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GM Reports $1.15 Billion Loss, Plans Repayments
http://online.wsj.com/article/SB1000...39284255805824.
html?mod=rss_Today's_Most_Popular DETROIT—General Motors Co. delivered the first postbankruptcy look at its financial health, showing a company inching toward recovery but with daunting hurdles ahead. The auto maker reported a $1.15 billion loss for July 10 to Sept. 30, narrowing the red ink from GM's prebankruptcy days. The company also said it plans to accelerate loan payments to U.S. and Canadian governments, with the first $1.2 billion installment due in December. GM Chief Executive Frederick "Fritz" Henderson described the performance as stable yet "unsatisfying." While the company reported positive cash flow and a profit in its international operations, GM also lost market share around the globe and its European operations contributed $400 million to the overall loss. The company warned that cash flow will be negative in the fourth quarter as it takes charges and begins to repay government loans. The auto maker didn't provide comparable data as it reported earnings for the stripped-down company that exited bankruptcy protection as well as for Motors Liquidation Co., in which it bundled legacy assets such as dormant factories, equipment and real estate. However, the report signals improvement from the third quarter of last year, when GM reported a loss of $2.5 billion and burned through $6.9 billion in cash. GM is taking something of a bullish view of the global outlook next year, predicting industrywide sales of 62 million to 65 million vehicles. IHS Global Insight has projected sales of 61.3 million vehicles. The results reported Monday underscore the growing importance of GM's operations outside the U.S. Mr. Henderson said GM ventures in China are "throwing off cash" and that important emerging markets have stabilized after the global financial meltdown. But Mr. Henderson warned against relying too heavily on China to drive revenue, though sales in the nation doubled in the third quarter. The majority of its Chinese sales are through GM's Wuling microvan venture, of which GM owns a third. The vehicles typically sell for a fraction of what U.S. vehicles cost and GM must share profits with its partners. Mr. Henderson warned that GM can't depend on China's rapid growth to continue, given the region's volatility. GM also tempered its expectations for industrywide U.S. sales next year, forecasting 11 million to 12 million vehicles. Earlier this year, company executives said the market could hit 12.5 million vehicles. GM posted positive cash flow of $3.3 billion excluding items and said its core North American unit lost $651 million. Its international business posted a $238 million profit. The company's global market share fell to 11.9% from 13% a year earlier. Mr. Henderson said the company "should be ready" for an initial public stock offering in the second half of next year but stressed the importance of beginning to repay U.S. and Canadian loans. "We think it's important that we show the taxpayer we can repay this investment," he said in a news conference. GM's progress comes as rival car makers have reported improved results following the dire conditions of the first half, helped by government incentive programs and steep production cuts.Toyota Motor Co. reported a surprise third-quarter profit, while Ford Motor Co. and Chrysler LLC reversed hefty cash burns. Mr. Henderson said the bulk of GM's U.S. restructuring is complete, though it is working to consolidate its massive operations in Michigan. Thousands of hourly workers remain laid off. His most immediate task will be to craft a restructuring for the company's European operations following GM's decision to retain the money-losing Opel and Vauxhall unit. Mr. Henderson said the plan should be complete in "weeks" and that a new European chief will take over in coming months. GM also said its cash pool totals $42.6 billion, $17.4 billion of which is committed to existing liabilities. The cash level is are far higher than pre-bankruptcy, when the auto maker came dangerously close to falling below minimum levels required to run the business. "The balance sheet has been significantly deleveraged," Mr. Henderson said. "We expect to be in a healthy position where we can support investment into our business." But the company warned that its cash flow will again be negative in the fourth quarter, when it will pay out $2.8 billion to former auto-parts arm Delphi Corp. and begin repaying U.S. and Canadian loans. Meantime, GM expects increased costs for the remainder of the year as it steps up its spending on advertising and engineering as well as boosts its capital spending. GM's spending on marketing and product development came to a virtual standstill during its bankruptcy proceedings. The third-quarter results don't comply with generally accepted accounting principles and exclude key items such as valuation changes for pensions and health care. -- Nancy Pelosi, Democrat criminal, accessory before and after the fact to Rangel's tax evasion. |
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