General Motors produced another awful financial surprise Thursday by announcing it lost $4.9 billion during the fourth quarter and more than $8.6 billion for all of 2005.
The company says the wide losses were due to the heavy cost of the company's contracts with the United Auto Workers and the need to bail out the bankrupt Delphi Corp.
Richard Wagoner, GM’s chairman and chief executive officer, said, “Our results were dramatically and adversely affected by charges for restructuring and matters associated with Delphi Corp.’s Chapter 11 filing,” Wagoner said. It “was one of the most difficult years in GM’s history,” he said.
to improve financial results in 2006 and 2007, we are moving quickly to
implement several important actions that will address these weaknesses in
However, Wagoner and Fritz Henderson, GM's new chief financial officer, said the pace of the restructuring will depend on talks with the UAW, which must sign off on any plan that includes worker buyouts or early retirement.
The fourth-quarter financial report was worse than most analysts expected and is certain to revive talk about a bankruptcy filing by the giant automaker.
By the numbers
GM reported it lost $1.2 billion, or $2.09 per diluted share in the fourth quarter of 2005, excluding special items, compared to a profit of $726 million, or $1.28 per share in the same period a year ago. Revenue was $51.2 billion compared to $51.4 billion a year ago.
General Motors North America, the core business, reported an adjusted loss of $1.5 billion, compared to adjusted earnings of $449 million in the year-ago period. The loss in the fourth quarter of 2005 was primarily attributable to lower production of full-sized sport-utility vehicles due to the start-up of production of GM’s new 2007 SUVs, increased healthcare costs, and higher marketing and advertising spending.
Special items or charges involving
the GM-UAW jobs bank for idled workers and for benefits guaranteed
For the full year, GM reported a loss of $8.6 billion, or $15.13 per share for 2005, including special items, compared to net income of $2.8 billion, or $4.92 per share in the year-ago period. Revenue was $192.6 billion in 2005, compared to $193.5 billion in 2004. In addition, GM’s cash reserves declined by more than $2.8 billion in 2005 or nearly $8 million per day.
For the year, GM’s automotive
operations reported an adjusted loss of $5.3 billion, compared to adjusted
earnings of $1.2 billion in 2004.
The decline was principally driven by large losses in North America,
partially offset by improved results in Europe and in the Latin America, Africa
GM Europe, while cutting its losses in half, was still in the red for the sixth consecutive year but Wagoner said better days are ahead. “Our European turnaround plan remains on track and we expect to see more progress in 2006,” Wagoner said.
Earnings from GM's critical Asia
Pacific operations also dropped by 28 percent to $524 million in 2005. The
changing mix in
General Motors Acceptance Corp. reported it earned $2.8 billion in 2005, down only slightly from the $2.9 billion it generated in 2004. In the fourth quarter of 2005, GMAC earned $614 million, compared to $683 million in the year-ago period.
However, the impact of GM's declining credit rating is beginning to take its toll on GMAC, which saw its borrowing costs jump significantly in the fourth quarter.