GM reports a stunning loss of $15.5 billion

Special charge boosted red ink by $9.1 billion

August 02, 2008|By New York Times News Service

DETROIT - General Motors Corp. reported a stunning second-quarter loss of $15.5 billion yesterday because of a deep decline in United States sales and charges for job cuts, plant closings and the falling value of trucks and sport utility vehicles.

GM, the largest American automaker, said it lost $6.3 billion on operations in the quarter that ended June 30, and its worldwide revenue fell 18 percent.

But the company's overall loss was inflated by $9.1 billion in special charges that included $3.3 billion for buyouts of hourly workers and $2.8 billion related to the bankruptcy filing of its former parts unit, the Delphi Corp.

The dismal earnings reflected the impact of steadily falling vehicles sales in the overall United States market, and a huge shift by consumers away from the trucks and SUVs that were once GM's most profitable vehicles.

GM's chairman, G. Richard Wagoner Jr., said the charges to scale down the automaker's work force and manufacturing operations were critical in its restructuring.

"As our recent product, capacity and liquidity actions clearly demonstrate, we are reacting rapidly to the challenges facing the U.S. economy and auto market, and we continue to take the aggressive steps necessary to transform our U.S. operations," Wagoner said.

While weak economic conditions and falling sales have affected nearly every automaker, Detroit's three car companies have borne the brunt of the slowdown.

Last week, the Ford Motor Co. reported a loss of $8.7 billion as it took big write-downs on the values of its North American truck plants and its inventory of used pickups and SUVs.

GM's second-quarter results were worse than projected by analysts, particularly its performance in its core North American market.

The company lost $4.4 billion in North America in the period, and its revenues dropped 33 percent, from $29.7 billion to $19.8 billion. That compared with a profit of $92 million in the quarter a year ago.

While GM's vehicle sales in North America fell 20 percent in the quarter, the company's international sales grew 10 percent.

Last month, as investors speculated openly about the possibility of GM's filing for bankruptcy protection, the automaker announced broad plans for further cost cuts, asset sales and debt offerings to improve its liquidity by $15 billion.

In its second-quarter report, GM said it had $21 billion in cash reserves and access to another $5 billion in credit.

But the automaker is burning through about $1 billion a month in cash as it tries to keep financing new product programs amid falling sales and revenue.

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