C6400hp

The good time to buy GM has already passed. I bought mine about 8 months ago when most here were saying "GM bankrupcy". BTW GM us up about 54% from when I bought it.

Malloric

GM Posts Wider Loss
On Restructuring Costs,
But Revenue Rises 12%
By JOHN D. STOLL and NEAL E. BOUDETTE
July 26, 2006 2:39 p.m.

DETROIT -- In a major coup for Chairman and Chief Executive Rick Wagoner, General Motors Corp. Wednesday reported significantly better-than-expected earnings for the second quarter, thanks to a 12% rise in revenue and steep reductions in pension and other non-cash costs.

GM reported a net loss of $3.18 billion, or $5.62 a share, compared with a loss of $987 million, or $1.75 a share, a year earlier.

The results included a total of $4.33 billion in special charges, including a $3.77 billion after-tax charge related to buyouts and early retirements, which allowed GM to reduce its hourly work force by 34,400. One-time items also included a loss related to the pending sale of a 51% stake in finance arm GMAC, a gain on the disposition of Isuzu stock and other restructuring charges.

Not including special charges, GM showed income of $1.2 billion. Boosted by sales of several newly launched sport-utility vehicles and some price increases, revenue climbed to a record $54.4 billion, from $48.47 billion a year earlier. That was about $3 billion more than analysts had expected. Automotive revenue rose to $45.24 billion from $40.45 billion.

MORE ON EARNINGS

GM's earnings per share, excluding special items, were $2.03 in the second quarter. Analysts polled by Thomson First Call were expecting earnings of 55 cents a share.

Despite the dramatic improvement, GM's earnings showed the company is still struggling in its core operations. The gross profit GM made by making cars, which it calls "contribution margin," declined by $100 million as a result of higher materials and freight costs.

In a conference call Wednesday, Chief Financial Officer Frederick "Fritz" Henderson acknowledged the improvement before special charges stemmed from noncash cost savings such as an adjustment to its pension obligations and lower warranty costs as a result of improved quality. "We're still not generating the profitability we need over time," he said.

Turnaround Plan Is on Track

Still, the quarter showed Mr. Wagoner's turnaround plan is producing results sooner than previously expected and much faster than the restructuring effort at Ford Motor Co. Ford last week said it would accelerate its turnaround plan after reporting a second-quarter loss of $123 million, which was worse than expected.

GM's improvement in the second quarter also raises questions about whether it makes sense for GM to join the existing partnership between France's Renault SA and Nissan Motor Co. of Japan. At the urging of GM's largest shareholder, Kirk Kerkorian, Mr. Wagoner recently opened alliance talks with Renault and Nissan.
[Richard Wagoner Jr]

Mr. Kerkorian and his representative on the GM board, Jerome B. York, believe Mr. Wagoner hasn't moved aggressively enough in restructuring GM, and believe the auto maker would benefit from the leadership of Carlos Ghosn, who is chief executive of both Renault and Nissan. Mr. Ghosn is hailed for a dramatic turnaround of Nissan over the last six years.

"It's rewarding to see our automotive business return to profitability on an operating basis and a clear sign that we're on the right track, but there is more work to be done," Mr. Wagoner said in statement.

After GM's earnings were announced, shares of GM jumped to their highest level since September in early trading on the New York Stock Exchange. The stock was up 4.1% at $31.91 recently, after moving as high as $33.06.

GM is restructuring its North American automotive operations after posting a $10.6 billion loss in 2005. The company has implemented several measures designed to rein in costs and boost liquidity as it seeks to stem a steady loss of market share to foreign rivals with leaner cost structures.

GM's global automotive operations earned $362 million on an adjusted basis in the second quarter, a $1.3 billion improvement over the like period a year ago and the first time since 2004 that automotive operations were in the black.

GM's North American operations showed an adjusted net loss of $85 million, a $1.1 billion improvement over the like period in 2005. GM said the improvement was attributable to reductions in its cost base, including improvement in warranty and other quality-related costs and a reduction in pension expense.

GM Europe posted earnings, excluding special items, of $124 million, versus $30 million in the second quarter of 2005, while GM Latin America, Africa and Middle East generated an adjusted profit of $156 million, up from $25 million. In the Asia Pacific region, GM posted adjusted earnings of $167 million, versus $183 million a year earlier.

Mr. Henderson told reporters at GM's headquarters here that the company's strong performance is primarily the result of cost improvement and that the company expects to post year-over-year earnings improvements for the remainder of the year. He declined to comment on when the auto maker could return its North American operations to profitability, which is the main goal of the restructuring program.

Thanks to the success of a recently completed early attrition program, GM is increasing its structural cost reduction target by $1 billion to $9 billion on a running rate basis by the end of 2006.

Mr. Wagoner said the impact of cost-reduction efforts on the company's bottom line will accelerate in the second half of the year. The company said Wednesday it expects to realize approximately $6 billion of cost savings in calendar year 2006, up from a previous target of $5 billion, with $4.5 billion of that coming in the second half of the year.

"Our turnaround has not just gained traction, it's accelerating into high gear," Wagoner said in the press release.

Other special items included a loss related to the pending sale of controlling stake in its General Motors Acceptance Corp. lending arm and the sale of its position in Japanese auto maker Isuzu Motors Ltd.

GMAC, long the source of strong profits for GM, posted a record net income of $898 million for in the second quarter, compared with $817 million a year ago. GMAC's performance was underpinned by strength at ResCap, the unit's mortgage activities, which offset lower earnings in the automotive-lending operations. ResCap's results included a gain of $259 million from the sale of its equity investment in a regional homebuilder.

GM's former parts division, Delphi Corp., also offered buyouts to it employees. The company, which is in Chapter 11, has been haggling with its unions over further concessions, and the threat of a strike at its biggest parts supplier has loomed over GM for months. Mr. Henderson said resolving that issue remains a priority for GM.

~~~

I just find it interesting how widely different the two articles are since they are both based on the same financial statement. Headlines really do play a huge role in how you read an article.

Chris Stack

You have a point. Seems like every quarter there is a "one time" this or a "special" that, or, even worse, a restatement.

I know it isn't directly connected to the operation of the business, but losing money is losing money, all the operating profits in the world won't help them if they keep blowing money out their asses on one-time deals for a net loss.


Kudos to them for the operating profit, however; my criticism of them aside, I really do want to see them succeed.

cdelena

Actually GM is just catching up.. it is Creative Destruction and a very expensive process.

Creative Destruction: A term coined in 1942 by Joseph Schumpeter in his work, Capitalism, Socialism and Democracy, to denote a "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one."

rockville

Interesting quote. That's not the actual quote but nice try.

vader1

You know, there might be some water to throw on the operating profit. They did have a sales surge from the short lived 0% for 60 months deal they had which probably propped up the numbers a bit.

I have been to 2 Pontiac/GMC dealers in the past couple weeks and both lots were bursting at the seams with intventory and each time I was there there were not any other customers.

But I was there to drive a couple Torrents as a cheap solution to my small towing needs. It is not on the top of my list right now, but my other choice is $10k more expensive so who knows. I was really impressed at the car for what it delivers at the price I can get it for. It will be hard to turn down. But that does include a deal at invoice with $2k in rebates, and $2300 in GM card money. At sticker I would not buy it, but at some level of discount it really was a nice little car.

kntrider

Torrents are nice.

How much are they going for?

vader1

Well, loaded up they will sticker for about $27k which is ridiculous. But they sell them for about $100 over invoice here, maybe a few bucks more. Drop the leather, heated seats, sunroof and fancy stereo and that would be what I would get. Basically an AWD with air, windows, lock, cd, cruise, tow package and with it invoices at about $24k even

Now subtract $2K for rebates and my $2300 GM card $ and I am at $19,700. Thats pretty fair for a utilitarian ute with average gas milage and boat hauling capability. The interior is also better than you would expect. It gets much better detailing than the Chevy version. Add back another $700 if you want leather and hot seats.

I am still puzzled by the popularity of heated seats, I don't like em and I am in MN, the lower half of the country never drops into territory where you would even use them??????

BTW- It is a hair below 100 here today on the tundra.