GM Loses 11.4 Billion Dollars....OUCH

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GM loses $11.4 billion
From: Agence France-Presse From correspondents in Detroit
January 27, 2006

GENERAL Motors Corp has posted an $US8.6 billion ($11.46 billion) loss for 2005 in one of the most difficult years in its history.

Losses stemmed from a sharp drop in US demand for its highly profitable sports utility four-wheel drives and massive charges for restructuring and the bankruptcy of its former parts subsidiary, Delphi Corp.
GM, like Ford Motor Co, has recently announced huge job cuts and plant closures to combat a steady decline in market share in North America to Asian competitors.

GM has now scored five straight quarters of steadily mounting losses. This was the first time it has posted an annual loss since 1992.

While the world's largest carmaker vowed to improve its performance in 2006 and 2007, it would not forecast when it would return to profitability.

A number of analysts have warned that GM is at risk of declaring bankruptcy, and the company has seen its credit rating cut deeply into junk territory.

Today's results showed that GM still has sufficient cash on hand to support its massive operations in the near-term, a good thing considering US President George W Bush warned that a bailout is unlikely for the struggling company.
While acknowledging that the current losses were unacceptable, GM's executives said the company was on the right path to recovery.

"In order to improve financial results in 2006 and 2007, we are moving quickly to implement several important actions that will address these weaknesses in North America," GM chairman and chief executive Rick Wagoner said in a statement.

"And we have a good line of sight on the steps we need to take to further reduce structural costs on a global basis that will position GM for long-term success."

Investors took little comfort from the assurance, with GM shares closing down 3.5 per cent at $US23.05 after having fallen to a low of $US21.94 in morning trade.

"The fourth quarter results suggest that the hole from which GM must dig out is deeper than anticipated," said Credit Suisse First Boston analyst Chris Ceraso, who downgraded GM stock to neutral from overweight.

GM's loss of $US15.13 a share was sharply lower than the consensus forecast of a loss of just $US4.17 a share.

"2005 was one of the most difficult years in GM's history, driven by poor performance in North America," Wagoner said.

"It was a year in which two significant fundamental weaknesses in our North American operations were fully exposed - our huge legacy cost burden and our inability to adjust structural costs in line with falling revenue."