$39 Billion Loss for Gm


by Evander Klum - Date: 2007-11-13 - Word Count: 437 Share This!

The world's largest automaker made the second largest quarterly loss in the auto industry history of the United States. General Motors lost a total of $39 billion on a charge that involves unused tax credits.

According to industry analysts, GM is heavily bleeding in North America. GM is deeply hurt by peaking gas prices, problems in the housing market and fickle-minded consumers. With this current situation, GM's restructuring efforts is hampered. Last Wednesday, GM reported their devastating cash lost.

"We continue to expect the fundamentals to worsen before they improve," Bear Stearns analyst Peter Nesvold said in a note to analysts.

According to Howard Silverblatt, senior index analyst for Standard and Poor's, GM's loss of $39 billion for the third quarter was the second-worst quarterly net loss in the U.S. corporate history under generally accepted accounting principles. The greatest loss was made by AOL Time Warner in 2002 amounting to $44.9 billion or $10.04 per share loss.

The damage to GM had been more aggravated as its strongest rival; Toyota Motor Corp. announced last Wednesday that its profit for the fiscal year rose by 11 percent making a $4 billion company record. GM and Toyota are head to head to the world's largest automaker by sales title for 2007.

GM Chairman and Chief Executive Rick Wagoner told WWJ-AM in Detroit that the accounting shift won't have a substantial impact on the business.

"I would stress no impact whatsoever on our cash position, no impact on our ability to use the tax offsets in the future, and from my perspective, really no change whatsoever in our outlook or optimism about the future of getting the business turned around," he said.

Fritz Henderson, GM's chief financial officer said that his company is optimistic with its cash and products significantly the money it will save from the new four year contract the automaker reached last month. The union controlled trust to support the health care benefits of retired GM workers would not affect their balance sheets by year 2010. Henderson also said that GM sees some benefits from the contract and they will probably start gaining it by next year.

"We feel good about our long-term prospects," he said.

It seems like it's not that bad for GM (Saab subsidiary makes Saab spark plugs). Vehicle sales were strong in other regions. In Latin America, GM poses a 22 percent volume increase and 16 percent in the Asian region.

"International and emerging markets expansion has been very positive for the company, as it establishes a dominant position in large growing markets such as China and India," said David Kudla, CEO of Mainstay Capital Management, in a note to investors.


Related Tags: auto parts, saab parts, saab auto parts, spark plugs, saab spark plugs

Evander Klum is a Business Administration graduate who hails from Alabama. He enjoys extreme sports and he is also a car racing fanatic. At present, he works as a marketing manager at an advertising agency in Cleveland.

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