GM Revises 2005 Loss to $10.6 Billion
16 March 2006
General Motors today said its 2005 loss was $2 billion larger than it previously reported due to charges related to factory job losses, its finance arm GMAC and the bankruptcy of former subsidiary Delphi Corp. That will bring its loss in 2005 to $10.6 billion.
GM previously reported a loss of $8.6 billion, including special items. (Earlier post.) GM’s automotive operations reported an adjusted loss of $5.3 billion in 2005, compared to adjusted earnings of $1.2 billion in 2004. The company is delaying filing its annual report with the SEC.
Shares in GM closed on Thursday at $22.22 and have gained almost 16% this month on signs that the company was making progress in its turnaround efforts, including a jump in sales of its newly redesigned full-size SUVs. In after-hours trade the stock slipped about 1 percent to $22.
GM remains the leading global automaker by revenue, but has dropped to number 8 in terms of market value.
Na-na na-na-na na na na na na na, hey hey hey, goodbye
Hey hey-hey, goodbye
Na na na na, na na na na, hey hey hey, goodbye
Na na na na, na na na na, hey hey hey, goodbye
Na na na na, na na na na, hey hey hey, goodbye
Posted by: Robert Schwartz | 16 March 2006 at 10:25 PM
Are you sure? Really sure, that you want the worlds largest automaker, an american company to go bankrupt, Robert? Do you really want american jobs and our economy to suffer? Good song... bad point, Robert.
Posted by: steve | 17 March 2006 at 12:30 AM
Global automotive production capacity is ~20-25% in excess of demand. Politically / wrt to labor relations, it is extremely difficult to close a plant, so automakers have focussed on higher-margin products and new markets such as China (which of course insisted on local assembly plants).
GM and Ford did well during the 90s with trucks and SUVs but the rise in fuel prices, combined with Toyota's clever hybrid strategy, has left them without adequate strength in smaller cars. Chrysler has been turned around - more or less - at significant expense by Mercedes which is now itself in dire straits.
One sign of hope is that GM has decided to concentrate the engineering of its models in those brands that are most successful in that segment. For example, Opel of Germany will be responsible for mid-sized sedans worldwide. These will be sold, with few modifications, under the Saturn brand in the US. Until recently, GM senoir management had scoffed at the idea of leveraging its foreign subsidiaries in this way.
Posted by: Rafael Seidl | 17 March 2006 at 01:28 AM
"Are you sure? Really sure, that you want the worlds largest automaker, an american company to go bankrupt, Robert? Do you really want american jobs and our economy to suffer? Good song... bad point, Robert."
No, as good capitalists we should prop up bad companies in perpetuity and reward them for not "saving for a rainy day" when they were doing well. That's obviously the intelligent thing to do.
Posted by: Joseph Willemssen | 17 March 2006 at 05:55 AM
So,part of GM's strategy is to import Opels from Germany. Not to mention all the outsourcing that goes on anyway. Even if GM does not go bankrupt, it does not mean that they will not do further overseas outsourcing. At this point, I see little reason why most American auto jobs won't end up overseas. Most American jobs may end up under Toyota.
Posted by: t | 17 March 2006 at 07:09 AM
The government should do nothing to prop up GM. I dont wish GM to fail but right now the labor unions have such an unfair stranglehold on GM they are killing the company.
Toyota pays a similar hourly wage to GM around $40 an hour for normal full time auto workers but GM has to pay workers who are NOT WORKING in the 'job bank'. The american auto worker would be better served without a union like in the Toyota plants. Toyota does not have to keep bad workers on after many mistakes or pay idle workers. I still dont understand why a 9-5 auto worker gets paid more then most teachers.
Posted by: Hampden Wireless | 17 March 2006 at 07:23 AM
"the labor unions have such an unfair stranglehold on GM they are killing the company."
Yes, of course. Labor is to blame - those lazy bastards. If only they'd work for Chinese wages without benefits, all would be well.
Posted by: Joseph Willemssen | 17 March 2006 at 07:27 AM
What is so magnificent about building a car? The same car that costs $ 20,000 to assemble in USA or Germany costs $ 5000 in China or South Africa where labor is very cheap. Mind you some of these cars have very little modification over others. Even competitiors frequently share parts and engines. Isuzu Ascender , GMC envor, Chevy Trailblazer, a certain SAAB SUV are all the same car. The little Isuzu NPR trucks also happen to be GMCs and Chevy and are assembled all world over. In some countries that same vehicle is substatially cheaper. The most sensible thing to do is follow the cellphone or sports apprell model: move production to low wage countries and export everywhere.
When the car starts looking like any other undifferentiated commodity, it makes no sense to retain expensive employees who add little or no special value.
Posted by: Alan | 17 March 2006 at 08:50 AM
8 billion...10 billion...who's counting? Those ethanol fumes must be pumped thruout the RenCen.
Posted by: fred dzlsabe | 17 March 2006 at 09:06 AM
GM and Ford will have to become competitive to survive. This is going to be extremely difficult if not impossible to do in USA/Canada unless their workers produce better cars for much less. Unfortunately, as more and more electrical and electronic components find their way into future vehicles, we all know where they will be produced and that will NOT be in USA/Canada. Overpaid 'unemployed' American/Canadian car union workers will most probably be in abundance within 5 years. The downsizing period may not be the best time to buy an American/Canadian (Big three) made car unless.......
Posted by: Harvey D | 17 March 2006 at 09:45 AM
Business interests cannot afford to let any Big 3 company to go under. The union will only make concessions if top management also eliminates its outrageous salaries and golden parachutes. Going under would shift the pension costs to the taxpayers. Going under would destroy the economies of several large metropolitan areas if not whole states. Aid to dependent corporations is a central part of the GOP platform. The combined forces against bancruptcy are too strong.
Posted by: tom deplume | 17 March 2006 at 04:04 PM
You wrote:
Yes, of course. Labor is to blame - those lazy bastards. If only they'd work for Chinese wages without benefits, all would be well.
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One word can make a big difference. I said "labor unions" not labor. Big difference. I pointed out the same basic wages paid to the workers with and without unions Toyota plant vs GM plant. I dont blame the american worker for GM's problems at all. GM quality is actually quite high now, and the worker is responsible for part of those gains.
I BLAME THE LABOR UNIONS. And I still do. Paying workers who do not work in the job banks as well as the extra overhead of the entire union is just too much.
Posted by: Hampden Wireless | 17 March 2006 at 07:40 PM
"I BLAME THE LABOR UNIONS."
Of course you do. They're a standard whipping boy, no matter how silly the claim against them.
Did management agree to the job banks or not? Why were they even established? Why are Japanese more competitive? Why are many new plants going to Canada instead of the US? Gee - could it be the different health care systems and the amount that a company would have to pay?
Blaming unions is a cheap way of dismissing what is a multifactoral situation, and is laughable in the first place because ultimately it is management which makes decisions about a company -- so it's their responsibility for its destiny.
Posted by: Joseph Willemssen | 17 March 2006 at 09:28 PM
Death watch drums are sounding
http://www.thetruthaboutcars.com/content/1142087337934924044/index.php
Posted by: duh | 17 March 2006 at 10:58 PM
"Blaming unions is a cheap way of dismissing what is a multifactoral situation, and is laughable in the first place because ultimately it is management which makes decisions about a company -- so it's their responsibility for its destiny."
Management is not ultimately responsible for decision making when the labor union artificially controls the labor supply and thus places demands upon management. The management would never have agreed to job banks or paying basic linemen the same pay as some engineers had it not been for union control.
The solution here is to make Michigan a Right to Work state so at least employees can choose to not support the union if they want.
Posted by: dc | 18 March 2006 at 04:21 PM
You wrote:
"Did management agree to the job banks or not?"
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There was a gun to thier head. No job bank and strike continues. More money is lost now.
You wrote:
"Why were they even established?"
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Because the union asked for them specifically.
Right to work is a great idea. What would be better is a union that worked with the auto company to make things better for both sides. Otherwise no union as Toyota has would be better.
Posted by: Hampden Wireless | 18 March 2006 at 09:58 PM
GM made some seriously bad choices at the very highest levels and they are paying the price for those bad decisions. If they do not end up paying for those bad decisions and we do a bail out for them with tax dollars it will perpetuate those moronic decisions. They should be building cars that get over 200 mpg not 20. The TriTrack that we are proposing would get in excess of 200 mpg equivalent and would be total electric thus ending our nation's need to import crude oil. It would also end traffic congestion as we know it and clean up the air to safe levels. These advanced transportation ideas have received no attention from the federal government but should be fully funded if GM is to recover by making cars that people need and want. It is fun to sing that song na na na na ... but it would be better if GM would get their act together and stop blaming and start doing. Killing the EV1 was legendary on the moron scale.
Posted by: Jerry Roane | 18 March 2006 at 10:35 PM
Wasn't the EV1 a complete sales failure though. Hardly a mistake to kill a product that is costing you money.
I agree with whoever said that the management should lose some of their benifits if they want the unions to be reasonable.
Posted by: James | 19 March 2006 at 04:10 AM
"There was a gun to thier head."
I see. Unions overpowered the management. Those poor leaders -- can't control their own corporation.
I love how this concept can somehow coexist with the one that says that management deserves their enormous compensation because they make all the hard decisions, etc.
So which is it? Are the leaders of a company responsible for their company or not? Or are they "responsible" only when it comes to getting their pay packages and/or when things go well (eg, during the 90s)?
And what did the leaders of GM do during the 90s, when their stock and company did very well? Why didn't they plan for a time when gas was expensive and people would stop buying their products?
Right -- it's all the fault of those unions who "hold guns to their heads".
Posted by: Joseph Willemssen | 19 March 2006 at 07:25 AM
In regards to those who think that G.M.'s and Ford's problems are insignificant, consider this: You ain't seen nothing yet.
The facts basically point to an economic meltdown occuring in the U.S. which would of course then spread worldwide. The only thing that's kept us afloat since the stock market crash of 2000 has been a real estate market bubble fueled by credit originating primarily from the Japanese Central Bank lending out money at 0% Interest, which was then reinvested in U.S. Treasuries and various other constructs that paid interest of at least 3%. Now, Japan is raising interest rates and very soon that slush fund will be cut off. A burst real estate bubble translates to another Great Depression.
So, you think this is nuts? Take a look at this website:
http://www.financialsense.com/fsu/editorials/jain/2006/0130.html
I suggest that doubters look at Fig. 4. It clearly illustrates that without the contribution of the housing bubble, the U.S. economy would have been in contraction for the last 5 years. A contraction of 5 years or more suggests that a Depression has been an ongoing event since the year 2000. A little bit of math suggests that our economic output, minus the increase in housing since 2000, would be at least 40% below the current numbers put out by the Feds.
Yep, currently about 40% of our economy is geared towards the loaning of money towards the construction and outfitting of all of these particleboard palaces we see popping up everywhere, not to say all of these second mortgages people are getting on pre-existing properties just so they can buy imported goods..
Look at the bright side- You'll still be able to get parts for all those Toyotas, Hondas, and Nissans out there backed by solvent companies, but since the Dollar will be in devaluation hell, you'll only be having to pay thousands of dollars for simple parts like starters, alternators, brake parts; etc, which of course are imported.
Posted by: Dave Zeller | 19 March 2006 at 10:11 AM
You wrote:
I see. Unions overpowered the management. Those poor leaders -- can't control their own corporation.
I love how this concept can somehow coexist with the one that says that management deserves their enormous compensation because they make all the hard decisions, etc.
------------------------
No, they can't. The union had great control at that point. It still does.
Maybe we actually agree on one point. Management makes far too much money. Here is a corperation loosing BILLIONS and they are paying the ceo 8.5 mi. For what? There are hundreds of people who would do that job for $200,000 and most of them would do at least as well as anyone they have had. Ok, so he took a 50% pay cut.
http://www.autoblog.com/2005/11/29/gm-ceo-secures-fat-pension/
He gets a 4.8 mil a year retirement package? A year? Did I read that right? Thats enough for 100 people to retire on.
Posted by: Hampden Wireless | 19 March 2006 at 02:34 PM
Ok, I'll agree fully that GM's management, as with other Big 3 management, made very stupid, shortsighted decisions time and time and time again during the "good ole days" when quality was looked upon with different standards and oil was really cheap. And I will agree that management as a general group of elites amongst big business are paid nauseatingly large amounts for such a miniscule amount of actual work (personally, being a third generation plant worker, I don't think many would call it work). However, I think most of us would agree that this loathable high-pay low-work scenario is the nature of ALL AUTOMOTIVE COMPANY MANAGEMENT (to varied extents, granted). So, while GM's management is paying for it's stupidity, don't make it out to seem like GM is the leftover remnant of the naturally corrupt American Automotive Industry and that all import automaker management is as pure as the driven snow. There are effective tyrants and ineffective tyrants, but they're still tyrants.
Posted by: D | 03 April 2006 at 06:43 PM
So Guys, what should GM do to over come the present desasteres sitation.
i) Do they need to go for land sliding down sizing?
ii) Do they need to completely out source their production units to cheap plabor countires? What about Sri Lanka? It is a country still automobile not tapped the skill labor advantage.
ii) Do they need to go for alliance or joint venture with Toyota, who are good at amintaining their iventry down to zero with JIT?
I have very good faith in GM mangement, consist with highly knowledgeable team, may be workign with the situation in finding new strategies for survival.
as a person who visited TOYOTA Japanese plants, GM should really work with global work force where skill labor is far too cheap ( Eg: You mae need to pay US$ 6000 to 8000 per annum for skill labor in automobile in Sri Lanka, whiich could be 7 - 8% compare with US worker advantage whihc GM need to harnes. (you can get more than 12 labors with the salary pay in USA for one person. Does US labor effecient 15 times effecient than Sri Lankan labor? Not at all.
Posted by: Ranjith Raddalgoda | 13 February 2007 at 03:16 AM