GM turnaround?
07-26-2006, 05:08 AM
#1
Thread Starter
GM turnaround?
http://news.yahoo.com/s/nm/20060726/bs_nm/...s_gm_earns_dc_4
DETROIT (Reuters) General Motors Corp. (NYSE:GM - news) on Wednesday posted a larger-than-expected quarterly operating profit as its restructuring in North America took hold and it raised its cost-cutting target by $1 billion, sending its shares to a 10-month high.
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GM, the world's No. 1 automaker by sales volume, reported a wider net loss for the second quarter after writing down $4.3 billion in previously announced costs associated with buyouts for almost a third of its factory work force.
But excluding those restructuring charges, GM outperformed the most optimistic Wall Street projections, touching off a rally in its stock and bonds that pulled Dow Industrial average futures and shares of Ford Motor Co. (NYSE:F - news) higher as well.
Meanwhile, the cost of insuring GM's debt against the risk of default fell sharply on the signs that GM's turnaround effort was producing results.
GM Chief Executive Rick Wagoner, who has been under pressure to show improvement as the company studies a possible three-way proposal with Nissan Motor Co. Ltd. (7201.T) and Renault SA (RENA.PA), said the results vindicated the company's strategy.
"Our turnaround has not just gained traction, it's accelerating into high gear," Wagoner said. "While significant work still remains, our ability to identify and initiate $9 billion in cost cuts over the past year is unprecedented in this industry."
Combined with GM's first-quarter net profit, the results show the automaker is on the right track with its restructuring, Argus Research analyst Kevin Tynan said.
"They have a good opportunity to convince a lot of people that what they are doing is working at least in the near to intermediate term as far as the restructuring actions go," he said.
GM said global automotive operations posted their first profit excluding charges since 2004 after cost reductions in the core U.S. market.
GM also raised its target for cutting recurring costs in North America by $1 billion to $6 billion by the end of 2006.
Shares of GM rose 5 percent to $32.18 in premarket trade on the Inet electronic brokerage.
Total revenues for the second quarter rose to a record $54.4 billion from $48.5 billion. Revenue from auto sales rose 11 percent to $45.2 billion from $40.4 billion.
On a net basis, GM posted a second-quarter loss of $3.2 billion, or $5.62 per share, compared with a loss of $987 million, or $1.75 per share, for the year-ago quarter.
But excluding charges related to buyouts for over 34,000 of its unionized workers, GM posted a profit of $2.03 per share.
That was more than double the most optimistic analyst forecast tracked by Reuters Estimates for a profit on that basis of 80 cents per share. The average forecast was 51 cents per share.
The company said it had slashed the adjusted loss at its North American operations to $85 million in the quarter, excluding special items, marking an improvement of $1.1 billion from the year-earlier period, as it cut pension and other costs.
In recent months, GM has cut factory jobs through buyouts and early retirement offers and clinched an agreement with its major union, the United Auto Workers, that reduces the company's share of health care costs.
GM shares, which have gained 60 percent since the start of the year, closed at $30.66 on Tuesday on the New York Stock Exchange on growing expectations that the automaker would report progress in its turnaround.
GM's largest individual shareholder, Kirk Kerkorian, has urged consideration of the Nissan-Renault tie-up in a move widely viewed as a means of prodding Wagoner to speed the automaker's turnaround efforts after a $10.6 billion loss in 2005.
The stock's rally above $30 has taken Kerkorian's nearly $1.7-billion stake in the automaker back to profitability.
(Additional reporting by Poornima Gupta in Detroit)
DETROIT (Reuters) General Motors Corp. (NYSE:GM - news) on Wednesday posted a larger-than-expected quarterly operating profit as its restructuring in North America took hold and it raised its cost-cutting target by $1 billion, sending its shares to a 10-month high.
ADVERTISEMENT
GM, the world's No. 1 automaker by sales volume, reported a wider net loss for the second quarter after writing down $4.3 billion in previously announced costs associated with buyouts for almost a third of its factory work force.
But excluding those restructuring charges, GM outperformed the most optimistic Wall Street projections, touching off a rally in its stock and bonds that pulled Dow Industrial average futures and shares of Ford Motor Co. (NYSE:F - news) higher as well.
Meanwhile, the cost of insuring GM's debt against the risk of default fell sharply on the signs that GM's turnaround effort was producing results.
GM Chief Executive Rick Wagoner, who has been under pressure to show improvement as the company studies a possible three-way proposal with Nissan Motor Co. Ltd. (7201.T) and Renault SA (RENA.PA), said the results vindicated the company's strategy.
"Our turnaround has not just gained traction, it's accelerating into high gear," Wagoner said. "While significant work still remains, our ability to identify and initiate $9 billion in cost cuts over the past year is unprecedented in this industry."
Combined with GM's first-quarter net profit, the results show the automaker is on the right track with its restructuring, Argus Research analyst Kevin Tynan said.
"They have a good opportunity to convince a lot of people that what they are doing is working at least in the near to intermediate term as far as the restructuring actions go," he said.
GM said global automotive operations posted their first profit excluding charges since 2004 after cost reductions in the core U.S. market.
GM also raised its target for cutting recurring costs in North America by $1 billion to $6 billion by the end of 2006.
Shares of GM rose 5 percent to $32.18 in premarket trade on the Inet electronic brokerage.
Total revenues for the second quarter rose to a record $54.4 billion from $48.5 billion. Revenue from auto sales rose 11 percent to $45.2 billion from $40.4 billion.
On a net basis, GM posted a second-quarter loss of $3.2 billion, or $5.62 per share, compared with a loss of $987 million, or $1.75 per share, for the year-ago quarter.
But excluding charges related to buyouts for over 34,000 of its unionized workers, GM posted a profit of $2.03 per share.
That was more than double the most optimistic analyst forecast tracked by Reuters Estimates for a profit on that basis of 80 cents per share. The average forecast was 51 cents per share.
The company said it had slashed the adjusted loss at its North American operations to $85 million in the quarter, excluding special items, marking an improvement of $1.1 billion from the year-earlier period, as it cut pension and other costs.
In recent months, GM has cut factory jobs through buyouts and early retirement offers and clinched an agreement with its major union, the United Auto Workers, that reduces the company's share of health care costs.
GM shares, which have gained 60 percent since the start of the year, closed at $30.66 on Tuesday on the New York Stock Exchange on growing expectations that the automaker would report progress in its turnaround.
GM's largest individual shareholder, Kirk Kerkorian, has urged consideration of the Nissan-Renault tie-up in a move widely viewed as a means of prodding Wagoner to speed the automaker's turnaround efforts after a $10.6 billion loss in 2005.
The stock's rally above $30 has taken Kerkorian's nearly $1.7-billion stake in the automaker back to profitability.
(Additional reporting by Poornima Gupta in Detroit)
07-26-2006, 05:59 AM
#2
Still not out of the woods but its good news for sure, especially if you hold stock.
07-26-2006, 08:30 AM
#5
Glad to hear. It would sound like they still lost money but it's due to one-time costs. Either way, hopefully they can continue to pull out of this.
07-26-2006, 11:07 AM
#7
Thread Starter
Operating profit is before special charges, Sam. With the huge special charge to buy-out a bunch of UAW slackers, it was a one-time expense that will further increase operating profit in the future. At some point, they will have a NET profit.
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07-26-2006, 11:14 AM
#8
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Yes, but how many more times are they going to have "one-time" costs? Wasn't the closing of Oldsmobile a one-time 11 billion dollar deal?
Although...if they can turn it around, now would be a good time to buy stock.
Although...if they can turn it around, now would be a good time to buy stock.
