Excluding special charges, it earned $529 million
General Motors Corp. beat analyst expectations for third-quarter earnings, saying its turnaround efforts are taking hold.
GM reported Wednesday morning a net loss of $115 million, or a loss of 20 cents per share, in the third quarter, but excluding special onetime items, it made $529 million, or 93 cents per share.
Excluding these items, GM was expected to make $277 million, or 49 cents a share, according to a consensus of analyst estimates by Thomson Financial.
Analysts focus on an adjusted net income that sets aside these one-time items as a way to assess a company's business on an on-going basis.
The special items amounted to $644 million in charges, including a write-down at GMAC in the commercial finance business and an increase to the charge associated with Delphi Corp.'s reorganization.
In a press statement, GM CEO and Chairman Rick Wagoner was upbeat about the results. GM had a net loss of $1.6 billion in the third quarter of last year — a $1.1 billion loss taking out special onetime items.
“Our third quarter results again reflect significant progress in our fast-paced initiatives to turn around our business and create a company that is leaner, faster and positioned for long-term sustainable growth,” said Chairman and Chief Executive Officer Rick Wagoner.
GM continued to lose money in its North American automotive business, a major drag on profits. The Detroit automaker lost $374 million in its North American automotive operations in the third quarter, but that was more than a $1-billion improvement from the third quarter last year.
GM has taken key steps in cutting costs in North America, including getting a deal with the UAW to reduce health care costs and having more than 30,000 hourly workers sign up for early retirement or buyout deals.
GM's press statement Wednesday morning also said it saw progress in the negotiations with the bankruptcy proceedings at Delphi, a former GM division and its largest supplier. GM narrowed the range for the cost that could result from benefit guarantees it made to Delphi to between $6 billion and $7.5 billion pretax, compared to the $5.5 billion to $12 billion previously estimated.
GM said it believes the amount of the liability is likely at the lower end of the new range.
To handle this potential liability, GM increased a reserve by $500 million in the third quarter, bringing total charges taken so far for this Delphi contingency to $6 billion.
GM also disclosed that the final agreement with Delphi may require GM to reimburse Delphi for some labor expenses. The initial payment in 2007 is not expected to exceed $400 million, GM said.
An ongoing expense would be for a limited time and is estimated to average less than $100 million annually. GM said it expects these payments to be exceeded by reductions in Delphi material cost premiums.
The third-quarter report comes just weeks after GM called off alliance talks with Renault SA and Nissan Motor Co. Shortly after the talks ended, GM board member
Jerry York, an adviser to shareholder Kirk Kerkorian, resigned, prompting some experts to predict a battle for control at GM. Strong third-quarter results would strengthen Wagoner's position, many analysts predicted at the time.
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President George W. Bush
The White House has set a date for President George W. Bush to meet with the heads of Detroit's automakers, senior adviser Karl Rove said.
"I'm not going to tell you what the date is, but there is a date," Rove said on WJR-AM radio (760) Tuesday, adding that the administration talks to "the auto boys all the time."
The meeting is expected in mid-November.
White House officials said they were aiming to hold the meeting then, but did not want to provide a firm date on the chance that it could be postponed again. Bush pledged in September to meet with the heads of General Motors Corp., Ford Motor Co. and the Chrysler Group after Gov. Jennifer Granholm and Democrats said the White House had ignored the problems facing Detroit's automakers.
The get-together had been conceived as a chance for the executives to talk about energy, currency and health care issues. But, if midterm elections swing one or both houses of Congress to Democrats, the meeting's tone could change.
Rove said health care, foreign trade and tort reform will be discussed.
"We need to expand markets; we need to have a level playing field so they can sell their products abroad," Rove said. "We need to have tax policies and litigation policies so they can get their job done without a bunch of junk and frivolous lawsuits."
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German automaker DaimlerChrysler AG saw profits drop 37% in the three months ended Sept. 30 primarily due to a quarterly operating loss of $1.5 billion at the Chrysler Group.
During a Wednesday morning third-quarter conference call, DaimlerChrysler reported an operating profit of $1.13 billion for the quarter thanks to better than expected results from its Mercedes and truck divisions. Mercedes' operating profit more than doubled from a year earlier.
DaimlerChrysler blamed the losses at its Chrysler division on falling demand for vehicles from dealers, negative net pricing and a shift in consumer tastes from large pickups and SUVs to smaller, more fuel-efficient – and less profitable – vehicles.
Chrysler's sales fell 26% to $12.1 billion from $16.4 billion.
In response to the decline in demand, Chrysler reports that it reduced third-quarter vehicle shipments, which are closely tied to production, to 504,426, down 158,937 from the third-quarter 2005.
“We are in no way satisfied with our third-quarter results” Chrysler Group President Tom LaSorda said in a statement. “We have taken dramatic steps to reduce production and shipments to address the inventory situation in the U.S. and we continue to work to find new ways to eliminate waste, lower our costs and improve quality.”
Chrysler is in the midst of evaluating its operations through a program called Project Refocus to determine where it can cut up to $1,000 from the cost of every vehicle it makes. LaSorda and DaimlerChrysler executives said nothing has been ruled out, including layoffs and idling plants.
Bodo Uebber, a member of the DaimlerChrysler board of management responsible for finance would not speculate during the Wednesday morning conference call on whether the options included selling Chrysler.
“We don't exclude anything here," Uebber said. “We will do our analysis. Second, we will talk about measures. And third, we will draw our conclusions.”
Concerns they could deploy if doors slammed hard
WASHINGTON - Toyota Motor Corp. said Tuesday it was recalling about 30,000 Scion TC sports coupes over concerns that the side air bags could inadvertently deploy if the door is slammed forcefully.
The recall affects about 20 percent of the tCs produced during the 2005 and 2006 model years, Toyota said. The vehicle is only sold in the United States.
The automaker said seat-mounted side air bags and side curtain air bags could deploy if the door on that side of the vehicle is closed forcefully while the ignition is on or within 90 seconds of when the ignition is turned off.
Toyota said it has received reports of 17 incidents in which the air bag deployed. No accidents, deaths or injuries have been reported.
Scion, Toyota's youth-oriented brand, will send recall notices to owners next month. Dealers will replace the side air bag sensors at no charge. Consumers can call the automaker at (866) 707-2466. |
