GM posts big loss as U.S. sales hurt
Weakness at GMAC, American Axle strike also hurts results, but overseas vehicle sales help company top analysts' forecasts.
NEW YORK (CNNMoney.com) -- General Motors Corp. reported a large first-quarter loss Wednesday, due in large part to struggles at its former finance wing GMAC, a strike at American Axle and slumping U.S. car sales.
GM, the nation's largest automaker, posted a net loss of $3.3 billion, or $5.74 per share. That was much wider than the $42 million, or 7 cents a share, loss from continuing operations it reported in the same period last year.
Excluding one-time losses from GMAC and $731 million in bankruptcy support for auto parts manufacturer Delphi, GM lost $350 million, or 62 cents per share. Analysts polled by Thomson Financial, who generally exclude one-time events from their forecasts, were looking for a deeper loss of $1.60 per share.
Though GM sold 51% of its financial services firm GMAC last year, large losses from the automaker's former finance wing continue to weigh on the company. GMAC (GMA) announced last week that it lost $589 million in the first quarter, though results began to improve slightly in its ailing mortgage loan unit, which has suffered from the subprime home loan fallout.
The automaker's sales fell 1.6% to $42.7 billion, but they topped analysts' forecasts of $40.8 billion.
Hurting sales was the two-month-long American Axle (AXL) workers strike, which is ongoing. The auto parts maker is a major supplier to GM, and the strike has affected 30 GM plants. Though GM said the strikes had a minimal impact on its ability to meet customer demand, the work stoppage accounted for $800 million in lost revenue.
In a conference call with analysts, GM President Fritz Henderson said he does not expect the fallout from the prolonged strike to significantly affect the company's ability to meet demand in the future, but he acknowledged that the situation is being analyzed "day to day."
The strike resulted in the loss of more than 100,000 large-sized vehicles, including trucks, SUVs and minivans in GM's inventories. But GM said it is making efforts to reduce dealer inventories in response to slumping demand, especially in trucks and sport utility vehicles.
"As strange as it seems, this strike couldn't have come at a better time for GM," Kevin Tynan, an auto analyst at Argus Research, said. "There's not a lot of demand out there, especially for large trucks."
Though GM said sales of its vehicles outside the United States rose 20%, with particular strength in China, Brazil, Russia and India, low American numbers dragged total auto sales down nearly 1% below year-ago numbers. That's despite the company recording a record 64% of its vehicle sales from outside the United States.
"In the emerging markets, our plan is to take our foot, affix it to the accelerator and jam it to the floor," Henderson said, adding that the company is taking measures to deal with "significant headwinds" in the U.S. market.
Slumping sales, brought on by high gas prices and an economic slowdown, led GM to join other U.S. automakers and forecasters in slashing their 2008 North American industrywide auto sales target.
The company cut its forecast to a seasonally adjusted rate in the mid-to-high 15 million range, down from an earlier estimate of about 16 million. If the U.S. auto industry only sells 15 million cars this year, it will be the poorest showing since 1995.
Amid the bleak outlook, GM said earlier this week that it will eliminate one shift at four of its North American pickup truck and large SUV factories, resulting in about 3,500 job cuts.
But rising gas prices are unlikely to spell the end of the American auto industry.
"Four dollar gasoline won't kill the industry, but it will force it to change," said Tynan. "Demand for hybrids will grow, which will force GM and Ford to compete with Toyota and Honda's new technology."
GM's results come after Japanese rival Toyota (TM) - the No. 2 in U.S. auto sales - announced last week its global sales rose 2.7% during the first quarter, enough to pass GM as the world's largest automaker.
No. 3 Ford (F, Fortune 500) also fared well in the quarter. Ford posted a $100 million first-quarter profit last week, boosted by strong sales abroad. The gain surprised analysts who were looking for another loss.