GM loss up 2 billions dollars
In a stunning announcement, General Motors Corp. revised its loss for 2005 to $10.6 billion, up from a previously reported loss of $8.6 billion, after increasing charges to restructure its North American operations and support bankrupt supplier Delphi Corp.
GM, whose accounts have been under investigation by the U.S. Securities and Exchange Commission, also said it would report restated earnings for the five previous years within two weeks after uncovering accounting errors.
The disclosures are bound to increase the intense pressure on GM Chairman and Chief Executive Rick Wagoner. He is grappling with the automaker’s poor performance in the U.S. auto market, its large exposure to the troubles of its onetime subsidiary Delphi and mounting fears on Wall Street that GM itself may be headed for bankruptcy. GM shares fell 52 percent in 2005.
The automaker said in a statement late Thursday it would delay its annual 10-K filing after finding problems with the accounting at the mortgage arm of its GMAC captive finance unit.
"It’s obviously bad timing when they are out there trying to sell GMAC," said John Casesa, managing partner of Casesa Strategic Advisors LLC, an independent consulting firm in New York.
In its revised 2005 results, GM increased the charge for liabilities related to Delphi to $5.5 billion, on a pretax basis, from $3.6 billion after reassessing its exposure.
In January, GM had estimated its exposure in a wide pretax range between $3.6 billion and $12 billion but now puts them at between $5.5 billion and $12 billion. The automaker’s charge reflects its belief that its liability will be at the low end of the range.