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Alongside its decision not to pursue a purchase of Chrysler, GM released its third-quarter 2008 financials, which they claim reflect "rapidly deteriorating market conditions in the U.S., slowdowns in other mature markets around the world, and continued losses at GMAC Financial Services (GMAC)."
Referencing third-quarter "turmoil" in global credit markets, GM claimed existence of a current financial crisis the likes of which hasn't been seen for more than 70 years. They claim that the auto industry is worst hit in the United States and Western Europe, both markets where the auto giant does significant business.
As we've all been reading in the headlines and seeing in the industry around us, tight credit, rising unemployment, declining income, falling stock markets, and housing segment declines have made for an environment where consumers are not spending and are "exiting the vehicle market" in GM's language. In addition, GM claims, many intending to purchase have been denied financing or were given rates they found unattractive.
So just how bad are the numbers? A net loss of $2.5 billion, or $4.45 per share for the third quarter. While this doesn't sound quite as bad as Ford's $3.0 billion after-tax operating loss
for third-quarter '08, it's presumably bad enough to effectively kill GM's proposed merger with Chrysler
. Reading further into GM's financials, they revise the loss numbers up to $4.2 billion "on an adjusted basis," which translates into a loss of $7.35 per share.
While a bit befuddling to the economics layman (like myself), a gargantuan company like GM has financial dealings and relationships with so many different entities (UAW: worker settlements, retiree health plans, buyouts--GMAC: partially owned by Cerberus Capital Management--Delphi: underwent bankruptcy proceedings) that the losses seem to morph given the vantage point one chooses to view them from.
But regardless of the perspective, the numbers are bleak. Factories are being closed, platforms under development are being axed, important new models are being delayed, R&D will surely suffer, and bright new possibilities like the 2010 Chevrolet Camaro
, 2011 Chevrolet Volt
, 2009 Cadillac CTS-V
, and GM's new baby Duramax Diesel
are simply going to have to carry the day if GM is to make it through this mess intact.--Colin Mathews
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