GM reports net loss of $15.5 billion
Bad news for General Motors: the second quarter of the year losses were worse than expected. A net loss of $15.5 billion or $27.33 per share was reported yesterday. After removing outside factors such as restructuring costs, the company still lost $6.3 billion, or $11.21 per share, on operations. Analysts were expecting only about a $2.62 loss per share. This is a large turnaround from last year, where GM gained $2.29 per share in this quarter.
A drop in total sales helped fuel this loss. GM saw a 21% drop in U.S. sales (although foreign sales rose 7%,) which led to a 5% drop in overall sales. GM named strikes, labor cutbacks, and actions to reduce vehicle output as main reasons for the loss.
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.
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.