GM Posts Record $39B Loss, Offers Buyouts

Horrendous 2007 Prompts New Round Of Buyout Offers For All 74,000 Hourly Employees

(CBS/AP)  General Motors Corp. , reported a $38.7 billion loss for 2007 on Tuesday, the largest annual loss ever for an automotive company, and said it is making a new round of buyback offers to U.S. hourly workers in hopes of replacing some of them with lower-paid help.

The earnings report and buyback offer came as GM struggles to turn around its North American business as the economy weakens.

But GM Chairman and Chief Executive Rick Wagoner said that the company made significant progress in 2007, reducing structural costs in North America, negotiating a historic labor agreement and growing aggressively in Latin America and Asia.

The Detroit-based automaker said it was offering a new round of buyouts to all 74,000 of its U.S. hourly workers who are represented by the United Auto Workers.

GM won't say how many workers it hopes to shed, but under its new contract with the UAW, it will be able to replace up to 16,000 workers doing non-assembly jobs with new employees who will be paid half the old wage of $28 per hour.

Much of GM's problem, analysts say, is image, reports CBS News correspondent Kelly Wallace. Studies have found there's now very little quality gap between U.S. and foreign cars but that's not the perception.

"The perceived quality, in other words, what's in customers minds is that the Asians are still making better cars than Americans so there is a perception gap," said Tom Libby of J.D. Power and Associates.

Ford Motor Co. and Chrysler LLC already have announced similar buyout offers.

GM shares fell 65 cents, or 2.4 percent, to $26.47 in premarket trading.

GM's annual loss of $38.7 billion largely was due to a third-quarter charge related to unused tax credits.

The 2007 loss topped GM's previous record in 1992, when the company lost $23.4 billion because of a change in health care accounting, according to Standard & Poor's Compustat.

Excluding the tax charge and other special items, GM lost $23 million, or 4 cents per share, for the year, compared with a net income of $2.2 billion in 2006, beating Wall Street's expectations. Analysts polled by Thomson Financial expected GM to post a full-year loss of 95 cents per share.

For the fourth quarter, GM posted a loss of $722 million, or $1.28 per share, in the fourth quarter, compared with a net income of $950 million in the year-ago quarter. Fourth-quarter charges included $622 million to Delphi Corp., GM's former parts division, for its restructuring efforts.

GM reported $181 billion in revenues for the year, down from $206 billion in 2006. Its automotive business saw record automotive revenues of $178 billion in 2007, up $7 billion from a year ago thanks to growth in emerging markets and favorable exchange rates.

GM was profitable in every region outside North America. GM's Latin America, Middle East and Africa division reported a record $1.3 billion in earnings, up 140 percent from 2006. GM's Asia Pacific division earned $744 million, up from $403 million in 2006, while GM Europe reported a profit of $55 million, down from a profit of $357 million in 2006.

But GM's North American division continued to struggle, posting a $1.5 billion loss for the year, nearly identical to its $1.6 billion loss in 2006. GM's North American division also reported a loss of $1.1 billion in the fourth quarter, compared with a loss of $129 million in the year-ago quarter.

Wagoner said the weak U.S. economy and high commodity prices hurt turnaround efforts in North America. He said GM's decision to reduce low-profit sales to daily rental companies by 110,000 in 2007 also affected U.S. sales.

"We're pleased with the positive improvement trend in our automotive results, especially given the challenging conditions in important markets like the U.S. and Germany, but we have more work to do to achieve acceptable profitability and positive cash flow," Wagoner said in a statement.

GM's results also were dragged down by its 49 percent stake in GMAC Financial Services, which lost $2.3 billion in 2007. GM reported a $1.1 billion loss attributed to GMAC.

GM barely retained its title as the world's largest automaker in 2007, selling just 3,000 more vehicles than Toyota Motor Corp. GM sold a total of 9,369,524 vehicles worldwide, up 3 percent from the year before.

In January, Ford President and Chief Executive Alan Mulally announced the company will be adjusting production and making further cost reductions in North America, including a new round of buyouts for its 54,000 U.S. hourly workers.

Ford said workers will begin leaving the company in April.

Chrysler, which is trying to cut up to 21,000 of its 45,000 U.S. manufacturing jobs, is giving workers on temporary or indefinite layoff up to $100,000 to sever ties with the company. Chrysler said the date workers will leave varies by plant, but some could leave as early as April.

[talkingham]

Right, blame the workers for the arrogant leadership of jerks paid millions of dollars to squander the US car industry and almost every other industry that has been outsourced. GREED.

We can build good cars in this country, we''ve done so in the past. But whe you see the oversized trucks and SUVs coming out of detroit you''d think gas was still 25-cents a gal mcuh less the Bush price. And to compare what they pay in Japan to the US is bunk. How much oil does Japan produce compared to the US and what is the investment in refinery capacity there. Our gas should be cheaper because we are major producers and don''t have to transport all of our oil from around the globe no matter what you are told.

It''s a complete rip-off so that stock speculators can house their multi-million homes in every major resort around the world.

Detroit is out of touch with everything except how much money they can pay the owners and major execs to outsource another US industry.

[squidusn]

jowand

If you have ever been to Japan you would know that space is and can be hard to come by. How many cars do you think they could import? Japan has a land size of 145,883 sq miles while say California alone is 163,696 sq miles. That alone should be enough to limit car imports and factories, or else Japan would be one big car lot. You also have to take into account fuel efficiency of the cars, we think we pay a lot for fuel in the US try Japan. Average price in Japan about $4.24 a gallon, the US is about $3.00 a gallon. Supply and Demand! Why import more cars when you can''t really sell the ones you already have.

[terrapin78]

I find it interesting that GM''s 2007 loss is about equal to ExxonMobile''s PROFIT!

[jowand]

Having recently owned an Chevy S-10 pickup, a Dodge Ram pickup and a Toyota Camry, comparing them the S-10 and Ram had much less problems than the Camry.
Managment and Unions are equally to blame for the mess the US auto industry is in. However the Japanese get to sell all and any of the their cars in the US and build factories here unrestricted. While US car manufacturers, Cadillac an example, have quotas on cars they can sell in Japan and are blocked from building plants by the Japanese goverment working under the table bring up new rules constantly to prevent US manufacturers from selling more cars in Japan.

[olebd]

As I said in an earlier post... the question that needs to be asked to every American car company executive is:

"What have you done to deserve your extremely high salary and bonuses?!"
--------------------------------------------------------------------------------

Posted by USAyesterday at 07:09 PM : Feb 12, 2008

From my observations, these executives become masters at delegating their duties to their team of assistants. The rest of the time is spent schmoozing with their elite friends, traveling to "meetings" in exotic places, playing lots of golf, then ultimately they leverage for the next big "score" (bonus) by joining another company to do the same things.

[squidusn]

This is not the 80''s. American car companies will not be saved with Japan bashing this time. The simple fact that American car companies look more to outsource the more the Japanese car companies look to take over that share of cars made in the US. To buy American is more like buy Toyota and Honda because more and more of the cars are being made in the US with the same quality. I have seen people say if you don''t buy from an American car company you are not patriotic, I would buy a car from Japan or any other country knowing that they are made in the US by US workers while US cars are being made more and more in other countries. Corporate greed and arrogance is whats killing the American car companies nothing more.

[yamuttya]

It''s hard to imagine how Detroit managed to squander total market domination ( 1960 ) to the point of bankrupcy 2 generations later, could it be .....
arrogance ??? or....
stupidity ?????
I wonder......
So here''s the deal Detroit... we''ll give you another chance, just dont f*ck it up this time.
The world ( especially China and India )is screaming for an environmentally friendly car.
Build it and the world is yours.
Do you have the vision TO ACTUALLY DO THE RIGHT THING ?????? or is that asking too much?
Good luck....

Years ago, when GM''s transmission were blowing up right and left, 60 minutes did a piece about it. I can still remember the GM mouthpiece attempting to explain transmission rebuilds as "routine maintenance"!! I still laugh about it. Now tonight I see another GM mouthpiece talking about "perceptions"...I''m still laughing... Who is attempting "perception manipulation" here??
Credibility is a problem for liars.....

[yamuttya]

I can hear Michael Moore chuckling from here....his prescient, award winning films on GM and health care were ahead of their time......and were ignored by the arrogant buffoons in Detroit and Washington.
Leadership sometimes takes on unusual forms.....

[brianp55]

"The party is over. Last one to leave please turn out the lights".

I grew up in the 60s in Michigan in a GM-supported household. The golden era when only American companies could mass produce cars is long gone. The two sentences above sum up the situation succinctly and effectively. Oh, and by the way, I also just bought a Sony LCD tv today....my third.

[mcv57]

The party is over. Last one to leave please turn out the lights.

Posted by SkyFive

"click"

[reel-crazy]

Americans want quality, styling, and prestige in automobiles and the Big 3 isn''t going to turn a profit until they meet that criteria. Same old stuff year after year with no innovation whatsoever.

Besides, my so-called "American Made" Chevrolet Tahoe was made in Mexico and assembled in Canada. Buy American?? I would again if any of them made one.

[mcv57]

Actually automakers has always been a red-light for economic forcast in the past. Whenever the automakers hurt, the whole country is going to hurt.

[incog-nito]

SharnCedar: Also, if you actually read the article you would see that GM is doing quite well abroad, and poorly at home. So it''s still NOT the other countries'' tariffs that is hurting GM. Back to quality again.

[incog-nito]

SharnCedar: If you read my previous posts on this thread you would see that I advocated imposing tariffs on imports to level the playing field and contain the outsourcing. Please do so before smart-mouthing someone.

[sharncedar]

So why does Detroit keep losing market share to the Japanese year after year? Simple: more and more people prefer to buy imports.

Posted by incog-nito at 04:32 PM : Feb 12, 2008


Well, it s a little more complicated, there, Milton Friedman. The Japanese cars are cheaper and better quality in the American market because their protectionism allows their companies to operate in a safe environment. for example, Japanese workers are guaranteed a job for life - this guarantee can only be made because they do not allow any imports of cars into their own country.

The Indians are developing an auto industry, the current import duties in that country are over 100%. That''s right, a $15,000 American car costs more than $32,000 in India, the extra $17,000 is protectionist import duties. in this way, their companies have time and profit to develop quality without having to worry about the next business cycle.

Japanese quality is subsidzed on a massive level by the protectionism of the Japanese system. Sorry the world is not a simple stupid mathematical model, Milton Friedstupid, buts it not. Protectionist countries win, and win, and win, and win, and win.

[tejasdemo]

You ever bought a GM vehicle in the last 10 yrs ? With a very few exceptions they are pure c rap. And there non existent customer service doesnt help either.

[mcv57]

Whatever, some people will do anything to hang-on to vanity. I laugh everytime I see a Mercedes parked in front of a WalMart. Whatever.

[mcv57]

Posted by kevsan1,

Yes, I heard and saw their proformance. Whatever, why even have a SUV 4 cylinder. That is as stupid as placing monster tires on a S10 - big wheels with a little toot. LOL.

[omega39-2009]

omega feel free to export yourself to one of those socialists meccas.

What are you waiting for?

Posted by easeup

Easup, pull your nose out of the propaganda the heritage foundation and CATO institute are regurgitating and get yourself a passport, you might be surprised by what you find.