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 billionrelated 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 asin 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,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.