General Motors reported another huge quarterly loss yesterday, intensifying pressure on CEO Rick Wagoner to speed up the overhaul of North...
DETROIT — General Motors reported another huge quarterly loss yesterday, intensifying pressure on CEO Rick Wagoner to speed up the overhaul of North American operations that produced a $1.2 billion torrent of red ink in the second quarter.
A surge of U.S. vehicle sales last month when GM extended its employee-discount plan to all customers helped the company reduce bloated inventories, but it added little to the bottom line.
That highlights the challenge Wagoner faces as the world’s largest automaker tries to come up with new hit models while cutting costs in a way that doesn’t trigger open warfare with unions.
“It’s no secret GM has too many plants, people and nameplates and high legacy costs,” Merrill Lynch analyst John Casesa said in a report. But he added that the poor results may make it easier for GM to win concessions from the United Auto Workers.
Most Read Stories
- Please go fishing, Washington state says after farmed Atlantic salmon escape broken net
- What caused Seattle-based crab boat to sink with 6 aboard? Coast Guard hoping to find out
- Seattle-based crab boat found on Bering Sea bottom; lost since February with crew of 6
- Thanks to Amazon, Seattle is now America’s biggest company town
- Lost Seattle-based crab-boat crew memorialized VIEW
Investors also seemed inclined to take a sanguine approach. GM shares fell only 25 cents to $36.58 yesterday, then regained the 25 cents in after-hours trading.
GM’s U.S. market share has fallen to all-time lows as customers increasingly choose models from Toyota, Nissan and other Asian automakers.
In response, Wagoner’s turnaround plan includes closing plants and eliminating 25,000 manufacturing jobs in the United States by 2008, which he said should generate annual savings of roughly $2.5 billion.
GM’s overall second-quarter loss was $286 million, or 51 cents a share, a dramatic reversal from the profit of $1.4 billion, or $2.42 a share, a year ago.
It capped a dreadful first half of 2005, which included a $1.1 billion first-quarter loss, GM’s deepest in more than a decade. Second-quarter revenue fell 1.6 percent to $48.5 billion from $49.3 billion a year ago.
GM North America lost $1.2 billion versus earnings of $355 million in the second quarter of 2004.
The culprits were lower production to compensate for growing inventories early in the year, a less favorable sales mix of cars to higher-margin trucks and SUVs, and rising health-care costs, which will approach $6 billion this year.
Excluding special items, including a $126 million charge for restructuring in Europe, GM reported a loss of $318 million, or 56 cents a share.
The consensus among Wall Street analysts surveyed by Thomson Financial was for earnings of 3 cents a share, though predictions ranged from a loss of 56 cents a share to a gain of 50 cents a share.
“Our second-quarter results reflect a mix of some important pluses and minuses,” said Wagoner, who also is GM’s chairman. “On the positive side, sales were up in all regions and global market share increased. … But, importantly, on the minus side, GM North America’s financial performance continued to be very disappointing.”
GM declined to offer a forecast yesterday for its third-quarter and full-year results.
This week it began talks on a new labor agreement, including health-care benefits, with the Canadian Auto Workers.
GM is counting on the launches of a new generation of trucks later this year to help boost profits.
It’s also hoping for a warm welcome for some of its other upcoming offerings, including the Chevrolet HHR, a blend of Chevy’s SSR roadster and 1949 Suburban, the Pontiac Solstice roadster and the upscale Buick Lucerne sedan.
Still, some analysts remain cautious about GM’s prospects in 2006, given the surprisingly weak first half of 2005.