GM posts $15.5B 2Q loss, 3rd-worst in its history

DETROIT - General Motors Corp. posted a $15.5 billion second-quarter loss Friday, the third-worst quarterly performance in the company's nearly 100-year history.

The loss came as North American sales plummeted and GM faced expenses due to labor unrest and a massive restructuring plan aimed at preserving cash to weather a prolonged U.S. economic downturn.

The loss of $27.33 per share was in stark contrast to the year-ago period when GM recorded a net profit of $891 million, or $1.56 per share.

Revenue for the April-June period was $38.2 billion, down $8.5 billion from a year earlier.

The company said its loss included $9.1 billion in one-time charges, including $3.3 billion for the buyouts of 19,000 U.S. hourly workers, most of whom left at the end of June, as well as $2.8 billion in liabilities related to Delphi Corp., its former parts division.

It also included $1.3 billion worth of write-offs due to a reduction in the value of GM's 49 percent interest in its former financial arm, GMAC Financial Services.

Additionally, GM took a $2 billion charge to its bottom line because of huge drops in the value of pickup trucks and sport utility vehicles coming back to the company after lease terms end. GMAC and GM have suffered big losses when they try to sell the now-unpopular vehicles at depressed prices.

GM also took a $197 million charge related to the settlement of a nearly three-month strike at supplier American Axle and Manufacturing Holdings Inc., which hurt production at more than 30 GM plants. GM agreed to help American Axle fund worker buyouts as part of the settlement.

Without the one-time charges, GM lost $6.3 billion, or $11.21 per share. Twelve analysts surveyed by Thomson Financial predicted a $2.62 per share loss on revenue of $44.57 billion.

GM shares fell 43 cents, or 3.9 percent, to $10.64 in midday trading after falling nearly 11 percent earlier in the day.

Ray Young, GM's chief financial officer, said the company burned through $3.6 billion in cash during the second quarter, which he attributed largely to reducing the company's inventory by nearly 90,000 vehicles to less than 800,000.

He said GM does not expect a similar reduction in future quarters, so the cash burn should be smaller for the rest of the year.

"In that respect, the negative cash flow in the second quarter is overstated," he said.

So far this year, GM has gone through about $1 billion in cash per month, including $3.4 billion in the first quarter.

Young said GM had $21 billion in cash and $5 billion available through credit lines at the end of June for total liquidity of $26 billion, which he called a strong position. GM already has announced plans to generate another $15 billion in liquidity in the next 18 months.

"We're going to get the second quarter behind us and just move ahead," Young said.

GM's net losses since 2005 total $51.1 billion.

The $15.5 billion loss reported Friday is less than half of GM's record $39 billion loss in the third quarter of last year. That loss was due to a charge for accumulated deferred tax credits. The second-worst loss was $21 billion in the first quarter of 1992.

GM said its revenues outside North America rose by $1.7 billion to $20.8 billion in the quarter, but those gains were more than offset by losses in North America, where high gas prices and the weak economy have wreaked havoc on the auto industry. The company said 55 percent of its automotive revenue was from outside North America.

North American revenues fell by nearly $10 billion to $19.8 billion for the quarter as sales in the region fell 20 percent. Work stoppages at American Axle and several other facilities in May and June also contributed to the decline, GM said. GM's revenue per vehicle in North America dropped 16 percent last quarter compared with the same period last year, from $21,375 to $17,940. The figure includes the drop in value of vehicles coming back to the company from leases.

Young said the revenue decline included the drop in leased vehicle values and the reduction in inventory, plus the company didn't have enough factory capacity to feed demand for fuel-efficient cars in the first half of the year.

With GM adding shifts at plants making midsize and compact cars in the second half, it should gain revenue from additional sales, he said.

"But ultimately we're going to have to grow the business in a tough market," he said.

On July 15, GM announced a plan to raise $15 billion for its restructuring by laying off thousands of hourly and salaried workers, speeding the closure of truck and SUV plants, suspending its dividend and raising cash through borrowing and the sale of assets.

GM also said it would reduce production by another 300,000 vehicles, and that may prompt another wave of blue-collar early retirement and buyout offers, Young said.

"As our recent product, capacity and liquidity actions clearly demonstrate, we are reacting rapidly to the challenges facing the U.S. economy and auto market, and we continue to take the aggressive steps necessary to transform our U.S. operations," GM Chairman and Chief Executive Rick Wagoner said in a statement.

GM sold 2.29 million vehicles in the second quarter, down 5 percent compared with the previous year. The company said a record 65 percent of those sales were outside North America.

For the first half of the year, Toyota Motor Corp. outsold GM by 277,532 vehicles. It was only the second time Toyota beat GM in sales for the first six months of a year.