GM’s Financials
Yesterday was a big day for GM financial news, as the company posted a 2007 loss of 39 billion dollars, the single greatest yearly loss for any automaker in history. Of course nearly all of that loss was due to the writedown of $38.6 billion that was given to the autoworkers union to pay for future healthcare expenses.
If you remove that nut, then GM wound up losing only $23 million. Overall they remained approximately tied with Toyota in selling the same number of cars worldwide, roughly 9 million each. Gm also is know to have about 27 billion in cash reserves.
Bob Lutz pointed out on his blog that GM is beginning to show signs of a strong turnaround in 2008 though, largely due to the newly redesigned, attractive, and well built Malibu (even comes in a mild hybrid version). He reports that GM has a 2.1 % increase in sales that month with an 11% increase in retail sales.
Rick Wagoner is working hard to turnaround the company and now they are trying to buy out the highest paid workers to replace them with lower wage new help.
CFO Fritz Henderson expects the effect of all this restructuring to take hold in 2010/2011 with a hopeful strong return to multibillion dollar profitability.
Of course by then, barring any major global catastrophes, we will be out of recession (are we in one?), and first and foremost the Volt will hit the streets.
Cool thing about that picture above, the three leading GM execs, CEO Rick Wagoner, Vice-Chairman Bob Lutz, and CFO Fritz Henderson..I actually have met them all.
Source (MotorTrend, and Forbes)
Popularity: 3%
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25 Responses to “GM’s Financials”
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February 13th, 2008 at 2:52 am
An article on CBC.ca indicates that there are “No buyouts for GM employees in Canada”:
The Detroit-based automaker is offering a new round of buyouts to all 74,000 of its U.S. hourly workers who are represented by the United Auto Workers. The buyouts are not being offered to any of the approximately 13,000 GM workers in Canada, company and union officials said.
Canadian Auto Workers president Buzz Hargrove observed that GM in Canada does not have a two-tier wage system, unlike the new UAW deal that pays less to new hires in the U.S. “The more people they can get out at $28 an hour, they can hire people in at $14,” Hargrove said. … So there’s a huge incentive for them to put buyouts on the table. It’s a lot cheaper. They don’t have that in Canada.”
http://www.cbc.ca/money/story/2008/02/12/gm-loss.html
February 13th, 2008 at 4:58 am
OK it seems that the financial markets did not take the news too badly if you loook at the quote of GM shares,
GM’s share price 11% higher since the New Year while the rest of the Dow Jones Industrial Average is down 6%.
See : http://www.marketwatch.com/news/story/gm-accelerates-downsizing-stay-race/story.aspx?guid=%7BF2BCCE4B%2DB947%2D4FD6%2D9854%2D87202BC8CEFD%7D
February 13th, 2008 at 5:45 am
As I understand it the settlement is to buy out of future fund contributions, so GM is now on a level playing field with Toyota.
35K starting to look cheap me thinks, from the following article!
“And as if peak oil wasn’t enough to worry about, Chavez is now threatening to halt Venezuelan oil exports to the U.S. due to their latest feud with Exxon Mobil. According to Chavez, the U.S. won’t see a drop of Venezuelan oil if things don’t work out. This threat came after a British court froze about $12 billion in Venezuelan assets.
I won’t hold it against you if your first reaction is to laugh and call it an empty threat. After all, we’re Venezuela’s largest client. Based on the EIA’s import data, the U.S. bought an average of 1.2 million barrels per day of crude oil and petroleum products from Venezuela in 2007. If Chavez stops selling us his oil, his country is going to be in trouble considering that oil accounts for more than half of government revenues.
But before you start calling Chavez’s bluff, don’t forget that there are a number of countries that wouldn’t mind taking that extra 1.2 million barrels per day off our hands.
China and India’s soaring oil consumption comes to mind. It appears that China is getting ready for more oil imports in 2008, too. Last July, the International Energy Agency (IEA) reported that China will add four times more oil refining capacity in 2008. Recently, the country approved a $5 billion oil refinery project which is expected to begin operation in 2010.
Here’s the problem for us…
The U.S. is going to have a hard time making up for the loss of that oil. As bullish as I am on Canadian oil sands, I’d be concerned about whether producers in Alberta could increase production quick enough. ”
Source: http://www.energyandcapital.net/newsletter.php?date=2008-02-12
February 13th, 2008 at 7:50 am
#3 NZDavid:
Which is why the Volt for transportation, and then transferring our energy needs to renewable sources is so important!
As to the original post:
While I don’t mind that GM is trying to get on track to become profitable, why is there no mention of the top corporate salaries being cut as well, for the good of the corporation?
I am not a management basher. On the contrary. I own my own business. But if times are hard, the pain should be felt all the way through the company!
February 13th, 2008 at 8:34 am
$14 per hour…..! I didnt know that. I say go after management….
February 13th, 2008 at 8:39 am
I think that people deserve a good wage, but there should be a way for the unions to assure they are productive for that wage. Im only guessing based on a few things I have read, and know little about it, other than watching from inside the workplace where I work.
February 13th, 2008 at 8:50 am
Jim @ 6, maybe it’s time to rid ourselves of unions. Most employment today is at-will. The industries that are still burdened with unions are stretched to the max. Look at teaches, police departments, etc. I do a lot of work in this area and the once necessary unions are no longer needed, as federal and state laws have been passed to protect workers. It’s killing America as now families are dependent on the corporation to supply health care and other necessities. If a company supplies the fringe benefit, great, but they shouldn’t be required to offer half of what they do. That’s why American auto manufacturers can’t compete in today’s global world and Mexico, China, and India are importing ALL of our jobs.
February 13th, 2008 at 8:57 am
Yes, I suspected.
February 13th, 2008 at 8:58 am
Still, the big exec’s make too much everywhere. People dont need that much money. I wonder what is the ratio of total resources to working people vs big execs. All high-end positions are out of control.
February 13th, 2008 at 9:22 am
Hopefully the executives are not sitting on the deck chairs of the Titanic. In order for America to compete, we need to address our compensation packages from top to bottom. I do not think the Boards of Directors will take effective action to return corporate executive compensation packages back to a market based price. Plenty of people are both willing and able to run GM for a few 100,000 a year.
But only by government fine tuning its regulation will the price fixing affecting executive compensation be curtailed. I for on am tired of the corrupt and incompetent leadership of our corporations, where they cook the books and fund golden parachutes when, like at Enron.
February 13th, 2008 at 9:40 am
Lyle posed the question — Are we in a recession?
There are legitimate arguments on both sides of that debate. From my perspective, we are on the brink of a recession but not yet there. Much is dependent upon the upcoming election.
Generally speaking, if we slide into a recession within 2-years of changing administrations, the cause can be laid at the feet of the present administration. Beyond that, it can be laid at the feet of the incoming administration.
At this point, my confidence for advoiding a recession is quite low with the choice of Presidential candidates, the price of oil, the housing industry, the loss of the U.S. manufacturing jobs, etc.
February 13th, 2008 at 10:43 am
I agree that in general, executives are paid too much. However, GM executives are nowhere near the top of that list (compared to executives of other companies). Don’t quote me on this, but I don’t think any of GM’s top people earn more than a couple million per year. That’s a lot, but not even close to the ridiculous salaries some others get. And a few million is basically nothing to a company as big as GM. I would guess that if all the executives worked for free, they could probably afford to pay the workers just another few cents per hour.
February 13th, 2008 at 11:48 am
When GM is trying to produce a technology leading car like the Volt, clearly the thing to do is to get rid of as many experienced workers as possible and repalace them with entry level people at half the wages.
IMHO, the problem with GM is not the workers. It is the “managment” which has consistently misread the market and failed to deliver the products which the American consumer wants.
The arrogant and ignorant statements about no one ever buying a hybrid car are just one glaring example of this mindset.
February 13th, 2008 at 11:51 am
I’m sorry, but what a joke. When GM cut the deal with the union to get retiree health care off their backs, it was hailed as a huge step forward for GM to become more cost-competitive. Now, they use the price tag of that deal to scream, “the sky is falling, we’ve got the biggest losses ever,” and everyone here seems to buy into the ploy and start in on bashing the workers for being lazy, etc.
Again, China is not just cheaper because its workers live in labor camps, but also because they pollute more than anyone else. What good does it do to buy a Volt to helpe stave off global warming, if we fuel a polluting economy in the process? I don’t care what kind of business you own, if $28 an hour workers are now making $14 an hour, people will have less money to buy your goods and services with. We need less union bashing, and more focus on getting a level playing field for our workers.
February 13th, 2008 at 12:34 pm
“I actually have met them all.” … name dropper.
February 13th, 2008 at 2:02 pm
The reports I heard yesterday said that this $38 billion writeoff was a result of a change in the treatment of tax loss carry forwards. It said nothing about the settlement to push the health care costs off on to the union(s)
As I remember it, this was the explanation last fall when it first came up as well. Evidently, they have had these huge tax losses, which they have booked as an asset somehow, because they could write them off agaist future profits. Now they have decided (with the help 0f the IRS? The SEC?) that these profits are unlikely to materialize. Thus these assets were stricken from the books, to more fairly (legally?) reflect the true financial status of the corporation, creating the huge loss.
So which is it? I am confused.
February 13th, 2008 at 2:24 pm
Noel #16
Perhaps this could help :
http://www.marketwatch.com/news/story/gm-posts-loss-reaches-buyout/story.aspx?guid=%7B4C37D2BE%2D17D0%2D48EE%2D93E8%2D4332401642AA%7D
I have difficulties to understand also, but the GM share does not seem to depreciate today, so perhaps the marked has understood better than us.
February 13th, 2008 at 2:31 pm
Are we in a recession?
It is not a matter of opinion wether we are or not. The definition of a recession is 2 consecutive quarters of negitive GDP. As of 4th quarter 2007, we have not had any negative quarters of GDP.
Of course there is the other definition, “a recession is when your neighbor loses his job, a depression is when you lose your job”.
Based on that I have never been in a recession in 25 years in the work force. Unless you count the one day I was out of work when I was laid off.
Why the media and pundits get away with making it sound like it’s a debatable issue I’ll never know.
February 13th, 2008 at 2:43 pm
Noel #16
I surfed the issue. All reports that I could find attributed it to a one-time tax issue. I found an interview with Bob Lutz that spoke about it being a loss that GM had deferred reporting for several years. The only place I’ve seen the reference to the retiree buy-out is the article on this site that we are commenting about. I does not change my view. Either way, GM reported a record-loss based upon a one-time issue (tax or retirees, or both) and simultaneously announced that it was going to try to buy out all of its US employees. The timing is not an accident.
This is classic propaganda. GM is creating cover for slashing wages by announcing a loss that, in Bob Lutz’s own view, does not reflect the current status of the company. Also, the market watch report linked above noted that one of the things weighing GM down was its investment in mortgages, not its automotive operations. Come on folks, let’s not bash the workers here.
February 13th, 2008 at 3:45 pm
Jean-Charles, #17:
The article refers to the $38 billion charge, but it doesn’t explain what it was. Over on the Fastlane blog, they seem to be blaming it on the GMAC, sub-prime issue, but I don’t think that’s it either. My biggest concern is that Lyle and the bloggers don’t get mislead by this vague and misleading (whether by intent or not) information out of GM.
At least they appear to have dumped half of GMAC onto Cerberus at the perfect time. If Cerberus survives the combination of GMAC and Chrysler, they should go to Las Vegas and start a magic show.
Thanks for you comment on the history of the electric car. Alas, how true.
Mark in WI, #19:
Thanks for your great analysis.
The mirrors are flashing, the blue smoke is boiling, and the spin machine is turning 7000 rpm. Alas, how are poor souls such as we to understand?
After they buy out all the workers, offshore all the production, and still can’t make any money, who will they blame then? Us? At least then I won’t have to agonize about buying an import any more.
February 13th, 2008 at 7:43 pm
I sincerely think Bob Lutz should fired ASAP, he is NO GOOD!
I sincerely think Bob Lutz should fired ASAP, he is NO GOOD!
I sincerely think Bob Lutz should fired ASAP, he is NO GOOD!
I sincerely think Bob Lutz should fired ASAP, he is NO GOOD!
I sincerely think Bob Lutz should fired ASAP, he is NO GOOD!
I sincerely think Bob Lutz should fired ASAP, he is NO GOOD!
His arrogance and stupidity toward HEV led to GM’s bad public image, especially in San Francisco area. 85% people here buy foreign cars, out of those who buy sedans, that figure is about 96%, you hardly see any new American cars, a few you see are probably fleet vehicles! Fire Bob and Rick and bring good management (from Japan) to run GM!
February 13th, 2008 at 7:44 pm
NZDavid,
Relax, and do not pay attention to what Hugo Chavez said in reference to what is happening with Exxon Mobil. First, take China out of the equation; it will take almost two months for a drop of Venezuelan oil to reach China’s territory. 2nd, Chavez can say all he wants about the USA, the fact of the matter that as crazy as Hugo Chavez is, he knows that he needs the USA more than USA needs him. Venezuela oil is sooo complex, and heavy that to be processed it needs a very complex process, and the refineries that have the technology to refine Venezuela oil just happen to be located in the USA. Meaning, that the oil from Venezuela first is extracted from lake Maracaibo and then send to the USA to be refine and then back to Venezuela. So, without those refineries in the USA, there is no Venezuela oil.
Viva la Volt.
February 13th, 2008 at 7:54 pm
He is the son of Hugo Chavez…Number 21…Fat Boy…
February 13th, 2008 at 9:27 pm
The GM loss is mainly due to a write-down of the value of future tax credits. That is a serious matter, as it reflects the judgment of independent experts that GM will never be profitable enough in the future to have income that can be covered with the tax credits, and the loss of a big asset affects GM’s credit and ability to borrow. On the other side, it has little or nothing to do with unions or employees, the present article notwithstanding. Most everything here is right, but occasionally something is not quite so.
February 21st, 2008 at 4:41 pm
“Of course nearly all of that loss was due to the writedown of $38.6 billion that was given to the autoworkers union to pay for future healthcare expenses.”
Not accurate. The big write-down was related to deferred income taxes credits that were deemed unsuitable for carrying on the balance sheet.