GM to record noncash charge of $39B

NEW YORK (CNNMoney.com) -- General Motors Corp. which has struggled to overcome losses and reach a non-competitive labor agreement over the last three years says it will take a $39 billion charge to close the door on that period.

The company announced Tuesday that it will record a net noncash charge of $39 billion for the third quarter of 2007 to meet federal accounting rules.

In a written statement, GM (Charts, Fortune 500) said the charges related to establishing a valuation allowance against its deferred tax assets in the U.S., Canada and Germany.

The statement refers to the company's "three-year historical cumulative loss" in the third quarter in the U.S., Canada and Germany as a significant factor in the establishment of the valuation allowance and said the company faces more challenges, near-term, in the U.S. and Germany.

The company had reached a new cost cutting labor agreement with the United Auto Workers in September after a two day strike.

Analysts surveyed by earnings tracker Thomson First Call forecast that the company lost 25 cents a share in the third quarter excluding items such as this charge. The company earned 93 cents a share in the year ago period although its core North American Auto operations lost money at that time.

Another significant factor mentioned in the statement was the ongoing weakness of the GMAC Financial Services' mortgage business, Residential Capital LLC, which suffered substantial losses due to its exposure to subprime mortgages.

"The establishment of a valuation allowance does not have any impact on cash, nor does such an allowance preclude us from using our loss carry forwards or other deferred tax assets in the future," said Fritz Henderson, GM vice chairman and chief financial officer in the company statement.

"It's also important to note that the establishment of a valuation allowance does not reflect a change in the company's view of its long-term automotive financial outlook," Henderson added.

GM shares were trading about 3% lower in after-hours trade.

GM will release its third quarter 2007 financial results Wednesday at 7 AM EST.