GM Global shows first profit since 04'
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GM Global shows first profit since 04'
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Updated: New York, Jul 26 07:57London, Jul 26 12:57Tokyo, Jul 26 20:57 USAUBZFPGRHKIMJPLNSMIND
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GM Has Loss on Buyouts; Auto Profit Beats Forecasts (Update2)
July 26 (Bloomberg) -- General Motors Corp., the world's largest automaker, reported a second-quarter loss because of a $3.7 billion charge to buy out workers. The carmaker's profit from operations exceeded analysts' estimates, sending its shares higher.
Shares of GM rose $1.29, or 4.2 percent, in early trading. The net loss was $3.2 billion, or $5.62 a share, compared with a loss of $987 million, or $1.75, a year earlier, GM said in a statement today. The Detroit-based company earned $1.2 billon on its normal operations. Global auto operations had their first profit, excluding one-time expenses, since 2004.
Worldwide revenue rose 12 percent to $54.4 billion. The profit on making and financing autos boosts Chief Executive Officer Rick Wagoner's turnaround efforts and may ease pressure to accept an alliance with Nissan Motor Co. and Renault SA proposed by billionaire investor Kirk Kerkorian. Wagoner is cutting jobs and selling assets after a $10.6 billion loss last year.
``If there was ever a time when GM needed to look good, this is it, because there's definitely a feeling on Wall Street that people want to believe they're turning around,'' said John Casesa, managing partner of Casesa Strategic Advisors LLC in New York. ``An operating profit could be proof of a sustained turnaround, but it's just a quarter.''
GM shares rose to $31.95 at 7:31 a.m. before normal New York Stock Exchange composite trading. The shares climbed 99 cents to $30.66 yesterday, the first close above $30 since October. They have gained 58 percent this year to lead the Dow Jones Industrial Average.
Losing Streak
The carmaker had five straight unprofitable quarters before posting a $445 million first-quarter profit due to an accounting change.
Excluding the charge for buyouts and early retirements for 34,400 workers, the average profit estimate was 55 cents a share in a survey of 15 analysts by Thomson Financial, which doesn't disclose a basis for the numbers. JP Morgan Securities analyst Himanshu Patel, ranked among the top five for accuracy on GM by StarMine Corp., estimated a quarterly gain of 80 cents a share.
Solo Act
Executives at GM want to be able to ``stand up and say, `We're getting better and we don't need Nissan or Renault,''' said Dennis Virag, president of the Automotive Consulting Group Inc. in Ann Arbor, Michigan.
Kerkorian, the fourth-largest owner of GM stock, has privately expressed dissatisfaction with the speed of turnaround efforts at GM, and he believes a three-way tie-up could restore long-term profits, a person familiar with his strategy said earlier this month.
Kerkorian, 89, controls 9.9 percent of GM's shares through his Tracinda Corp. He discussed the alliance with Carlos Ghosn, chief executive of Nissan and Renault, before formally broaching the subject June 30 in letters to GM, Renault and Nissan.
Nissan yesterday posted a 26 percent drop in first-quarter operating profit due in part to U.S. sales, which fell 11 percent in the period. Renault is set to report earnings tomorrow for the first half of 2006.
Buyout Program
GM's high acceptance rate for U.S. employee buyouts means Wagoner can cut annual spending by $9 billion by year end, $1 billion more than the most-recent goal, and shed the workers two years ahead of schedule. GM offered buyout packages of as much as $140,000 in March.
GM is struggling to boost sales in North America as Asian rivals such as Toyota Motor Corp. and Honda Motor Co. erode the automaker's U.S. market share, pushing it down in the first half of the year to 24.3 percent, the lowest since 1925. Through June, sales fell 12 percent, the most of any major automaker.
The company is trying to win back customers through redesigned car and truck models even as Wagoner plans to trim production by about 1 million units by year's end while closing 12 North American facilities by 2008.
Buyers are turning away from GM's mid-size sport-utility vehicles, such as the Chevrolet Trailblazer and GMC Envoy, and its Buick model line, said Rebecca Lindland, an analyst with Global Insight Inc. in Lexington, Massachusetts.
``GM has taken a very proactive approach to changing their product lines,'' Lindland said. ``People want the new crossover vehicles that GM is coming out with later this year, which have better gas mileage than those mid-size SUVs.''
Employee Pricing
GM said it won't revive an employee-pricing program offered last year. Instead, the company is trying other, higher-profit incentives. Sales declined 26 percent in June compared with a year earlier, when the employee-pricing offer began.
Wagoner still must resolve a contract dispute between auto- parts supplier Delphi Corp. and its United Auto Workers employees, who have threatened to strike over the company's plan for pay cuts. A walkout would cripple GM's production.
Wagoner plans to sell a 51 percent stake of the General Motors Acceptance Corp. finance unit by the fourth quarter for about $14 billion, including about $10 billion this year. The unit's sale could help stabilize its debt rating, which was cut to junk last year.
The company's 8.375 note due in 2033 rose less than half a cent to 81.25 cents on the dollar yesterday, yielding 10.5 percent, according to Trace, the NASD's bond-price reporting service.
To contact the reporter on this story:
Greg Bensinger in New York at gbensinger1@bloomberg.net
Last Updated: July 26, 2006 07:48 EDT
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Updated: New York, Jul 26 07:57London, Jul 26 12:57Tokyo, Jul 26 20:57 USAUBZFPGRHKIMJPLNSMIND
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GM Has Loss on Buyouts; Auto Profit Beats Forecasts (Update2)
July 26 (Bloomberg) -- General Motors Corp., the world's largest automaker, reported a second-quarter loss because of a $3.7 billion charge to buy out workers. The carmaker's profit from operations exceeded analysts' estimates, sending its shares higher.
Shares of GM rose $1.29, or 4.2 percent, in early trading. The net loss was $3.2 billion, or $5.62 a share, compared with a loss of $987 million, or $1.75, a year earlier, GM said in a statement today. The Detroit-based company earned $1.2 billon on its normal operations. Global auto operations had their first profit, excluding one-time expenses, since 2004.
Worldwide revenue rose 12 percent to $54.4 billion. The profit on making and financing autos boosts Chief Executive Officer Rick Wagoner's turnaround efforts and may ease pressure to accept an alliance with Nissan Motor Co. and Renault SA proposed by billionaire investor Kirk Kerkorian. Wagoner is cutting jobs and selling assets after a $10.6 billion loss last year.
``If there was ever a time when GM needed to look good, this is it, because there's definitely a feeling on Wall Street that people want to believe they're turning around,'' said John Casesa, managing partner of Casesa Strategic Advisors LLC in New York. ``An operating profit could be proof of a sustained turnaround, but it's just a quarter.''
GM shares rose to $31.95 at 7:31 a.m. before normal New York Stock Exchange composite trading. The shares climbed 99 cents to $30.66 yesterday, the first close above $30 since October. They have gained 58 percent this year to lead the Dow Jones Industrial Average.
Losing Streak
The carmaker had five straight unprofitable quarters before posting a $445 million first-quarter profit due to an accounting change.
Excluding the charge for buyouts and early retirements for 34,400 workers, the average profit estimate was 55 cents a share in a survey of 15 analysts by Thomson Financial, which doesn't disclose a basis for the numbers. JP Morgan Securities analyst Himanshu Patel, ranked among the top five for accuracy on GM by StarMine Corp., estimated a quarterly gain of 80 cents a share.
Solo Act
Executives at GM want to be able to ``stand up and say, `We're getting better and we don't need Nissan or Renault,''' said Dennis Virag, president of the Automotive Consulting Group Inc. in Ann Arbor, Michigan.
Kerkorian, the fourth-largest owner of GM stock, has privately expressed dissatisfaction with the speed of turnaround efforts at GM, and he believes a three-way tie-up could restore long-term profits, a person familiar with his strategy said earlier this month.
Kerkorian, 89, controls 9.9 percent of GM's shares through his Tracinda Corp. He discussed the alliance with Carlos Ghosn, chief executive of Nissan and Renault, before formally broaching the subject June 30 in letters to GM, Renault and Nissan.
Nissan yesterday posted a 26 percent drop in first-quarter operating profit due in part to U.S. sales, which fell 11 percent in the period. Renault is set to report earnings tomorrow for the first half of 2006.
Buyout Program
GM's high acceptance rate for U.S. employee buyouts means Wagoner can cut annual spending by $9 billion by year end, $1 billion more than the most-recent goal, and shed the workers two years ahead of schedule. GM offered buyout packages of as much as $140,000 in March.
GM is struggling to boost sales in North America as Asian rivals such as Toyota Motor Corp. and Honda Motor Co. erode the automaker's U.S. market share, pushing it down in the first half of the year to 24.3 percent, the lowest since 1925. Through June, sales fell 12 percent, the most of any major automaker.
The company is trying to win back customers through redesigned car and truck models even as Wagoner plans to trim production by about 1 million units by year's end while closing 12 North American facilities by 2008.
Buyers are turning away from GM's mid-size sport-utility vehicles, such as the Chevrolet Trailblazer and GMC Envoy, and its Buick model line, said Rebecca Lindland, an analyst with Global Insight Inc. in Lexington, Massachusetts.
``GM has taken a very proactive approach to changing their product lines,'' Lindland said. ``People want the new crossover vehicles that GM is coming out with later this year, which have better gas mileage than those mid-size SUVs.''
Employee Pricing
GM said it won't revive an employee-pricing program offered last year. Instead, the company is trying other, higher-profit incentives. Sales declined 26 percent in June compared with a year earlier, when the employee-pricing offer began.
Wagoner still must resolve a contract dispute between auto- parts supplier Delphi Corp. and its United Auto Workers employees, who have threatened to strike over the company's plan for pay cuts. A walkout would cripple GM's production.
Wagoner plans to sell a 51 percent stake of the General Motors Acceptance Corp. finance unit by the fourth quarter for about $14 billion, including about $10 billion this year. The unit's sale could help stabilize its debt rating, which was cut to junk last year.
The company's 8.375 note due in 2033 rose less than half a cent to 81.25 cents on the dollar yesterday, yielding 10.5 percent, according to Trace, the NASD's bond-price reporting service.
To contact the reporter on this story:
Greg Bensinger in New York at gbensinger1@bloomberg.net
Last Updated: July 26, 2006 07:48 EDT
Email this article Printer friendly format
RSS
More News
GM Posts Loss on $3.7 Billion Jobs Cost; Shares Rise on Operating Profit
Glaxo Net Rises 14 Percent on Children's Vaccines, Avandia Diabetes Drug
Boeing Posts First Quarterly Loss in Three Years on Legal Bills, Delays
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Re: GM Global shows first profit since 04'
Is the "loss", a loss compared to "projected" profit goals, and not an actual deficit??
It just seems the term loss gets thrown around loosely sometimes...
It just seems the term loss gets thrown around loosely sometimes...
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