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General Motors Loses $6 billion in First Quarter

Worse, the ailing automaker burns another $10 billion in cash.

by on May.07, 2009

Not much to smile about for GM CEO Fritz Henderson. The automaker posted another $6 billion loss for the first quarter of 2009.

Nothing to smile about for Fritz Henderson as GM posted a $6 billion loss, and shares traded at $1.66.

General Motors Corporation reported a huge net loss of $6.0 billion this morning, including special items, which translates to -$9.78 per share in the first quarter of 2009. This compares with a reported net loss of $3.3 billion, or -$5.80 per share, in the year-ago quarter. 

Excluding special items, the company reported an adjusted net loss of $5.9 billion, or -$9.66 per share, in the first quarter of 2009 compared to an adjusted net loss of $381 million, or -$0.67 per share, in the first quarter of 2008.

The company said a worldwide decline in industry sales of 21% was responsible for the sea of red ink. However GM production declined at roughly twice that rate.

GM’s revenue for the first quarter of 2009 was $22.4 billion, down 47% from $42.4 billion in the year-ago quarter. The drop in revenue was primarily due to GM’s production volume decline of 903,000 units, or approximately 40%, on a global basis year-over-year.

The company said the losses were partially offset by cost cutting. However, GM continues to run through cash at a non-sustainable rate, hemorrhaging $10.2 billion in Q1. alone. Without government financing, GM would be history by now. And its future is by no means assured.

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Cash and marketable securities totaled $11.6 billion on March 31, 2009, down from $14.2 billion on December 31, 2008. The change in liquidity from the negative operating cash flow in the first quarter of 2009 was partially offset by U.S. TARP funding. Further details on GM’s current liquidity position and outlook will be disclosed in a Form 10-Q filing with the Securities and Exchange in the coming day. Surely, the news here will not be good.

“Our first quarter results underscore the importance of executing GM’s revised Viability Plan, which goes further and faster to lower our break-even point,” said Fritz Henderson, president and chief executive officer.  The failing automaker desperately needs to get out of the headlines as saturation coverage is clearly driving away potential buyers.

On a standalone basis its GMAC finance arm, which is crucial to GM’s and now bankrupt Chrysler’s future plans, reported a net loss of $675 million for the first quarter 2009, down $86 million from the year-ago quarter. GM realized a reported loss of $500 million for the quarter as a result of its equity interest in GMAC. Excluding the impact of the $385 million gain related to GM’s portion of GMAC’s gain associated with the accounting on its debt extinguishment, GM realized an adjusted net loss of $885 million.

GMAC’s results were primarily attributable to continued pressure in mortgage operations, weaker credit performance on both auto and mortgage assets, mark-to-market adjustments, and an original issue discount related to its fourth quarter debt exchange. The losses were partially offset by profitable performance in its insurance business and gains on debt extinguishment transactions.

Later today the U.S. Treasury Department will put GMAC on the list of banks that do not meet its health test, meaning that GMAC will either have to sell off more assets or raise billions of dollars in additional capital.

Beginning in the first quarter of 2009 and reflected in this release, GM will report its automotive operations and regional results on an earnings-before-interest-and-taxes (EBIT) basis, with interest expense and income tax reported in the corporate sector.

 

 General Motors Corporation

First Quarter

 
  2009 2008 O/(U) 2008
Revenue (bils.): $22.4 $42.4 $(20.0)
Reported automotive EBIT (bils.): $(5.2) $0.5 $(5.7)
Adjusted automotive EBIT (bils.): $(3.9) $0.8 $(4.7)
Reported net income (bils.): $(6.0) $(3.3) $(2.7)
Adjusted net income (bils.): $(5.9) $(0.4) $(5.5)
Reported earnings per share (dollars): $(9.78) $(5.80) $(3.98)
Adjusted operating cash flow (bils.): $(10.2) $(3.1) $(7.1)

 GM Automotive Operations

GM recorded an adjusted automotive EBIT loss of $3.9 billion ($5.2 billion reported EBIT loss) in the first quarter 2009. The loss compares with adjusted automotive EBIT income of $808 million in the first quarter of 2008 (reported EBIT income of $484 million).

GM’s automotive results showed a revenue decline in all regions. GM’s results were also hurt by unfavorable foreign currency exchange and mark-to-market commodity hedging versus the year-ago quarter. These losses were partially offset by a structural cost improvement of $3.1 billion when compared to the first quarter of 2008.

GM launched several new vehicles in the first quarter, including the Chevrolet Cruze in China. In North America, GM began production of the Chevrolet Camaro. The company also launched the Chevrolet Captiva Sport in Brazil, and introduced the Cadillac CTS-V to the Middle East. The 2009 European Car of the Year, the Opel/Vauxhall Insignia, continued to ramp-up production and in its first full quarter of sales, and GM said it surpassed all competitors in the mid-size sedan segment in Europe.

 

 GMNA

First Quarter

 

2009

2008

’09 O/(U) ’08

Revenue (bils.)

$12.3

$24.5

$(12.2)

Reported EBIT (bils.)

$(3.2)

$(.4)

$(2.8)

Adjusted EBIT (bils.)

$(2.8)

$(.2)

$(2.6)

GMNA Market Share

17.9%

21.7%

(3.8) p.p.

 

GMNA revenue for the first quarter 2009 was $12.3 billion, down 50% compared to $24.5 billion in the year-ago period, mainly attributable to the impact of the U.S. recession on consumer spending. Earnings were affected by substantially lower production volume, down 58% year-over-year, due to the depressed industry, lower market share and adjustments to U.S. dealer inventory. GMNA managed its business in-line with lower industry demand by reducing U.S. dealer inventories by 105,000 units within the first quarter of 2009, from 872,000 units down to 767,000 units.

GMNA’s losses were partially offset by a reduction in the accrual for residual support programs for leased vehicles, primarily due to the improvement in residual values. In addition, GMNA significantly reduced engineering and manufacturing cost in the first quarter.

 

GME 

First Quarter

 

2009

2008

’09 O/(U) ’08

Revenue (bils.)

$5.3

$9.9

$(4.6)

Reported EBIT (bils.)

$(2.0)

$0.1

$(2.1)

Adjusted EBIT (bils.)

$(1.2)

$0.2

$(1.4)

GME Market Share

8.9%

9.6%

(0.7) p.p

 

GM Europe (GME) sales volume was up in Germany, as were industry sales, which were aided by a government stimulus to encourage auto sales. Due to sales declines in other countries, though, GME experienced a 46% decline in production volume versus the year-ago quarter.

In addition,  err subtraction, GME experienced unfavorable foreign currency exchange, driven mainly by the weakening of the British Pound, and unfavorable mark-to-market commodity hedging. Results were partially offset by favorable mix and pricing, due in part to the success of the Opel/Vauxhall Insignia, and cost cutting across the region.

 

 GMAP

First Quarter

 

2009

2008

’09 O/(U) ’08

Revenue (bils.)

$2.4

$5.3

$(2.9)

Reported EBIT (mils.)

$(21)

$310

$(331)

Adjusted EBIT (mils.)

$(21)

$310

$(331)

GMAP Market Share

8.0%

6.9%

1.1 p.p.

 

GM sales in China were up 17% on SAIC-GM-Wuling performance and, what it called an “aggressive government stimulus.” This helped overall regional sales and market share increases, but GMAP still lost money as sales decreased in most countries across the region, excluding China, driving down production volumes, which impacted GMAP revenue. In addition, GM Daewoo revenue dropped as export volumes declined significantly across its major export markets.

 

GMLAAM

First Quarter

 

2009

2008

’09 O/(U) ’08

Revenue (bils.)

$3.4

$4.8

$(1.4)

Reported EBIT (mils.)

$16

$500

$(484)

Adjusted EBIT (mils.)

$42

$500

$(458)

GMLAAM Market Share

16.9%

17.6%

(0.7) p.p.

 

GM Latin America, Africa and Middle East (GMLAAM) experienced sales increases in Ecuador and Peru in the first quarter, where it set new sales records. At the same time, GMLAAM saw market share increases in Colombia, Ecuador, Chile, Peru, Venezuela, Egypt, Kenya and North Africa.

However, consistent with the industry’s downward trend in the region, GMLAAM production volume dropped 24% versus the year-ago quarter, which impacted revenue. The region also experienced unfavorable foreign currency exchange primarily related to the depreciation of the Brazilian Real. In addition, special charges related to restructuring were incurred in several countries.

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