one-time expenses and because of the continued expectation of strong profits at GMAC and improved earnings in North America.

 

"The establishment of a valuation allowance does not have any impact on cash, nor does such an allowance preclude us from using our loss carryforwards or other deferred tax assets in the future,'' Henderson said in the statement.

 

The allowance also doesn't "reflect a change in the company's view of its long-term automotive financial outlook,'' Henderson said.

GM reported deferred tax assets of $34.8 billion in the U.S., $3.1 billion in Canada and $2.5 billion in Germany as of the end of last year, in an annual regulatory filing in March. The three countries accounted for $40.4 billion of GM's $40.8 billion in such assets, according to that filing.

 

Today's results including the tax-related charge may overshadow GM retaking the No. 1 spot in worldwide sales from Toyota Motor Corp. Chief Executive Officer Rick Wagoner also moved to reduce future costs by approving a labor accord that eliminates retiree health-care obligations and cuts new workers' pay by 50 percent.

 

Labor Accord

 

GM completed an agreement with the United Auto Workers last month after a two-day strike to transfer $47 billion in future union retiree costs to the union in exchange for a one-time contribution of about $32 billion.

 

Wagoner had already reached labor agreements to close plants and trim health-care expenses, which the company has said would reduce its costs by $9 billion this year.

 

GM has said the union retiree health fund will drain cash next year by $3.3 billion before adding $2.8 billion to cash flow in 2010 and $3.3 billion in 2011.

 

GM's 8.375 percent note due July 2033 rose 0.5 cent to 89.75 cents on the dollar yesterday, according to Trace, the NASD's bond-price reporting service. The yield fell to 9.44 percent.

 

Credit-default swaps tied to General Motors Corp. climbed 4 basis points to 598 basis points, the highest in seven weeks according to CMA Datavision in London.

 

An increase signals declining investor confidence in the company's ability to pay back its debt.

 

 

http://www.bloomberg.com/apps/news?pid=206...qFKg&refer=home

[Nothingtodo]

Announcement for retrenchment is already made known last mth. However such big hole is surprising

[Comfy]

got so many people buy GM cars meh? still number 1 carmaker...

[Genie47]

No. 1 in terms of size, distribution, employees but not sales. Toyota No. 1 in sales volume.

 

GM = Giant Machine.

[Apollo]

GM = gone moldy...

[Comfy]

like tat still can call number 1 carmaker?? wat a way to 'judge'... Toyota has been really successful in the north america and the europe market this few years..

[Relagsingh]

GM = go mati.

 

american car manufacturers can close shop liao...

 

what are the brands under GM?

 

- chevy

- saab

- opel

- holden

- saturn

- vauxhall

 

anymore?

[Relagsingh]

toyota: japan's idea of taking over the world

[Comfy]

GM = go mati.

 

american car manufacturers can close shop liao...

 

what are the brands under GM?

 

- chevy

- saab

- opel

- holden

- saturn

- vauxhall

 

anymore?

 

still got hummer and daewoo lor...

[Comfy]

thru toyota??

[Nitrous]

and i think GM owns a substantial share in Subaru as well.

[Comfy]

to what i know is Fuji heavy is the big shareholder with toyota as well... GM sold part of the shares to toyota and the rest to open market..