GM plunges to $15.5bn loss
General Motors lost a towering $15.5bn in the second quarter as it was hammered by falling sales in its core North American market and a dramatic shift from big pick-up trucks and sport-utility vehicles to more fuel-efficient but less profitable cars.

Together with mounting evidence that the Detroit carmaker will lose its crown to Toyota this year as the world’s biggest vehicle manufacturer, the loss casts a long shadow over celebrations in coming weeks to mark GM’s 100th anniversary.


Nonetheless, Rick Wagoner, chief executive, said on Friday that “we are reacting rapidly to the challenges facing the US economy and auto market, and we continue to take the aggressive steps necessary to transform our US operations”.

GM’s US sales slumped by 18 per cent in the year to June, and it is expected to report another hefty decline when July sales data are published later on Friday.

Its share of the US light-vehicle market sank to 21.4 per cent in the first half of 2008, from 23 per cent a year earlier, according to Autodata, a market research firm.

The second-quarter loss, which compares with a $800m profit in the year-ago quarter, includes $9.1bn in special items, such as the cost of worker buyouts, the cost of plant closures and an impairment of GM’s 49 per cent stake in GMAC, the financial services group.

It has also set aside an extra $2.8bn to support Delphi, its biggest parts supplier, which is struggling to implement a restructuring plan.

GM was also hit during the first half of the year by a lengthy strike at American Axle, another key supplier.

Impairments in the value of leased vehicles cost GM $2bn, including its share of lease writedowns at GMAC. A glut of used SUVs and pick-up trucks has hammered auto-lease providers by forcing them to sell off-lease vehicles at prices well below contracted residual values.

Second-quarter revenues fell to $38.2bn from $46.7bn, due entirely to lower North American business. Revenues at GM’s healthier overseas operations rose by $1.7bn to $20.8bn.

Operating cash outflow totalled $3.6bn, pulling down cash reserves to $21bn at the end of June from $23.9bn three months earlier. GM outlined plans last month to raise $15bn in liquidity by the end of 2009, largely through internal cost-cutting and restructuring measures.

North American operations posted a pre-tax loss of $9.3bn, up from an $88m loss a year earlier. Sales volumes dropped by one-fifth. But GM noted that some recently-launched cars, such as the Chevrolet Malibu and Cadillac CTS, sold well.

GM Europe’s pre-tax earnings fell to $20m from $315m, due to unfavourable exchange rates and the economic slowdown in Spain, Italy and the UK. Nonetheless, sales reached a second-quarter record driven by a strong performance in Russia.

Earnings from Latin America, Africa and the Middle East soared to $445m from $296m. GM said that it set quarterly sales records in Brazil, Chile, Egypt and North Africa.

Asia-Pacific swung to a $163m loss from a $280m profit a year earlier, due to a $285m pre-tax charge related to hedge accounting. GM said that its Holden subsidiary in Australia posted an improved operating performance.

GM shares have seesawed in recent weeks, touching a half-century low of $9.38 on July 14, but subsequently recovering modestly to Thursday’s close of $11.07.

By Bernard Simon in Toronto

Published: August 1 2008 12:53 | Last updated: August 1 2008 12:53