Dragon

GM Posts $39 BILLION loss for 3rd Quarter

47 posts in this topic

!!!!WHAT????!!!! This is very bad news, and not needed when they are trying to get back on the up swing.
0

Share this post


Link to post
Share on other sites

The article doesn't do a very good job of explaining the loss. Apparently it has something to do with tax credits that won't be earned due to forecasted profit-loss. In the Detnews article I read, if they show profit and forecast future profit, they can apply the tax credit back to their earnings report and show a $39 BILLION dollar profit.

Someone else needs to explain this...

0

Share this post


Link to post
Share on other sites

But in a television interview early Wednesday, GM Chairman and CEO Rick Wagoner said he is confident the company is in better position to earn money going forward and utilize the tax credits. He said it needed to take the writedown at this point to comply with strict accounting rules.

Correct me if I am wrong, but it seems like it is more of a "paper" loss to adjust the writedowns and correct the accounting books which they had from the previous mess.Physically GM did not lose any money (may be by market perception which may cause loss of share value) in value, this may be the same as the payout last year of $10B, when GM handed the money for buying out jobs.

0

Share this post


Link to post
Share on other sites

Correct me if I am wrong, but it seems like it is more of a "paper" loss to adjust the writedowns and correct the accounting books which they had from the previous mess.Physically GM did not lose any money (may be by market perception which may cause loss of share value) in value, this may be the same as the payout last year of $10B, when GM handed the money for buying out jobs.

Thats the way I understood it as well.

0

Share this post


Link to post
Share on other sites

From the Detroit News article:

In announcing the accounting charge on Tuesday, GM said it was doing so in accordance with the Financial Accounting Standards Board's Statement of Financial Accounting Standards, which requires companies to offset the value of tax credits if they do not foresee earning taxable income in the near-term.

Which tells me that they have to show a loss for tax credits they would have earned were they forecasting near-term profitability. If they turn their operations around and show that they will be profitable, they apply those credits back to their earnings report.

0

Share this post


Link to post
Share on other sites

The silver lining is that GM didn't actually LOSE this much money. But what it does mean is that 1) They don't foresee profits in the near future and 2) This will lower their market value which will hurt them somewhat.

0

Share this post


Link to post
Share on other sites

Correct me if I am wrong, but it seems like it is more of a "paper" loss to adjust the writedowns and correct the accounting books which they had from the previous mess.Physically GM did not lose any money (may be by market perception which may cause loss of share value) in value, this may be the same as the payout last year of $10B, when GM handed the money for buying out jobs.

It's not a cash charge.
0

Share this post


Link to post
Share on other sites

What exactly does this mean?

Sounds like financial gymnastics to me.

Clear as mud. :blink:

0

Share this post


Link to post
Share on other sites

sounds to me like they are making way for a 39 billion dollar Trust Fund...

is it coincedice that that is the aproximated amount they were going to put asside for it...?

is it coincidence that that is the approximate cash that they have?

or what about the fact they have an opperating profit of 122 million for this quarter...?

0

Share this post


Link to post
Share on other sites

A company can use those deferred tax assets against future earnings (there ususally is a time frame for which a company can do that - 5 or 6 years, for example), but since there isn't a reasonable expectation of future profits to use those tax credits against, they have to write them off: remove tham from the asset's side of the balance sheet (lowering balance sheet total) agains recording a loss on the P&L statement that reduces earnings (reducing the stockholders equity component of the balance sheet by the same amount).

0

Share this post


Link to post
Share on other sites

In other words, more bad/mediocre news is expected in the future, so please don't hold these tax credits as assets, since to truly be assets, we need to make X+ profits to apply them.

They're not expecting reasonably foreseeable profit in the future to keep them on the books. It's not good.

GM can't make enough profit with the model mix---the historical dependency on obscene truck profits and little to no profits elsewhere is coming home to roost, unfortunately.

0

Share this post


Link to post
Share on other sites

In other words, more bad/mediocre news is expected in the future, so please don't hold these tax credits as assets, since to truly be assets, we need to make X+ profits to apply them.

They're not expecting reasonably foreseeable profit in the future to keep them on the books. It's not good.

GM can't make enough profit with the model mix---the historical dependency on obscene truck profits and little to no profits elsewhere is coming home to roost, unfortunately.

And the auto operations' net earnings (excluding the deferred tax write off) were a meager $122 million when revenue was $43.1 billion. In essence they were at their breakeven point for the quarter, so... what's next?
0

Share this post


Link to post
Share on other sites

It means they won't have as much money in the future as they thought they were going to have, therefore there could be platform cuts and/or plant closures or both.

0

Share this post


Link to post
Share on other sites

Wagoner was on --IIRC-- Squawkbox this morning. Did he have a mini-stroke at some point?; he often talks out of the right side of his mouth and he was blinking every 2-3 seconds.

Anyway, he said the same as above- car-operations profit of $122M, the $xB was a non-cash charge. He also said GM car operations have been profitable all year (again; IIRC), and that was expected to continue in the near future. Granted, it's not a huge profit, but it's far better than running in the red there.

With the recent profitablility in c.o., the ramp-up of the recent UAW contract, better operating fundamentals ($9B in reduced expenditures, reduced inventories) and with the future product pipeleine in mind, he was (naturally) quite bullish on the near future for GM.

Edited by balthazar
0

Share this post


Link to post
Share on other sites

Wagoner was on --IIRC-- Squawkbox this morning. Did he have a mini-stroke at some point?; he often talks out of the right side of his mouth and he was blinking every 2-3 seconds.

Anyway, he said the same as above- car-operations profit of $122M, the $xB was a non-cash charge. He also said GM car operations have been profitable all year (again; IIRC), and that was expected to continue in the near future. Granted, it's not a huge profit, but it's far better than running in the red there.

With the recent profitablility in c.o., the ramp-up of the recent UAW contract, better operating fundamentals ($9B in reduced expenditures, reduced inventories) and with the future product pipeleine in mind, he was (naturally) quite bullish on the near future for GM.

He'll be bullish until Toyota ratchet's up the incentives on their product line to keep the losses coming at GM and Ford. They can certainly afford to do it. Still feels like "death by a thousand cuts" to me.

0

Share this post


Link to post
Share on other sites

As great as the possibility exists that this is only paper accounting and has no major effects in GM's wallet, the perception of 39 BILLION DOLLAR LOSS is just too juicy for the media not to spin and too attention grabbing for people to look into fully.

0

Share this post


Link to post
Share on other sites

Did he have a mini-stroke at some point?; he often talks out of the right side of his mouth and he was blinking every 2-3 seconds.

Yeah nothing wrong at GM with all that blinking going on is there? :rolleyes:

0

Share this post


Link to post
Share on other sites

In related news, earlier today, Detroit based General Motors (NYSE:GM) finally approved production of Mak's new 2008, 3.6 DI, FE-3, 6-Speed Manual equipped Cadillac CTS after repeated delays. When asked about this recent development, Mak stated, "Holy crap, I never thought these clowns were going to actually build my car. You know, I must REALLY like the new Cadillac CTS to have put up with all the misinformation and months of missed-production dates".

While a positive sign, this news did not impact GM's shares, which closed down $2.21, or 6.11% after GM reported a much larger than expected operating loss and a whopping 39 billion dollar non-cash accounting charge.

-Mak

08, FE3 CTS 6-Speed

(Note to GM: It might help if you could actually deliver cars when you say you will.)

0

Share this post


Link to post
Share on other sites

In related news, earlier today, Detroit based General Motors (NYSE:GM) finally approved production of Mak's new 2008, 3.6 DI, FE-3, 6-Speed Manual equipped Cadillac CTS after repeated delays. When asked about this recent development, Mak stated, "Holy crap, I never thought these clowns were going to actually build my car. You know, I must REALLY like the new Cadillac CTS to have put up with all the misinformation and months of missed-production dates".

While a positive sign, this news did not impact GM's shares, which closed down $2.21, or 6.11% after GM reported a much larger than expected operating loss and a whopping 39 billion dollar non-cash accounting charge.

:lol: that made me laugh!
0

Share this post


Link to post
Share on other sites

Threads like these are toooo funny.

"How to spin a THIRTY NINE BILLION DOLLAR LOSS".

:stupid:

0

Share this post


Link to post
Share on other sites

Ouch. I had to do a few double takes and date checks upon reading that.

Edited by blackviper8891
0

Share this post


Link to post
Share on other sites

Bloomberg: General Motors Corp., the world’s largest automaker, reported a record $39 billion quarterly loss after three money-losing years forced the company to write down the value of future tax benefits. The loss, excluding the tax writedown, was $2.80 a share, more than 12 times analysts’ estimates. Mortgage-related losses at GM’s partly owned finance unit overwhelmed auto sales that were the highest ever. GM shares fell 5 percent, giving the Detroit-based automaker a market value of $19.4 billion, about half the size of the third-quarter loss. GM signaled that it won’t generate enough earnings to use the benefits. Chief Executive Officer Rick Wagoner cited concerns about defaults on subprime mortgage loans at GMAC LLC and auto sales in the U.S. and Germany . Slumping U.S. sales in the past half year “feel like the conditions we’re going to face,” Wagoner said. “This all suggests that GM thinks that things are so ugly out there that they can’t see the possibility of profitability for many quarters, maybe even years,” Bradley Rubin, an analyst with BNP Paribas in New York, said in an interview.

0

Share this post


Link to post
Share on other sites

Your content will need to be approved by a moderator

Guest
You are commenting as a guest. If you have an account, please sign in.
Reply to this topic...

×   You have pasted content with formatting.   Remove formatting

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor