General Motors (NYSE: GM) announced its financial results for the second quarter of 2008, which include significant charges and special items.
The reported net loss was $15.5 billion or $27.33 per share for the second quarter, including these charges and special items, compared with net income from continuing operations of $784 million or $1.37 per share in the second quarter of 2007. On an adjusted basis, GM posted a net loss of $6.3 billion or $11.21 per share, compared with net income from continuing operations of $1.3 billion or $2.29 per share in the same period last year.
GM previously announced that it anticipated a significant second quarter loss, driven in large part by costs associated with the American Axle and local U.S. strikes, and charges related to the successful U.S. hourly attrition program, actions to reduce North American truck capacity, Delphi and other matters. The operating and liquidity actions announced on July 15 contemplated weak second quarter results and a continued unfavorable U.S. environment. The company has outlined a strong cadence of product, powertrain, capacity and liquidity actions over the past 60 days, to realign the business with current U.S. economic and auto market conditions, and position the company for profitable global growth.
Some of those actions include cessation of production at four truck plants, shift reductions at two truck plants, the addition of shifts at two car plants, announcement of the new Chevrolet global small car program and next generation Chevrolet Aveo compact car, introduction of a high-efficiency 4-cylinder engine for U.S. application, salaried headcount reductions and compensation actions, deferral of certain payments to the UAW VEBA, suspension of the dividend on common stock, reductions in sales and marketing budgets, the strategic review of the Hummer brand and production funding approval for the Chevrolet Volt extended range electric vehicle.
“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,” said GM Chairman and CEO Rick Wagoner. “We have the right plan for GM, driven by great products, building strong brands, fuel-economy technology leadership and taking full advantage of global growth opportunities.”
GM’s second quarter results were primarily driven by several factors: significant losses in GM North America (GMNA) due to continuing U.S. industry volume declines and shifts in vehicle mix, the long strike at American Axle and large lease-related charges; a number of special charges associated with GM’s ongoing restructuring actions; continued losses at GMAC Financial Services (GMAC) and updated estimates regarding recoveries and expectations of assumed benefit obligations in the Delphi bankruptcy.
GM recorded $9.1 billion of special items, predominantly non-cash in nature for the current quarter or near-term periods, which include:
$3.3 billion relating to the 2008 GMNA hourly special attrition program
$2.8 billion adjustment to the Delphi reserve
$1.1 billion GMNA restructuring and capacity related costs
$1.3 billion impairment of GM’s equity interest in GMAC
$340 million Canadian Auto Workers contract-related accounting charges
$197 million related to settlement of the strike at American Axle
Details on these and all other special items are in the financial highlights section of this release.
In addition, the GMNA adjusted net income results reflect a $1.6 billion charge related to lower residual values for off-lease vehicles. The total impact of declining residual values in GM’s second quarter earnings was $2.0 billion, including impairments of lease assets at both GMAC and GM.
Revenue for the second quarter was $38.2 billion, down from $46.7 billion in the year-ago quarter, which is more than accounted for by the decline in GMNA revenues. Combined revenues for the GM Europe (GME), GM Asia Pacific (GMAP) and GM Latin America, Africa and Middle East (GMLAAM) regions were $20.8 billion, up $1.7 billion over the same period 2007.
GM reports its automotive operations and regional results on an earnings-before-tax basis, with taxes reported on a total corporate basis. -General Motors
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