GM Posts 90% Decline in Net Profit in First Quarter

[CSpec]

http://online.wsj.com/article/SB117629894771066330.html

General Motors Corp. on Thursday posted a 90% plunge in first-quarter profit, though its loss narrowed at its core North American region, as poor earnings at GMAC Financial services weighed on the auto maker.

GM, in the midst of an extensive corporate restructuring, reported net income of $62 million, or 11 cents a share, for the quarter, compared with $602 million, or $1.06 a share, a year earlier.

Earnings in the latest quarter included unfavorable special items of $32 million, or six cents a share. The auto maker posted a positive automotive operating cash flow of $300 million for the quarter. The year-ago results included a gain of $395 million from the sale of a portion of GM's equity ownership position in Suzuki Motors.

Excluding items, GM said it would have reported first-quarter earnings of $94 million, or 17 cents a share. Analysts polled by Thomson Financial had expected the Detroit company to post earnings, excluding items, of 87 cents a share.

Chief Financial Officer Fritz Henderson said the company's operating earnings were significantly affected by weakness at the GMAC lending arm. GMAC's performance was hit hard by weakness in subprime lending. "Frankly, I don't think that was fully factored in," Mr. Henderson said, referring to analysts' expectations for the quarter.

GM recognized a net loss of $115 million on its 49% ownership of GMAC, including the accrual of dividends on GMAC preferred membership interests and certain tax benefits realized. GMAC on Wednesday posted a net loss of $305 million, compared with a year-earlier profit of $495 million. (See related article.)

In recent pre-market trading, GM shares fell 57 cents, or 1.8%, to $31.87.

GM's revenue in the latest quarter fell 16% to $43.9 billion from $52.4 billion. The revenue decline largely reflects the divestiture of a majority stake in the GMAC lending arm last year. Automotive sales fell to $42.9 billion from $43.53 billion. Financial services and insurance revenue fell to $986 million from $8.85 billion.

The first-quarter results underscore the challenges U.S. auto makers face in restructuring their domestic operations at a time of significant uncertainty for the U.S. economy, particularly in the housing market. Ford Motor Co. last week reported better-than-expected overall results, though losses in its North American unit widened even as the company implemented steep cost cuts. Earlier this week, GM and Ford both reported sharp declines in their U.S. sales for April.

GM Chairman and Chief Executive Officer, Rick Wagoner said the latest period marked "another quarter of continued progress in GM's global automotive operations. We were able to expand vehicle sales and improve automotive profitability based on the progress in our turnaround initiatives in North America and Europe and our expansion strategy for key growth markets like China, Russia and South America, Wagoner said.

"We continue to see progress on the automotive bottom line as we implement the strategies laid out two years ago," the CEO added.

In the first quarter, GM sold a record number of vehicles worldwide. Still, it was surpassed by Toyota Motor Corp. for the No.1 spot in the world during the quarter.

At GM North America, the net loss came to $46 million, versus a loss of $292 million, a year ago. Net sales fell to $28.51 billion from $30.86 billion. GM attributed the narrower loss in North America mostly to large cost savings in health care and manufacturing-related expenses. The auto maker also credited strong acceptance of new products, as well as the company's continuing scaling back of sales to daily rental car fleets for the improvement at its core North American unit.

The domestic auto makers are cutting back dramatically on low-margin sales to daily rental car companies to focus on more lucrative sales to customers at dealerships.

The North American unit's loss narrowed, despite a production cut of 192,000 units, GM noted. The volume decline reflected an 111,000-unit reduction in dealer inventories in the U.S. and Canada, and a 69,000-unit cut in deliveries to daily rental companies in the U.S. and Canada, GM said.

GM Europe posted net income of $5 million, down from $59 million. Net sales rose to $8.49 billion from $8.06 billion.

Net income at GM Asia Pacific fell to $116 million from $492 million, though sales climbed to $4.56 billion from $3.39 billion. GM Latin America had net income of $201 million, versus $40 million a year earlier. Sales rose to $3.57 billion from $3.16 billion.

<table border="1" cellpadding="3" cellspacing="1" width="100%"><tbody><tr><td class="p11" valign="top"><b>Net Sales</b> </td><td class="p11" align="center" valign="top"><b>2007 1Q</b> </td><td class="p11" align="center" valign="top"><b>2006 1Q</b> </td></tr>

<tr><td class="p11" valign="top">North America </td><td class="p11" align="center" valign="top">$28,506 </td><td class="p11" align="center" valign="top">$30,857 </td></tr>

<tr><td class="p11" valign="top">Europe </td><td class="p11" align="center" valign="top">$8,485 </td><td class="p11" align="center" valign="top">$8,055 </td></tr>

<tr><td class="p11" valign="top">Asia/Pacific </td><td class="p11" align="center" valign="top">$4,559 </td><td class="p11" align="center" valign="top">$3,386 </td></tr>

<tr><td class="p11" valign="top">Latin America </td><td class="p11" align="center" valign="top">$3,573 </td><td class="p11" align="center" valign="top">$3,161 </td></tr>

<tr><td class="p11" valign="top"><b>Earnings</b> </td><td class="p11" align="center" valign="top"><b>2007 1Q</b> </td><td class="p11" align="center" valign="top"><b>2006 1Q</b> </td></tr>

<tr><td class="p11" valign="top">North America </td><td class="p11" align="center" valign="top">($46) </td><td class="p11" align="center" valign="top">($292) </td></tr>

<tr><td class="p11" valign="top">Europe </td><td class="p11" align="center" valign="top">$5 </td><td class="p11" align="center" valign="top">$59 </td></tr>

<tr><td class="p11" valign="top">Asia/Pacific </td><td class="p11" align="center" valign="top">$116 </td><td class="p11" align="center" valign="top">$492 </td></tr>

<tr><td class="p11" valign="top">Latin America </td><td class="p11" align="center" valign="top">$201 </td><td class="p11" align="center" valign="top">$40 </td></tr>

</tbody></table>

[PrimeGTP]

WSJ should keep their nose out of the automotive business. They are good at what they do, but the auto industry is not one that can be run quarter-to-quarter. Most WSJ analysts don't know what "long term" means.

[Dragon]

better than a loss.

seems selling off part of GMAC was a good idea afterall, at least for now

[Z-06]

According to Ford's website the base Mondeo starts at £14,995 which is about $30,000

When GM auto division was making losses and GMAC was profitable these analytical spinners were magnifying those losses, saying that is the "cpre" of GM is.

Now when it is other way around they turn their spin 180 degrees focusing on the total profit not the profit of the Auto Division.

In short they have one spin DIE GM DIE!

[FUTURE_OF_GM]

When GM auto division was making losses and GMAC was profitable these analytical spinners were magnifying those losses, saying that is the "cpre" of GM is.

Now when it is other way around they turn their spin 180 degrees focusing on the total profit not the profit of the Auto Division.

In short they have one spin DIE GM DIE!

+1

Because they don't buy GM cars AND they stand to profit from it's demise.

[GXT]

When GM auto division was making losses and GMAC was profitable these analytical spinners were magnifying those losses, saying that is the "cpre" of GM is.

Now when it is other way around they turn their spin 180 degrees focusing on the total profit not the profit of the Auto Division.

In short they have one spin DIE GM DIE!

Or perhaps they are just doing what financial reporters do... trying to emphasize the parts that would be of interest to an investor? When you have a decline of $52.3Billion to $43.9Billion, and ~8Billion of that is GMAC, shouldn't it be a bit of a focus? It seems significant to me. If they didn't mention it, people would assume it was the auto division related.

If they really had it in for GM there was a lot more they could have written on the auto side. Like how GM's auot sales may be expanding in Asia/Pacific but how they are doing so at the cost of profitability... from a 681 million profit in Q1 2006 to a 94 million profit in Q1 2007. (GMNA in the making?). Or how, in spite of all the new products from GM, GMNA sales are down 7.6% and the cost savings in health care are going to quickly be rendered miniscule by the continued increases that GM themselves have been forecasting. Or they could have mentioned how the GMNA market share went from 23.8% to 22.8%.

All in all it seems good as the bleeding has gone from a drop to a steady decline. The really good news is that Fleet is down from 30.0% to 25.5% in the US. The bad side of that is they are still at 36.8% for cars. That is down from 41.6% Q1, 2006... but it is still extremely high.

SEC filing:

http://secfilings.nasdaq.com/filingFramese...2F2007&pdf=

Edited May 3, 2007 by GXT

[Z-06]

GM's revenue in the latest quarter fell 16% to $43.9 billion from $52.4 billion. The revenue decline largely reflects the divestiture of a majority stake in the GMAC lending arm last year. Automotive sales fell to $42.9 billion from $43.53 billion.

Or perhaps they are just doing what financial reporters do... trying to emphasize the parts that would be of interest to an investor? When you have a decline of $52.3Billion to $43.9Billion, and ~8Billion of that is GMAC, shouldn't it be a bit of a focus? It seems significant to me. If they didn't mention it, people would assume it was the auto division related.

Buddy are you out of your mind?

Here is the quote from the Horse's mouth

Total revenue for the first quarter of 2007 was $43.9 billion, down from $52.4 billion, almost entirely due to GMAC revenue no longer being included in GM’s consolidated results.

If you look at the revenue for Q1 of 2006 and exclude GMAC, (Mr. Wiseman, the good word to know is EXCLUDE, which means, "To prevent from being included, considered, or accepted; reject:"), the revenues are $ 43.2 billion. Are you comparing apples with apples, buddy? No not at all. In fact the revenues have gone up by $ 0.7B. Don't you think that is an "improvement"? (The key word here is IMPROVEMENT, which means, "A bringing into a more valuable or desirable condition.")

Now if you are an intelligent investor those are the numbers you should compare. You obviously are not a smart investor, rather a sheepling who believes in media spin, since you are comparing apples with oranges, without getting the holistic picture.

Now answer our questions, to justify your BS on the Anti-Volt comments of yours. :AH-HA_wink:

[Mr.Krinkle]

I think most people who read articles like these dont stop at the first line they dont agree with and read them in entirety.

The housing is a big issue now, as is auto.

Earnings in the latest quarter included unfavorable special items of $32 million, or six cents a share. The auto maker posted a positive automotive operating cash flow of $300 million for the quarter. The year-ago results included a gain of $395 million from the sale of a portion of GM's equity ownership position in Suzuki Motors.

Excluding items, GM said it would have reported first-quarter earnings of $94 million, or 17 cents a share. Analysts polled by Thomson Financial had expected the Detroit company to post earnings, excluding items, of 87 cents a share.

These filings are extremely complicated and often need people to cut throught he muck to see what it is they are saying.

It paints the whole picture because like it or not it is a business and for a business to succeed it needs profit and investment. You say these people urban elitists or what only care about money so why in the holy hell would it matter if they like GM or not? Groove on that one for a while.

or we can just say move it along, there is nothing to see here, everything is ok.

If everything was sunshine, lollipops and rainbows there wouldnt be a "re"-structuring or a turn"around".

The first-quarter results underscore the challenges U.S. auto makers face in restructuring their domestic operations at a time of significant uncertainty for the U.S. economy, particularly in the housing market. Ford Motor Co. last week reported better-than-expected overall results, though losses in its North American unit widened even as the company implemented steep cost cuts. Earlier this week, GM and Ford both reported sharp declines in their U.S. sales for April.

GM Chairman and Chief Executive Officer, Rick Wagoner said the latest period marked "another quarter of continued progress in GM's global automotive operations. We were able to expand vehicle sales and improve automotive profitability based on the progress in our turnaround initiatives in North America and Europe and our expansion strategy for key growth markets like China, Russia and South America, Wagoner said.

"We continue to see progress on the automotive bottom line as we implement the strategies laid out two years ago," the CEO added

As GM fans we should be happy its reported as effective and hope this isnt the spin.

btw What happened in Asia?

Edited May 4, 2007 by Mr.Krinkle

[Windy-57]

WSJ should keep their nose out of the automotive business. They are good at what they do, but the auto industry is not one that can be run quarter-to-quarter. Most WSJ analysts don't know what "long term" means.

I half agree with this. I don't think the WSJ should keep their noses out of auto. I think the auto industry has closed itself off from the rest of the business world for too long. It's time to open up and embrace some ideas that aren't of the old, stodgy manner.

On the other hand, you are correct that evaluating businesses (all businesses, not just auto) on a quarter-to-quarter basis is stupid. In fact, that's a big reason the Big 3 are in such trouble because they manipulated sales (fleets and incentives) in order to meet short-term revenue targets when, many times, the better move would have been to deal with lagging sales, keep the brand equity in tact, not train buyers to expect big "deals", and focus on fixing the problem the right way - by building better vehicles and adjusting structural costs as necessary. I'll go even further as to say that I believe that the short-term pressures exerted on businesses by Wall Street is a fundamental flaw in the American business model.

[ZL-1]

The auto maker posted a positive automotive operating cash flow of $300 million for the quarter.

Small number, but significant for being positive.

Also, GM's CFO conference call quote at the bottom left of the page is significant as to where GM is aiming for, with the contract talks coming up: "We're basically operating the [North American] business at around break-even, certainly in the first quarter. That's not our goal, obviously." -- GM CFO Fritz Henderson

Edited May 6, 2007 by ZL-1

[regfootball]

it is true the economy is in the crapper and GM is doing alright in spite of it. The housing industry problems are real and are coming to roost after 5-6 years of being propped up by the banking industry and such that cannot afford to do it anymore. Consumers won't buy anything because their real wages are tanking, (well, most people, the upper classes continue to prosper) and people know there will be no force of change until Jan 09 at the earliest. There is no hope for improvement before then, unfortunately. People are concentrating on getting by without new house or car purchases until there is a change in direction/ leadership in this country and everyone's wages are are going to stop being pilfered by the crooks in oil, government, and health care. I used to think Detroit and big oil were in bed together but really in the last 5 years or so big oil stepped out on its own and said, "we are better off without you" and thus all the huge gas price increases. Detroit got stiffed and hasn't figured out how to evolve and make it on anything besides bigger cars yet. Big oil will get their cash however they want to. If we keep driving big cars, they will make big bucks. If we all drive small cars, they will raise the price even more (which is what the ecoweenies don't understand). If we all drove Prius our gas prices would double (and so would our insurance rates). Nothing will change until we develop a real alternative to the monopoly that is called gasoline. No one in government will aloow us to do that. Otherwise, we'd have all sorts of big funds available to advance science and techonology to ween us off it.

GM is somehow treading water in spite of the big waste our country has turned into, for most Americans' pocketbooks. Pretty encouraging, actually.

Edited May 7, 2007 by regfootball