AFSCME 3357-HOF'S BLOG

Breaking News: GM's Latest Bad News Friday
GM's Quarterly Loss = $15.5 Billion

For some time now, General Motors has been saving its bad news press releases for Friday, preferably the Friday before a holiday. Since GM couldn't stretch the announcement of 2nd quarter financial results until Labor Day, it announced the bad news today. Led by "one time charges" of $9.1 billion, GM announced a net loss of $15.5 billion. Excluding the one time charges, GM's net loss was $6.3 billion or $11.21 per share. As I write this, Yahoo finance is reporting GM's share price as $10.42. I think when a company's quarterly loss is greater than the total value of all its stock, its a significant event.

Of the one time charges, $3.3 billion went to employee buyouts, and $1.1 billion went to lease write-downs. In that later category, the devil may be in the details. If the write-downs were only for leases that expire soon, then the "one time charges" could be a regular event.

Prior to this earnings report, it was widely reported that GM was burning cash at the rate of about a billion dollars per month. With regular operations accounting for $6.3 billion loss and other true cash outlays, including billions in buyouts, accounting for much more, the billion-a-month may be off by a factor of three or more.

In terms of sales, GM's sales were down 20% in North America, but were up 10% outside of North America. In fact, 65% of GM's total sales were outside North America.

To put this quarter's loss in perspective, you might recall that last month, General Motors announced a two-year plan to boost its liquidity by $15 billion. IF that plan is successful, it will bring GM back to where it was, oh, I don't know, 3 MONTHS AGO. The liquidity plan does not change the market forces that have pushed GM into its current corner.

Primary source: thetruthaboutcars.com