GM sees bright side despite $42b loss

[Dragoneye]

Go tell your friends, GM is fine.

EXECUTIVES at General Motors said improvements in the company's North American division were evidence that a company turnaround is on track despite a staggering $US39 billion ($42 billion) third-quarter loss.

GM's loss was one of the largest for a US company, trailing only AOL Time Warner's loss of $US54.2 billion in the first quarter of 2002 and a $US41.8 billion first-quarter loss by JDS Uniphase in 2001. GM shares fell 6 per cent on Wednesday on the New York Stock Exchange after the announcement.

GM recently signed a labour contract that analysts expect to make the company more competitive with foreign companies such as Toyota. The analysts say GM's outlook will be determined by the success of new models.

"I didn't see anything in the core operating numbers today that was shocking," said Pete Hastings, an analyst at Morgan Keegan. "GM is pretty much in the same condition they were in before. They are still faced with the same task of selling new models in a tough market. The new models are performing well."

GM's third-quarter results differed starkly from those of Toyota, also issued on Wednesday. Toyota's profit rose to $US3.94 billion. Its results were lifted by booming US sales and a weak yen that added nearly $US1.3 billion to the bottom line. Toyota boosted its dividend and raised its profit forecast for the year to almost $US15 billion.

Most of GM's loss came from a big accounting charge, which resulted from a change in the way the country accounted for tax credits accumulated from prior years, the company said.

Frederick Henderson, GM's chief financial officer, said the charge did not affect cash flow or automotive operations.

Although the losses at GM are on paper only, they represent an assessment by GM officials that the company will not earn profits large enough or steady enough in the near future to use the tax credits built up from previous losses.

GM reported a narrower loss in its North American division - $US247 million, compared with $US660 million in the third quarter last year, reflecting stronger sales of more profitable vehicles. In Europe, GM's loss widened to $US90 million, from $US39 million a year earlier. Profit in the Asia-Pacific increased to $US138 million in the quarter, from $US57 million.

[stovt001]

Basically, the loss was a technical, on paper loss that doesn't relate at all to the company's operations. Basically it was a change in how certain finances are reported on paper, but really, nothing material has changed.

[CamaroSpike23]

its basically like gambling, all that is reported is how much they lost, not how much they gained overall from different tables compared to where they started.